Yup.
I like tires at least 1 3/4, though. Softer ride at speed.
Ohio motorbike regs even states 1 3/4" or bigger, 24" minimum.
You can get more clearance on most kits by reversing the sprocket, one side is dished in, the other out. Sprocket hub adapters like the Manic Mechanic adapter let you slide the sprocket and clamshell farther outboard to get more tire clearance, but in fact the engine sprocket's distance from the engine center line determines where the sprocket on the wheel needs to be.
Most kit engines will allow 2.125 tires. You may just need to flip your rear sprocket and make certain your rag joint is assembled to the spokes correctly.
There are also narrower chains, like the 415 Industrial chain from KMC. It gets you 1/16th inch more clearance than a standard 415.
Hope this helps.