White House Lashes Out At IMF's Tax Reform Skepticism

White House budget director Mike Mulvaney has come out swinging at The IMF, after the establishment-sponsored organization threw shade at Trump's tax reform plan's growth expectations, accusing them of wanting the reforms to fail.

The angry response came after Vitor Gaspar, The IMF’s head of fiscal affairs, told the Financial Times:

The idea that one would produce additional revenue by lowering tax rates is something that, being a conceptual possibility, is rarely documented empirically.

Asked about the IMF’s scepticism, The FT reports that Mr Mulvaney, previously a deficit hawk, said:

 “Yes, they are heavily invested in it not working out.” He drew a parallel with critics who challenge the growth-enhancing properties of Mr Trump’s deregulatory agenda.


“There are folks that are invested in seeing this fail because if it works then what is their argument for re-regulating? 


By the same token, if lowering tax does actually lead to growth, what is their argument going to be for raising taxes in the future?”

Mr Mulvaney does have a point and even Mr Gaspar admitted that it was not possible without full details of US tax plans to estimate the impact on tax revenues or growth.

“Policy has to be evidence based. One needs to study very carefully the particulars of the situation,” he said. But he added:


“The frequency of situations where tax cuts pay for themselves is low.”

But, we note, he still did offer an opinion, and additionally, The IMF showed its more truly progressive colors, supporting US ambitions to remove income tax deductions and close loopholes...

Better off individuals use tax loopholes much more than those who are not as well off, which means that progressivity, in practice, is much less than what you would have guessed based on tax rates alone,” Mr Gaspar said.

And thinks countries have to raise income-tax rates for top incomes without harming growth.

“We do not find systematic evidence that increasing tax progressivity hurts growth."

Apart from, hhmm, let's see, the last decade?

Notably, The Trump administration and The IMF have very different forecasts for the trajector of US public debt...

Given The IMF's terrible historical forecasting record, it's a coin toss at best over who is right.

As Mulvaney concludes, following derision from critics over the growth expectations,

"When I introduced the concept of 3 per cent growth in my budget in March I was laughed out of the room. We are there now..."


“We are trying to target our tax reforms at productivity, with the theory that maybe those types of reductions, those types of reforms, will lead to the GDP growth that the IMF says is impossible.”