He campaigned saying the rich should pay more and the middle class should pay less. Nope. As this post reveals, the Trump tax plan is an obscene transfer of wealth predicated on what Geo. Bush called voodoo economics. It failed with Reagan & it will fail again. Read on. Shocking, absolutely shocking.
Trump Tax Plan: A Massive Wealth Grab
During the campaign, Trump made all kinds of promises to be an ally of blue collar workers, promising that the rich would pay more in taxes. He said he would stop corporations from offshoring manufacturing jobs with a border adjustment tax on imports. He would end trade cheating and declare China a currency manipulator on his first day in office. He would launch within his first 100 days a $1 trillion infrastructure improvement program to create millions of jobs fixing the nation’s airports, bridges, and roads. But his one-page tax plan is riddled with giveaways for the rich and ultra rich and absolutely no guarantees of any relief for the middle class or the poor.
As reported in “Another Tax Plan for Captains of Industry” published by Truthout, Trump’s plan would eliminate the alternative minimum tax. Report author, Leo Girard writes: “This is a levy intended to require billionaires like Trump to pay at least something after subtracting their multitude of special-rich-people deductions. Trump’s 2005 return, uncovered in part by a newspaper, shows that he had to pay $31 million as a result of the alternative minimum tax.”
It is worth noting the historic context in which Trump’s Tax Plan has emerged. The chart at left shows the historic reduction of the tax rate on corporations over the past 60 years. What it reveals, of course, is a steady decline in the tax rate on corporations, hardly mirroring Trump campaign rhetoric about the urgent need to provide relief to corporations suffering under an inordinate tax burden. An even more extreme decline the personal tax rate for the highest income taxpayers, again over the past 60 years. It is in this context that Donald Trump has developed a plan that grossly extends tax benefits to the wealthy and to corporations.
Trump’s plan would also eliminate the estate tax, a tax paid only by those who inherit more than $5.5 million, not exactly relief for the middle class. Trump’s plan also calls for cutting by more than half the tax paid by “pass-through corporations.” Girard reveals that “Trump’s attorneys indicated in his presidential financial disclosures that his approximately 500 businesses are almost all pass-throughs.” He goes on to disclose that, “A 2015 study by the nonpartisan National Bureau of Economic Research found that the top 1 percent get 69 percent of pass-through income. Right now, a worker can’t get in on that low 15 percent tax rate unless reporting income below $37,950. But doctors and lawyers and investment bankers would get that special discount rate, no matter how much they make, as long as they pay a few bucks to establish a pass-through corporation. Trump’s plan would allow a lawyer paid $1 million a year to cut his taxes by $180,000 by setting up a pass-through.” Again, not exactly relief for the middle class or poor.
But, when asked on ABC’s “Good Morning America” last week whether the middle class would pay more under the plan, Treasury Secretary Steven Mnuchin said: “I can’t make any guarantees.” But the chart at left illustrates analysis from the Tax Policy Center that shows that while comprising only 0.8% of the population, our nation’s millionaires would derive nearly 50% of the total cuts in taxes while the bottom 80% of the population would only receive 17% of the cuts.
As if all this were not bad enough, Girard closes by noting: “But it’s not just taxes. The health insurance proposal Trump is pushing would cost many low- and middle-income workers thousands of dollars more a year. Trump has proposed eliminating the Chemical Safety Board, which prevents workplace deaths. He delayed rules protecting workers from deadly silica and beryllium. He signed a law ending a requirement that large federal contractors disclose and correct serious safety violations. Trump has no federal infrastructure plan and reneged on naming China a currency manipulator.” Oh my.
Our only hope is that this plan is so transparently impractical that likely all but the most avaricious Republicans will balk. It is estimated that it would reduce revenue to run the Federal government by $3 to $7 TRILLION over the next decade. That is serious cash and would require massive cuts in all health and social services and leave precious little to invest in infrastructure. Plus the only way this budget would not result in an absolutely catastrophic level of debt is if our economy suddenly leapt into high gear — make that an unheard of overdrive, growth at a 4.5% annual rate. In the first quarter of Trump’s administration it grew by 0.7% and in the last quarter of Obama’s administration it grew by but 2.1%. The premise behind Trump’s tax cut chicanery is predicated on what is called the Laffer Curve, a theory that George Bush called “voodoo economics.” It didn’t work for Reagan who exploded the national debt and precipitated runaway inflation. It won’t work for Trump either.
This President plays so fast and loose with the facts, with research and reality, we are just fortunate that there are a couple handful of Republicans with enough common sense and sense of dignity to not fall in line with Trump’s crazy health plans and tax plans. At least for now.
Roxanne and Paul
Categories: Economic justice, Tax Policy
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