Chief White House economic adviser Kevin Hassett on Monday called Democrats’ proposals to increase taxes on the wealthy “economically illiterate.”
To recap, the new proposals include:
- Alexandria Ocasio-Cortez: taxing income over $10 million at a rate of 70 percent
- Elizabeth Warren: imposing a 2 percent annual tax on households worth at least $50 million and a 3 percent tax on households worth at least $1 billion
- Bernie Sanders: expanding the estate tax to 77 percent for billionaires and 55 percent for those worth at least $50 million
Trump’s proposals over the years have been something of a combination of these. His most famous/infamous proposal from 1999 was to impose a one-time 14.25 percent tax on individuals and trusts with net worths of $10 million or more. It was a proposal PolitiFact has said would have been the “largest tax increase in American history.” Trump pitched it as a way to eliminate the national debt in one fell swoop.
“Some will say that my plan is unfair to the extremely wealthy,” Trump wrote in his 2000 book, “The America We Deserve.” “I say it is only reasonable to shift the burden to those most able to pay. … I believe we have an obligation to pay. Taxes represent the cost of freedom and its defense. It is a small price.”
This came up occasionally during the 2016 Republican presidential primary, but it wasn’t just a one-off. In addition to his idea for a one-time tax, Trump has also pushed for a “substantial” increase in the tax rate paid by the wealthiest Americans.
In 1991 testimony before the House Budget Committee’s Subcommittee on Urgent Fiscal Matters, Trump recommended taxing the wealthy at 40 percent, 50 percent or even more so that they would invest the money instead. “The higher it is,” he argued, “the more incentive there would be.”
Here’s an exchange he had with then-Rep. Jerry Huckaby (D-La.):
HUCKABY: But you have suggested a new twist here that is necessary to raise the top tax bracket from the 31 to 33 percent up to 40 or 50 percent, and in order to encourage people to invest in these areas. Is that really correct? If we had the passive losses and the accelerated depreciation and one could anticipate future increases in the value, do you think it is necessary to increase the tax rate?TRUMP: I think it would be a big help for the upper-income taxpayer to have incentive, rather than paying taxes, to invest. I think that the accelerated depreciation, depreciation schedules being shortened, would be a tremendous help for the obvious reason that you would be able to get — assuming the active passive and assuming the right to syndicate — you would be able to get investors to come into real estate transactions....HUCKABY: How high do you think you would have to take the top tax brackets in order to make this happen?TRUMP: The higher it is, the more incentive there would be. I guess it was 50 and 60 at one point, and it was obviously even higher than that. But the higher it is, the more incentive. I don’t mean middle income or low income. If anything that could stay the same would be lowered. I am talking about the people that are making a great deal of money should have an incentive to invest. And I know it was 50, and I am talking about a substantial increase, with the ability to get it down to the minimum number.
Trump’s 1991 proposal was somewhat similar to Ocasio-Cortez’s, but with key differences. The first is that the point here wasn’t so much to raise money for the government as it was to push people to invest rather than sitting on their money. But the practical implications were still a massive tax hike on the wealthy if they didn’t invest.
Trump was somewhat squishy on the rate, but it sounded like he at least wanted a return to the 50 percent rate on the top tax bracket that existed before President Ronald Reagan’s 1986 tax package. That’s shy of Ocasio-Cortez’s 70 percent, but remember that Ocasio-Cortez’s only affects income over $10 million. Trump’s was for all people in the top bracket, so it would have affected millions more.
Similarly, Trump’s 1999 tax plan sounds a bit like Warren’s, in that it was a tax on net worth. The difference is that it would have been a one-time tax at a higher rate vs. an annual tax at a lower rate. But it also would have affected many more people, given that the threshold was $10 million in net worth (or $15 million in today’s dollars) vs. Warren’s $50 million.
And as with any tax plan, what it really boils down to is how much revenue it could create. And on that measure, Trump’s 1999 proposal is on another planet.
Estimates indicate that Ocasio-Cortez’s plan would raise $720 billion over 10 years, Warren’s would bring in $2.75 trillion over that same span, and Sanders’s would bring in $315 billion. Trump’s plan, though, was pitched as an instant $5.7 trillion windfall for the U.S. government.
Sanders’s plan would bring in an estimated total of less than half that over time — $2.2 trillion. Ocasio-Cortez’s would need to be in place for as many as 80 years before producing that much. And Warren’s plan would need about 20 years before doing what Trump’s would have done right away.
Trump has renounced these plans. But before they call stuff like this “radical” and “economically illiterate,” people like Hassett might want to consider that those characterizations could just as easily be applied to Trump when he was a grown man in the 1990s.