So it is with tax reform. Trump and his advisers at various times have promised not to give the rich any tax cut, to attack the deficit/debt and to bolster the middle class. His tax plan bears no resemblance to that message, as Democrats were eager to point out on Wednesday.
Senate Minority Leader Charles E. Schumer (D-N.Y.) decried the plan. “It seems that President Trump and Republicans have designed their tax plan to be cheered in country clubs and corporate board rooms.” He ticked off a list of distinctly not-for-the-middle-class proposals. “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 percent 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.” He persisted, “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.”
On the subject of the rate change for the upper bracket from 39.6 percent to 35 percent, he argued that they didn’t need a tax break. In fairness we don’t know whether the cut in the top rate with elimination of some deductibles and credits means the rich will pay the same or even more. Trump has decided to hide the ball. However, I think it’s fair to speculate that if the bill was more or equally progressive than the current code Trump would have put out specific numbers.
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.
As for fiscal responsibility, the proposal is an outrage. The Committee for a Responsible Budget, a fiscally conservative group, in written statement declared:
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.
CFRB also spots an obvious gimmick: “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.” Unsurprising for a party and president allergic to sound policy and economic reality, Republicans seem determined to snow their donors (See what we’ve come up with!), hand liberals a political gift and infuriate the lonely fiscal conservatives out there who recognize the added debt outweighs any benefit from the temporary growth bubble one could expect to derive from this scheme.