The President has a breathtaking contempt for your understanding of his tax plans.
White House strategists calculate that you will neither take the time to understand their framework, nor will a meaningful cohort of Americans move against a morally-crooked tax restructuring.
Meanwhile, they are stacked-up on my desk over here, little cairns of nauseating tax statistics that would guide us if we followed them, but rarely see daylight, because in fiscal debate they're obscured behind well-worn axioms of political non-speech. America wins when government gets out of the way. Tax cuts grow the economy. A rising tide lifts all boats. They have the hook of a campaign shtick and a glimmer enough of truth to stand if the winds are still.
No doubt the bylines of Mr. Trump’s tax campaign are market-tested for middle-Americans punished by three decades of thundering inequality, but all the structure of his plan is metered to stand-up a more enduring capital class.
Consider the principal beneficiaries of Mr. Trump’s tax relief. In 2017 American corporations pay a smaller portion of their profits in taxes than they have in 80 years. They have had virtually a decade of unlimited borrowing capacity at near-zero interest rates to hire underemployed Americans or make capital investments. Their profit margins are at cyclical highs. Nowhere in this economy’s reams of data do we find evidence that Corporate America is raring to grow GDP, if only they suffered a lesser tax burden.
At the same time the bottom fifty percent of earners in the United States haven't seen a raise since the '70s. Statistical weather vanes like median income, median net worth, and median disposable income remain so distorted by the spectacular success of the top 10% of earners, since the financial crisis, that you can’t see the working class through the haze of averages. In reality, your working-class neighbor has not held a smaller claim to their country, relative to the colossal peaks of American wealth, in nearly a century.
Yet President Trump takes to podiums in Indiana, Missouri, and Arizona to argue that we target tax cuts at corporations whose contribution to federal revenues are already near all-time lows. Fully three quarters of his reform’s benefits would go to people making over $700,000 a year and as they open a $1.5 trillion hole in the budget, of which $450 billion the Senate says will come from cuts to Medicare, President Trump shouts that he’s here for America’s forgotten.
"We're going to make sure rich people don't benefit."
- Treasury Secretary Steve Mnuchin on This Week
"Our framework includes our explicit commitment that tax reform will protect low income and middle income households, not the wealthy."
- President Donald Trump, Farm Bureau Building, Indianapolis
The framework doesn’t stop, though, at misappropriation of relief. Not only does the proposal intend to lower rates for the wealthiest Americans (39.5% to 35%), raise rates for the poorest Americans (10% to 12%), and diminish the role of business taxes, it endeavors to structurally alter the tax code in a way that shields top earners from future rate hikes.
By collapsing our current seven tax brackets into three, Mr. Trump, as a representative of that top tax bracket, manages to bind-up households making seven- or eight-figure incomes with households making, for example, $300,000 a year, rendering any future rate hike on the top bracket drastically more difficult. As such, Treasury Secretary Mnuchin and Economic Advisor Cohn – also members of that tax bracket – have devised a human shield for top earners and called it “simplification.”
Let’s put on the table exactly what is at stake. The other side of the tax cut coin is the attrition of critical American initiatives. It's poor kids’ access to food. It's grandparents’ healthcare. It's the streets we drive on, it's our investment in public universities and it’s the solvency of public pension funds. It is clean energy research and city planning in the era of rising tides and record storms. We tax those who have gained the most from American economic prowess because if we don’t, we end up taxing the vulnerabilities of our most needy citizens and the integrity of our country’s basic architecture.
By measures of wealth, income, and economic security the pendulum has swung as far away from America’s middle class as at any time since Teddy Roosevelt was beating back industry’s hunt for empire. President Trump – five decades a maker of empire himself – would take the first tax reform in thirty years to push that pendulum farther.
1. Pass Through Businesses, https://taxfoundation.org/pass-through-businesses-data-and-policy/
2. Major Tax Issues 2017, https://www.brookings.edu/research/major-tax-issues-in-2016-2/
3. Corporate Tax as % of Corp Profits, https://fred.stlouisfed.org/series/A464RC1Q027SBEA#0 (corp tax/corp profits)
4. Households per bracket, http://www.taxpolicycenter.org/model-estimates/baseline-distribution-tax-units-tax-bracket-july-2016/t16-0085-number-tax-units-tax
5. Medicare cuts, https://www.vox.com/policy-and-politics/2017/9/29/16387518/senate-republicans-budget-cut-medicare
6. How the brackets will be grouped, http://www.businessinsider.com/trump-tax-plan-details-corporate-rate-individual-brackets-deductions-cuts-2017-9
7. 80% of tax benefits go to 1% through 2027 and beyond, http://www.latimes.com/business/la-fi-trump-tax-wealthy-20170929-story.html
8. Share of income by quintile, http://www.russellsage.org/sites/default/files/aggregate-national-household-income-large_0.jpg
9. Share of wealth in top 10%, https://www.washingtonpost.com/news/wonk/wp/2015/05/21/the-top-10-of-americans-own-76-of-the-stuff-and-its-dragging-our-economy-down/?utm_term=.2f51fa9ec1c6