Trump aide Hassett's message to million-dollar earners about possible tax hikes: You have 'plenty of resources'

Key Points
  • The possibility of the GOP tax cut plan actually increasing taxes would only impact "a few people at the very top," says Kevin Hassett.
  • The reason that tax bills may go up stems from the GOP's desire to eliminate the state and local tax deduction.
CEA's Kevin Hassett on GOP tax bill

The possibility of the GOP tax cut plan actually increasing taxes would only impact "a few people at the very top," said Kevin Hassett, economic advisor to President Donald Trump.

"They've got plenty of resources," said the Council of Economic Advisors chairman, referring to people who make more than $1 million in high-tax states, such as New York and California. They may find themselves with higher, not lower tax bills, he acknowledged. "I don't think there are very many 'sharply raised' people in the distribution tables."

The reason that tax bills may go up for some stems from a part of the GOP tax reform packages that eliminate the allowance for taxpayers to deduct state and local taxes on their federal returns.

GOP tax writers are aiming to make up for ending the so-called SALT-provision by lowering overall federal tax rates and doubling the standard deduction. But those measures may not be enough of an offset for the very wealthy.

"For most people around the country, the lower rate overpowers the state and local deduction. But there are some people in very high-tax jurisdictions where that's not true," Hassett told CNBC's "Squawk Box," following a similar analysis from Treasury Secretary Steven Mnuchin.

"For someone who makes [up to] $300,000 in high-tax states, they will get tax cuts. People who make a million dollars or more, their taxes are going to go up on the personal side," Mnuchin told CNBC on Friday.

But like Mnuchin, Hassett stressed that most working Americans won't be affected. "There's a big middle-class tax cut. There's an ample amount of simplification."

Million-dollar-plus earners who find themselves with higher tax bills should put pressure on their state and local governments to run more efficiently and lower their taxes, said Hassett, formerly an economist at the conservative American Enterprise Institute and the Federal Reserve. He also advised presidential campaigns, including Republican Mitt Romney's unsuccessful 2012 run.

Republicans feel the SALT deduction gives high-tax states and local municipalities the ability to raise their taxes knowing the federal government will foot the bill. Critics of eliminating the deduction argue that the bigger, higher tax states already pay more in taxes than they get in federal funding.

The House passed its version of GOP tax reform last week, while the Senate Finance Committee advanced a separate plan. The full Senate is expected to vote after Thanksgiving. The goal, according to Mnuchin, is to have congressmen and senators work out and pass a compromise plan to send to President Trump for approval by Christmas.

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