Fresh from yet another failure to repeal-and-not-quite-replace Obamacare, President Trump and fellow Republicans are attempting to pull another trick out of their traditional playbook: “massive” tax cuts, mainly helping the rich.
The “Unified Framework” released Wednesday is, like most things Republican of late, more of a sketch than a plan. But it is a telling sketch, both in what it includes and in what it doesn’t.
There is deep irony in how things are playing out. The Republicans faithfully claim to be learning the lesson of the failed Obamacare repeal effort, but stripped to its essence, what is the lesson? It is a simple one that Trump himself ought to know full well: People hate to lose.
Trumpcare would have been a major loss for tens of millions of Americans, which was exactly its point. The quest to kill entitlement programs has become a holy grail of the right, Obamacare becoming the Moby Dick turning Paul Ryan and his merry band of conservatives into a gang of raging Ahabs.
Of course, entitlement losers make for tax cut winners. The trouble is, the losers from Trumpcare and the winners from Trump tax would not have been the same people.
The Trump tax sketch includes plenty of “wins” for the billionaire class. It lowers the top income tax rate from 39.6% to 35. Saving 4.6% of their income is a nice prize for those couples already making over $470,000 a year. It slashes the corporate tax rate from 35% to 20%. It eliminates the alternative minimum tax, which billionaires like Trump pay. It creates a special 25% tax rate for “small businesses,” defined by their legal form of ownership as “pass-through entities.”
What is such a thing? Well, technically it includes partnerships, limited liability companies, and S corporations. But the more relevant fact may be that President Trump personally owns nearly 500 of them.
Paying for these tax breaks for the rich like Trump are the seemingly forgotten losers. Trump’s sketchy tax plan has several categories for them:
Single-parent households. While loudly trumpeting the doubling of the standard deduction, the Trump plan would not be kind to single parents. It would eliminate the rate structure for single-parent households, which now splits the difference between married taxpayers and singles without children. Millions would suffer.
Larger families. Back to that standard deduction trick. Trump’s plan would roughly double the “standard deduction” given to taxpayers who do not itemize their deductions, from roughly $6000 to $12,000 for single persons, twice as much for married couples. But the plan would also eliminate personal exemptions, presently roughly $4,000 per person, including children. So there is a net gain of $2,000 for single persons. Married couples without children gain $4,000 on net ($12,000 in rise in standard deduction, but $8,000 in losses from removing their exemptions.) Having a single child makes the change neutral (gain $12,000, lose $12,000), and having more than one child makes your family a loser. Some of this effect will be affected by the raise in the lower bracket from 10% to 12% and the as-yet unspecified increase in the child credit, but larger families will still lose out in this math.
Blue state earners. The repeal of the state and local tax deduction will mainly hurt upper middle income earners in states with high income taxes — which means California, New York and Illinois. One can check various color-coded electoral maps available in the White House to see for whom these states voted in 2016.
The future. Even with all the details being nowhere close to in place, the Trump plan would be a “massive” increase in the debt and deficit. Trump is now talking about the cuts spurring a 6% growth rate, more than double what we have now — levels we haven’t seen in over three decades. As is, interest payments on the federal debt take up over 6% of our budget, more than twice as much as the federal government spends on education and more than what we spend on housing and community, energy and the environment, international affairs, and science — combined. With interest rates rising and more debt being added, that figure will rise, choking off the possibilities for government spending and making a tax increase — likely a sneaky tax increase on the working class — inevitable. Of course, that fiscal pain is pushed down the road — perhaps to when a Democrat is in the White House again.
What’s most striking about this list of losers, of course, is its juxtaposition with the winners — mainly, the rich. Consider, for example, the proposed repeal of the estate or so-called death tax: a tax that only falls on individuals dying with more than a $5.5 million net worth, nearly $11 million combined for married couples. This is 0.2% of the population. It is also people whom Trump economic adviser Gary Cohn has called “morons” for not simply planning around the tax, as billionaire Sheldon Adelson has already done to the tune of almost $8 billion.
And so the final question is: Is it really fair that millions of working parents, single and otherwise, should see their taxes increase to help finance a massive tax cut for hundreds of multimillionaire morons?
