Friday, May 05, 2017

Now we know Donald Trump’s plan to sell tax cuts for the rich

Matthew Yglesias · Tuesday, May 02, 2017, 9:17 am

He’s gonna lie about it. A lot.

Last week, Donald Trump proposed an enormous deficit-increasing tax cut slanted toward the interests of high-income families. That’s a tough sell at a time when public opinion has tilted sharply against cutting taxes on the rich, and when a low unemployment rate and Federal Reserve interest rate increases have eliminated the case for fiscal stimulus.

But in a series of interviews over the past few days, Trump and his team have made it clear that they have a plan to deal with these challenges.

Lie aggressively, lie shamelessly, and lie repeatedly.

It’s a strategy they’ve also been trying on health care, where the administration tends to simply assert that the various iterations of his plan would leave patients with better insurance coverage when the reality is the opposite. The White House has achieved only limited success with it. The “lie about what your health plan does” strategy only works if the plan doesn’t pass. Vulnerable Republicans — and Republicans in Medicaid expansion states — know that reality will kick back if they actually try to do the plan.

On taxes, where the windfall to the rich will be less visible, lying may be easier to get away with.

Trump’s tax plan is a bonanza for the wealthy

The easiest way to see how much Trump’s tax plan is a win for the richest Americans is to simply ignore the part of the plan that alters the main federal income tax. That set of reforms is, naturally, a major focus of media attention since those are taxes that most of the producers and consumers of political news pay.

But there’s a lot more going on in Trump’s proposal:

  • He wants to cut the corporate income tax rate from 35 percent to 15 percent while halting efforts to try to collect taxes on companies’ foreign earnings. The precise incidence of the corporate income tax is somewhat controversial, but the vast preponderance of the evidence suggests that it falls mostly on shareholders in a country where 80 percent of stock is owned by 10 percent of households, with about half of that held by just 1 percent.
  • He also wants to cut the top tax rate on the incomes of owners of closely held businesses from 39.6 percent to 15 percent. Republicans characterize a sharp cut in the taxation of passthrough businesses as a tax cut for “small businesses” but this means small in the sense of “small number of owners.” The Trump Organization would benefit from this tax cut, as would basically every hedge fund and private equity shop in the United States. Law firms are generally passthroughs. Businesses that have small profits will get a small tax cut from this measure, while businesses with millions of dollars a year in profits will get a huge one.
  • He wants to repeal a 3.8 percent surtax on investment income that helps pay for some of the Affordable Care Act’s benefits: The Medicare surtax is paid only by households with over $200,000 in adjusted gross income.
  • He wants to eliminate all federal taxation of estates: The estate tax, which is levied only on estates that are worth more than $5.45 million per person (i.e., $10.9 million for a married couple), raises $0 in revenue from 98 out of a 100 families. Among that top 2 percent of the wealth distribution that does have more than $5 million stashed away, about 55 percent of the wealth consists of unrealized capital gains that have never been taxed.
  • He wants to eliminate the alternative minimum tax: More than 80 percent of the households affected by the AMT have more than $500,000 in income, and 99 percent have incomes over $100,000.

All of these proposals are overwhelmingly tilted toward the interests of the richest families. There is simply nothing in Trump’s tax plan that in any way offsets any of these measures. If you own a very profitable business or a lot of shares of stock, or if you stand to inherit a large fortune, Trump is delivering a major cut in your taxes.

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