Americans should expect the "largest tax change since Reagan," with federal tax cuts for average income earners as well as U.S.businesses, President-elect Donald Trump's nominee for Treasury secretary said Wednesday.
"There will be a tax cut for the middle class," banker, movie producer and former Goldman Sachs partner Steven Mnuchin told CNBC's Squawk Box in his first public comments on the incoming administration's economic priorities. "Any tax cuts that we have for the upper class will be offset by less deductions to pay for it."
Tax deductions for charitable contributions would still be allowed, he said. There would be a cap on mortgage interest payments, though "some deductibility" would continue, said Mnuchin.
The proposed changes also include cutting the nation's 35% top business tax rate to 15%, along with an effort to encourage repatriation of the estimated $1 trillion that large U.S. corporations hold in foreign subsidiaries to avoid the domestic tax bite. Trump has proposed a special 10% rate on overseas funds the companies shift back to the U.S.
"We think by cutting corporate taxes we'll create huge economic growth and we'll have huge personal income, so the revenues will be offset on the other side," Mnuchin said in the interview.
The changes should help increase sustained U.S. economic growth, he predicted.
"I think we can absolutely get to sustained 3% to 4% GDP. And that is absolutely critical to the country," Mnuchin said. "To get there, our No. 1 priority is tax reform. This will be the largest tax change since Reagan."
The proposals echo some proposals Trump outlined during his campaign. However, the claim that any tax cuts for the wealthy would be offset with fewer reductions appeared to conflict with the formal tax plan of the New York City businessman. Although Trump said his economic team projected 3.5% GDP growth over the next decade during a September speech at the Economic Club of New York, he also told the gathering, "I think we can do better than that."
Some tax experts voiced cautious optimism about the proposals, even as they cautioned about a potential repeat of the federal deficit increases that followed the Reagan tax system overhaul in 1981.
Slashing the corporate tax rate and allowing businesses to expense capital investments in the year they're made could make 3% to 4% GDP growth "a reasonable goal," said Robert Goulder, senior tax policy counsel for Tax Analysts, a non-partisan publisher focused on tax policy and administration.
However, capping mortgage tax deductions and other cost-saving proposals, such as reducing or eliminating deductions for state and local taxes, could prove politically difficult, said Goulder. Others have tried such plans and failed, he said, citing the federal tax reforms proposed in 2014 by then-congressman David Camp, R-Mich.
"Where are the spending cuts? Where are the federal entitlement reforms?" asked Goulder. "Can we run up a larger deficit without having negative effects that outweigh the positives of pro-growth tax plans?"