The great tax heist

The American press is obsessed with wins.

As it approaches the Trump administration’s 100-day mark, cable news and much of what’s left of the print press have been focused on the president’s failure to enact much of his professed agenda. Healthcare? A loss. The border wall? A loss. Supreme Court? A win.

It’s obvious why. Covering the wins and losses as if what goes on in Washington was the same as NBA playoff game coverage makes it easier on the reporter — analysis is difficult, and it can leave reporters open to accusations of political bias.

So, it’s no surprise that the response to the plan was to paint it as an effort to get a win among many losses. Coverage on Brian Williams 11th Hour was typical:

Approaching 100 days? Needing a win? Debate about Republican support? Check. Check. Check.

Forget the politics. Forget the wins and losses. These things are important, but should not be the primary focus of coverage or debate. There is only one thing that matters about this bullet-point handout passing as a tax plan: It’s little more than a heist. The rich get richer, the poor get nothing and those of us living in blue states get screwed.

Here is the description of the plan, as described by The New York Times (The Times also offered this useful breakdown):

The proposal envisions slashing the tax rate paid by businesses large and small to 15 percent. The number of individual income tax brackets would shrink from seven to three — 10, 25 and 35 percent — easing the tax burden on most Americans, including the president, although aides did not offer the income ranges for each bracket.

Individual tax rates currently have a ceiling of 39.6 percent and a floor of 10 percent. Most Americans pay taxes somewhere between the two.

The president would eliminate the estate tax and alternative minimum tax, a parallel system that primarily hits wealthier people by effectively limiting the deductions and other benefits available to them — both moves that would richly benefit Mr. Trump. Little is known of Mr. Trump’s tax burden, but one of the small nuggets revealed in the partial release of a 2005 tax return this year was that he paid $31 million under the alternative minimum tax that year.

Corporations would not have to pay taxes on their foreign profits, an unusual proposal for a president who has championed an “America first” approach and railed against companies that move jobs and resources overseas. They would also enjoy a special, one-time opportunity to bring home cash that they are parking overseas, though administration officials would not say how low that rate would be or how they would ensure that the money would be invested productively.

Mr. Trump wants to double the standard deduction for individuals, essentially eliminating taxes on around $24,000 of a couple’s earnings. That proposal was met with alarm by home builders and real estate agents, who fear it would disincentivize the purchase of homes. The proposal would scrap most itemized deductions, such as those for state and local tax payments, a valuable break for taxpayers in Democratic states like California and New York.

But the president would leave in place popular breaks for mortgage interest, charitable contributions and retirement savings.

That’s a lot to unpack and, given the skeletal nature of what was released yesterday, it is likely to take some time to put flesh on its bones. But its broad outlines should raise concerns. The liberal Economic Policy Institute issued a press release yesterday that called these outlines “a very big step in precisely the wrong direction.” Trump, EPI said, “is proposing straightforward tax cuts for the rich, which will need to be temporary because they will increase the federal budget deficit.” The “centerpiece” of the plan is a “cut to the rate faced by both corporations and ‘pass-throughs’ to 15 percent, accompanied by the claim that the tax cuts will pay for themselves” by creating unprecedented economic growth.

EPI offers three issues with this:

1. They would be, if passed, “a windfall to already-rich households,” because “this type of income is incredibly concentrated at the top, with the top 1 percent alone claiming 53 percent of it in 2013.”

2. While pitched in Reaganesque fashion as helping the rich to help the rest of us, “these tax cuts will not trickle down,” because “corporate tax cuts are terribly inefficient fiscal stimulus relative to nearly any other tax cut or spending increase.”

3. They won’t pay for themselves, which will disincentivize personal — and ultimately, government — savings. This is likely to create a series of economic and policy outcomes that will harm middle- and working-class people that include cuts to needed programs. (EPI doesn’t dig into this.)

This is the exact opposite approach than the one that should be taken, EPI says.

The corporate income tax is steeply progressive, and genuine tax reform should be raising more money from the corporate income tax, not less. Tax reform should close loopholes, not open new ones.

The most damning comment comes from The New York Times editorial board, which accurately described the plan as “a laughable stunt by a gang of plutocrats looking to enrich themselves at the expense of the country’s future.”

Taken alongside his budget “plan” — also little more than a set of bullet points — Trump has now given us a roadmap of his vision. Budgets — both the spending and revenue components — are policy documents. The money makes concrete the priorities. For Trump, who is pushing to cut social programs and taxes mostly for the rich, while expanding the military and gutting the State Department, the priorities seem pretty clear.

To put this in the language of winning and losing: The rich will win and the rest of us lose. Bigly.

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