Slash Taxes, Balloon Federal Deficit, Get Democrats To Fix, Blame Democrats For Deficit, Rinse And Repeat
That’s been the story of U.S. politics for as long as we can remember. Still, the plan Trump unveiled at an event in Indiana stands out: if it passes in a substantially similar form to what he’s proposing, the multi-trillion dollar cut would be the most sweeping tax overhaul in a generation.
The entire 9-page document (attached here) reads like a brochure for a not-to-be-believed time share. With similar unmentioned pitfalls and risks. The Treasury Department also issued a 1-page summary of the 9-page document.
All in all: a fitting pitch from a President who promised “I will give you everything.”
Oh, and those pesky details about how to pay for it? That’ll be up for congress to figure out. Or not. Doesn’t congress know by now tax cuts don’t pay for themselves? Yes, probably. But even if they still believe in trickle down, the prospect of a monumentally out-of-control deficit would not be a total loss for many Republicans, for instance House Speaker Paul Ryan. He’s just itching to dismantle Social Security, Medicare, stuff like that. And it’s a much easier sell if he appears to be doing it not because of some twisted compulsion of his, but because we can’t afford not to. But that fated day, if it comes, is still probably a few years off.
Let’s look at a few central features of the President’s plan:
• Gives middle class a “fun-house mirror” of a tax cut: it appears much bigger than it really is. The first thing Trump mentions in his speech is “the first $12,000 of income earned by a single individual will be tax free”. The White House touts that as a “doubling” of the current deduction. Not exactly. Right now while the single deduction is only half that, each person also gets an individual exemption. That will disappear. So while there’s still a small benefit, it’s far from double.
Here’s a chart to illustrate:
• Kicks off with a big party for big business: for the first 5 years any new capital investments big corporations make they’ll be able to write off immediately, instead of doing it little by little. This is a neat trick to rev things up at the start and make it look like the plan is really working. Corporate taxes overall cut from 35% to 20%.
• Could be big for small businesses: Instead of having profits taxed as income, certain types of mostly small businesses would now be subject to a 25% tax, which would represent a big cut in many cases. As we mentioned yesterday, why wouldn’t everybody in a higher tax bracket become their own one-person business? Answer: It’s on Congress to figure out a way to control that.
• Fewer tax brackets: Instead of 7, there would be 3 (or maybe 4), with the highest dropping from 39.6% to 35%, and the lowest rising from 10% to 12%. The President did not specify what each income threshold would be.
We Watched The Entirety Of The President’s Speech, So You Wouldn’t Have To
And while we won’t linger on this, we found it surprisingly uninspiring, not even entertaining: in short, not typical Trump. Everybody’s entitled to an off day. Still, we almost felt sorry for Trump whenever he paused for applause (which of course was often) and there was just a smattering. And he appeared to be poorly lit or color-balanced: something the White House must’ve noticed too, because they found ways to make his image brighter and more vibrant as the day wore on. Both these images are from Trump’s Twitter feed:
Republican Embrace Far From Certainty
Newly lame-duck Republican Bob Corker said tax reform will make health care look like a “piece of cake”. And he won’t support it if it adds to the deficit. The slippery thing here is what various Republicans will or won’t be willing to accept as evidence something will add to the deficit, because the numbers add up very differently depending on what your projections are for growth. (Probably also who your President is will also make a difference).
Targeted Legislation: How A Huge Tax Cut For The Rich Could End Up Being A Tax Hike For Rich Democrats
People in many parts of the country have routinely been rewarded for no valid reason as part of the deal making process in Washington. It’s called pork. But there’s a new strategy the President and Republicans have been obliquely playing with: using legislation to target and punish people who didn’t vote for them. (Democrats could never get away with doing the same thing, since they have to at least pretend to support low-income people regardless of where they reside).
Republicans did that in their latest failed health care plan: mustering support by offering red states much more support than blue states, generally. And they’re doing it again with tax reform by threatening to end the deduction for state and local taxes. Who’s that going to cost the most? People who make a lot of money and live in high tax states: like New York, Connecticut, New Jersey, Maryland, California, Virginia, Massachusetts. Trump did not win a single one of those. And now he wants them to pay. Literally.
Editorial: Why We Can’t Let Trump Kill The Estate Tax
On the face of it, the Estate Tax (or “Death Tax”) as Trump calls it, sounds heartless and unfeeling: someone dies, and there’s the federal government, hovering over like a vulture waiting for its cut.
And Trump pulled out all the stops on this one. Calling it “Crushing. Horrible. Unfair.” Saying it brutalized “small businesses” and “farmers”. Never mentioning it only applies to people with personal wealth of over $5.5-million, or about 2 out of every 1,000 people who die. Never mentioning the extremely wealthy 1%ers: CEOs, hedge fund managers, real estate developers who stand to benefit most from its repeal.
And that’s why in our opinion it has to stay: for all the lip service Democrats like Elizabeth Warren and Bernie Sanders have given to the runaway wage gap, and the inequity of astronomic CEO salaries, they’ve been completely unable (and will continue to be unable in this Congress, with this President) to pass any legislation to change that.
So the only thing on the books right now that successfully claws back part of those excessively skewed earnings is the estate tax.
That’s why Trump wants it gone. That’s why it’s gotta stay.
Health Care: President’s Tangled Tweets, Bipartisan Efforts Start Up Again, White House Deepens Strategy To Trash Obamacare
• Remember how Paul Ryan said the possibility of a bipartisan plan was forever kaput? Well, the impossible is possible again! Senate HELP (the “H” stands for help) Committee Chair Lamar Alexander is reopening bipartisan talks and says he might still be able to do something to stabilize Obamacare markets for the next 2 years.
Alexander originally aimed to get some legislation passed by the end of the month, when insurers have to set rates for 2018. That probably won’t happen now. Which might mean Republicans’ final failed attempt to repeal Obamacare may have served a horrible, horrible purpose after all, in the form of substantially higher Obamacare premiums for next year than otherwise would’ve been.
• Trump Tweeted he actually has the votes now to pass the latest version of the Senate Republicans’ health care bill, but couldn’t get all of them lined up by this weekend’s deadline because one of his “yes” votes is hospitalized. To which the Senator behind that vote Tweeted:
Trump almost simultaneously said he’s now willing to work with Democrats on a compromise. But why would you be willing to do that if you’ve got the votes?
• Vox discovered yet another move by the White House to help tear Obamacare apart: it found in Mississippi at least, the Administration is discontinuing operations to brief in-state advocacy groups, officials, insurance salespeople, about sign-ups for the coming year.
Trump’s people didn’t deny it, replying: “As Obamacare continues to collapse, HHS is carefully evaluating how we can best serve the American people who continue to be harmed by Obamacare’s failures.” How’s that for a response!
Could 280 Characters Throw Trump For A Loop?
Most people have been interpreting Twitter’s decision to double the number of characters allowed per Tweet as a boon for Trump; he’ll have more room to rant. We think it might be the opposite. Trump is a master of the 140 character Tweet. It’s like telling a gold medalist in the 100-meter he’s going to have to run distance.