The Trump administration can no longer promise that the president won’t cut taxes on the rich, but the White House still swears that he isn’t trying to — and will take no pleasure in accidentally doing so.
Months ago, Treasury Secretary Steve Mnuchin declared that “any reductions we have in upper-income taxes will be offset by less deductions so that there will be no absolute tax cut for the upper class.” Donald Trump has stuck with this line, saying earlier this month that the wealthy “will not be gaining at all” from his proposed changes to the tax code.
But this week, as the president prepared to release his final framework for tax “reform,” Mnuchin clarified that Trump was merely expressing a heartfelt aspiration — not drawing a line in the sand. Asked by CNN’s Jake Tapper if “that pledge that there will be no ‘absolute tax cut’ for the upper class” was still in effect, Mnuchin replied, “It was never a promise. It was never a pledge … It was what the president’s objective was.”
It may sound a trifle absurd for a president to insist that he wants to keep taxes on the rich at their current levels – but can’t promise that he won’t absentmindedly slash them. And yet, there is a certain logic to Mnuchin’s claim. It’s very difficult to cut taxes on the middle class without also giving a break to the rich — any cut in the marginal rate paid by households earning $75,000 will also apply to the first $75,000 of income earned by a billionaire. Further, the White House’s plan was always to offset benefits to the rich by ending targeted tax breaks, like the state and local tax deduction. But every deduction has its own interest group — no loophole closure will come easy. So, it’s understandable that Trump does not want to promise his other tax changes will live or die on whether such loopholes get eliminated. Donald Trump is president, not king. If congressional Republicans insist on aiding the billionaire class, what’s a populist president to do?
But on Tuesday, the details of the administration’s framework for tax
“reform” leaked — and exposed all these excuses for the brazen lies that they are. The president is so uninterested in cutting taxes for the rich, his plan abolishes two taxes that affect virtually no one but multimillionaires. According to Bloomberg, the plan calls for ending the tax on estates valued at over $5.49 million, and the alternative minimum tax, which puts a cap on how much a well-off household can reduce its tax burden by piling up deductions. While Republicans insist that their opposition to the former is grounded in concern for small, family-run businesses and farms, such entities account for only one percent of the estates subject to the tax — and only fifteen-hundredths of one percent of the total revenue the tax generates. The alternative minimum tax, meanwhile, primarily affects households that make between $200,000 and $1 million a year. (Trump may not consider such voters “rich,” but most Americans would.)
To be fair, Trump’s framework does (reportedly) call for abolishing the state and local tax deduction, a break that primarily benefits affluent families in blue states. But the plan’s only gesture toward blocking an absolute tax break on all high-earners is laughably hollow: Trump’s framework cuts the top marginal rate on personal income from 39.6 to 35 percent — but invites congressional Republicans to consider adding a fourth, higher rate on the very wealthiest Americans.
This is a bit like handing Hannibal Lecter a fresh human corpse, and then stipulating that he’d be welcome to consider veganism — or telling Donald Trump that, while the official White House schedule blocks out two hours for livetweeting Fox & Friends tomorrow morning, no one would complain if he chose to read through a stack of white papers on nuclear strategy and the opioid crisis, instead.
Other pieces of Trump’s tax plan that would primarily benefit the rich include:
1) Slashing the rate on corporate income from 35 percent to 20 percent. The savings that companies secure through tax cuts go primarily to shareholders and CEOs, and what does trickle down to workers rarely makes it below management.
2) Cutting the rate on “pass-through” entities to 25 percent. Right now, partnerships and limited liability companies — entities that range from mom-and-pop grocers to hedge funds to the Trump Organization — don’t pay taxes on income, but rather, pass their earnings through to their owners, who then pay individual rates, typically the top one of 39.6 percent. Slashing that rate to 25 won’t just give a huge break to hedge-fund managers — and Donald Trump — but also create an incentive for high-earning workers to reclassify themselves as independent contractors, incorporate as single-person LLCs, and get their personal wages taxed at 25 percent. Trump’s framework insists that the plan will include unspecified measures to prevent such gaming. But given that the president also wants to cut the IRS’s budget for tax enforcement, it’s difficult to take such promises seriously.
All that said, the framework does deliver some benefits to ordinary Americans. The plan would nearly double the standard to deduction to $12,000 for individuals and $24,000 for families, while also “significantly increasing” (the plan stipulates no number) the child tax credit that currently sits at $1,000 for every child under 17.
But by themselves, these measures may do little to offset the unpopularity of a plan that delivers its biggest benefits to the super wealthy. Virtually no one in the United States believes that taxes on corporations and rich people should be cut. In one recent Gallup survey, just 9 percent of respondents said corporations paid too much in taxes, while 67 percent said they paid too little; for “upper income people,” those figures were 10 and 63, respectively. A Washington Post/ABC News poll released last week found conservative Republicans oppose tax cuts on the rich by a margin of 42–50 percent. What’s more, most voters don’t see any major need for their taxes to be cut. In April, Gallup found 61 percent of Americans saying that their current income-tax burden is “fair” — the highest that figure has been at any point since 2009.
None of this feedback has led Republicans to change their legislative priorities. But it has led them to redouble their efforts to mislead the public about what those priorities are.