Trump and his allies, Gary Cohn, chief WH economic adviser and Steven Mnuchin, Treasury secretary, can’t stop lying about their tax plan.
From the onset, they have made a series of statements that are blatantly false — not merely shadings of truth or questionable claims but outright fabrications.
The New York Times: “The statements make [Cohn and Mnuchin] look more like Trump press secretaries than serious business executives whom members of Congress can trust.”
The lies fall into two main categories. The first is who benefits from the tax plan. The second is it’s deficit-friendly attributes.
“Wealthy Americans are not getting a tax cut,” Cohn said echoing a promise that Mnuchin made before the inauguration. “Any reductions we have in upper-income taxes will be offset by less deductions, so that there will be no absolute tax cut for the upper class.”
Trump has pitched his tax plan as a boost for the middle class. “The rich will not be gaining at all with this plan,” Trump said.
Nothing could be further from the truth. Trump’s tax plan is reducing the top income-tax rate from 39.6% to to 35%. It is deeply cutting corporate taxes, which benefits people who own a lot of stock.
It repeals the alternative minimum tax and the estate tax. It eliminates the 3.8% tax on net investment income on people who have a modified adjusted gross income of over $200,000 for single filers and $250,000 for married couples filing jointly. It sets up a big new loophole that will allow wealthy individuals to pretend that they are small businesses (pass-through entities), and get a preferential tax rate. All of these overwhelmingly benefit the wealthy, mainly the top 1%.
In a Sept. 29 analysis of the GOP plan, the nonpartisan Tax Policy Center (TPC) estimates that the average tax bill would decline in 2018 for “all income groups,” but “[t]hose with the very highest incomes would receive the biggest tax cuts.” Half of the “total tax benefit” would go to the top 1% of taxpayers who have incomes of more than $730,000.
“All the big provisions benefit the rich, not the middle class.” The measures affecting middle-class families are relatively small change.
Senate Minority Leader Charles E. Schumer (D-NY) said, “It seems that President Trump and Republicans have designed their tax plan to be cheered in country clubs and corporate board rooms.”
“Repealing the estate tax? How does that help middle-class people? Only 5,200 of the wealthiest families in America — couples whose estates are worth $11 million pay the estate tax,” he said.
“Lowering the rate on pass-through entities? That would create a huge loophole allowing very wealthy Americans like hedge fund managers to funnel their income through a business entity in order to avoid the top bracket and pay a much lower rate.”
He explained why this isn’t even fair to the upper-middle class, who makes 6-figures and would be taxed at a 39% rate while “wealthy hedge fund managers, and lawyers, and whoever can, through a pass through, pay no corporate tax, and then a 25% rate on the rest of their taxes.”
“Does that help middle-class Americans? Absolutely not. Does it help the wealthiest, who have the lawyers to set up these pass through entities? Absolutely.”
The Washington Post: “Once again Republicans seem to have missed a golden opportunity to shed their image as the party of the rich and adopt a more middle-class-friendly economic approach. Put enough Goldman Sachs billionaires and millionaires in the Cabinet and it’ll happen every time.”
In total, by 2027, according to TPC, 80% of the tax cuts go to the top 1%, just 12% of the gains go to the middle 60% of Americans. Then there’s a clincher: More than a quarter of middle-class families would actually see their taxes go up due to ending the deductibility of state and local taxes and other deductions.
What has become clear is that tax cuts for the rich are the overriding objective of the modern GOP. They were the principal motivation for the attempt to repeal the Affordable Care Act, since that would also mean repealing the high-income taxes that pay for it. Depriving millions of health care was acceptable collateral damage.
With regard to the deficit, Trump has proposed no net spending reductions to offset his tax plan’s $3 trillion to $5 trillion increase in the debt.
The tax cuts in the GOP proposal would reduce government revenues by trillions of dollars. Some of that would be offset by closing loopholes. But the TPC still predicts an extra $2.4 trillion in red ink over the next decade. If Republicans’ promised level of economic growth fails to materialize, all of that would be added to the federal debt.
“I’m guessing Trump is going to care less about the details than just getting tax reform passed,” said William Gale, TPC co-director.
Cohn claims their proposed tax cuts will be paid for through economic growth. He says the cuts will drive growth that will exceed 3%.
“This tax plan will cut down the deficits by a trillion dollars,” Mnuchin said. Cohn insists that “we can pay for the entire tax cut through growth.”
These may seem marginally more defensible, because they’re predictions. But they’re ridiculous predictions, not so different from promising to save money by spending more.
The Committee for a Responsible Budget (CFRB), in a written statement said: “While significant detail still needs to be filled in, enough exists for a very rough and very preliminary estimate of the details presented. Based on those details – and many assumptions – we estimate the plan calls for roughly $5.8 trillion of tax cuts and $3.6 trillion of base broadening, resulting in about $2.2 trillion of net tax cuts.”
“These numbers come with a high degree of uncertainty and exclude a number of potential offsets where no details exist. But it is clear that much more work needs to be done to ensure tax reform is fiscally responsible. Given today’s record-high levels of national debt, the country cannot afford a deficit-financed tax cut. Tax reform that adds to the debt is likely to slow, rather than improve, long-term economic growth.”
“Given that it calls for only five years of expensing rather than permanent – a major budget gimmick – it also potentially sets the stage for an extenders package of over $1 trillion when expensing expires.”
Fiscal conservatives easily can recognize the added debt outweighs any benefit from the temporary growth bubble one could expect to derive from this scheme.
Republicans seemed to be repulsed by sound policy. They paint an alternate economic reality designed to serve their donors at the expense of those who could really use a tax break.
“Our framework includes our explicit commitment that tax reform will protect low-income and middle-income households,” Trump said. “Not the wealthy and well-connected. They can call me all they want; I’m doing the right thing.”
He then added: “And it’s not good for me, believe me.”
(Actually, we don’t have a way of knowing since he refuses to release his tax returns. We don’t know which taxes he pays. Blessed are those who believe without seeing.)
Trump knows that it’s smart to say that he’s rejecting the rich and helping the poor. But he’s also shown that he’s willing to ignore that rhetoric when he wants to. He thinks Americans won’t notice.
Trump’s administration is trying to sell their ambitious bid for tax cuts with lies. Instead of defending their ideas on their merits and in good faith. This was too much to ask for.