“My whole life I’ve been greedy, greedy, greedy. I’ve grabbed all the money I could get — I’m so greedy,” Donald Trump told Republican primary voters last January. “But now I want to be greedy for the United States.”
In a country so besotted with wealth and power that a real-estate scion serially firing his less well-born subordinates made for must-see television, this proved to be a winning pitch. With a single sentence, Trump rebranded his long history of ripping off contractors, investors, indebted single parents, and his own severely ill family members into a testament to his own ruthless efficacy. He pursued his own prosperity by any means necessary. Now, he’d do the same for his country. The line’s audacity gave it a ring of authenticity. It was simple, memorable, surprising — and, of course, exactly what a presidential candidate who was still “greedy, greedy, greedy” for himself would say.
Here are the dizzying reversals and changing policy positions of Trump’s first 100 days in office.
Since Trump took office, he has provided countless demonstrations of the insatiable avarice he proudly advertised. The president has shamelessly refused to put any meaningful distance between himself and his globe-spanning business interests, while directing millions of public dollars into the coffers of his own properties, and using his bully pulpit to promote his daughter’s fashion line.
But all that tasteless, unprecedented, norm-shattering stuff is small potatoes. For Donald Trump, the real payday lies in simply passing a personally tailored version of the Republican Party’s regressive agenda.
On Wednesday, the president unveiled his plan for “reforming” the corporate tax code. And the cornerstone of that proposal is a giant tax cut for corporations — and an even bigger one for businesses like his own.
The Trump Organization, like many real-estate concerns, isn’t structured as a “C corporation,” but as a collection of “pass-through” enterprises — businesses that pass their income and deductions through to their owners’ individual returns. Thus, at present, Trump almost certainly pays the 39.6 percent top marginal rate on his earnings.
His tax plan would cut the rate for all businesses — corporations and pass-throughs alike — down to 15 percent. Currently, the top rate for corporations is 35 percent (although barely any of them actually pay that much). This would immediately blow a multi-trillion-dollar hole into the deficit — before kicking off a wave of tax avoidance that’d widen that hole into a chasm.
It would also, almost certainly, save Donald Trump tens of millions of dollars.
Granted, Trump would be far from the only beneficiary of a giant cut on pass-through entities. Most businesses in the U.S. are structured as pass-throughs, including many of the mom-and-pop small businesses that are valorized in virtually every speech uttered by American politicians. Right now, the discrepancy between the top corporate rate and the pass-through one is (statutorily) a mere 4.6 percent. If Trump slashed the corporate rate down to 15 — while giving nothing to pass-throughs — the latter would raise hell on Capitol Hill. And they’d be able to lace their demand for a tax cut of their own with populist rhetoric about Washington favoring big businesses over small ones. And such complaints wouldn’t be entirely mendacious!
But they’d still be mostly so: More than two-thirds of the income at pass-through companies accrues to the top one percent of earners. Seated beside those sacred mom-and-pops at the pass-through table is virtually every hedge fund in the United States (apparently, those guys are no longer “getting away with murder”). What’s more, most small businesses don’t generate enough income to benefit from Trump’s cut, anyway.
Even if one believes that cutting taxes on America’s medium-sized businesses is good public policy, Trump’s approach remains indefensible. Or, at least, it’s indefensible if you don’t also believe that promoting tax avoidance is good policy. As Vox’s Dylan Matthews explains:
The plan creates a massive loophole with which ordinary people can evade taxes. Instead of just working for Vox.com, I could form DylanCorp LLC, contract with Vox to provide writing services, and pay a 15 percent rate on DylanCorp’s earnings rather than my current 25 percent rate. For rich people paying a top rate of 39.6 percent (or the top individual rate of 33 percent that Trump proposed during the campaign), the incentive to do this will be even larger. A new study finds that when Kansas exempted pass-through income, the result wasn’t more investment or growth but a surge in this kind of tax avoidance.
Treasury Secretary Steve Mnuchin claims that the tax plan will include provisions barring high-income individuals from taking advantage of this loophole. But most tax experts believe that such measures would be impossible to administer.
Trump’s corporate rate cut would swell the deficit by $2 trillion over the next ten years, according to a Tax Foundation analysis. The pass-through cut would add at least $1 trillion on top of that, according to The Wall Street Journal, while the Tax Policy Center estimates that the ensuing uptick in tax avoidance alone would add $650 billion.
And that’s before we even get to Trump’s cuts on individual income.
Here’s a quick rundown of some of the other elements of the president’s tax proposal:
The abolition of the estate tax.
The president’s family would stand to (eventually) gain billions from repealing the tax on inherited wealth. But since everyone agrees that social mobility in the United States is too high, wealth inequality is too low, and Donald Trump’s kids aren’t nearly as rich as they deserve to be, this should be an easy sell.
The abolition of the alternative minimum tax.
To ensure that there is some limit to how much the super-rich can profit from their investments in tax (evasion) advisers, they are currently subject to an alternative minimum income tax. Eliminating that rule would (almost certainly) further swell Trump’s personal bank account, as Mother Jones notes:
We don’t know much about Trump’s taxes, but his 2005 returns, which were obtained by MSNBC, indicate the he earned $153 million that year. Without the AMT, Trump apparently would have paid just $7 million in taxes, according to the New York Times—a tax rate less than 5 percent. But the AMT forced him to pony up an additional $31 million that year, raising his tax rate to about 25 percent. Asked at a Wednesday press briefing how eliminating the AMT would impact Trump’s tax liability, Secretary of the Treasury Steven Mnuchin dodged the question and abruptly ended the briefing.
A substantial increase in the standard deduction.
This is one of the few ways that Trump plans to cut the middle class in on his heist. Right now, the standard deduction is $6,300 for individuals and $12,600 for married couples. In other words, if an individual makes $70,000, she can deduct $6,300 from that and pay taxes on just $63,700.
Trump’s plan would double both of those figures.
That move may create more buy-in for the plan among voters, but it would also earn Trump’s bill powerful enemies: If a taxpayer claims the standard deduction, she can’t also take advantage of itemized deductions like those for mortgage interest or charitable giving. A substantial increase in the standard deduction would encourage more Americans to forgo those deductions, and, thus, to take out fewer mortgages and give less to charity — a prospect that homebuilders and nonprofits will find abhorrent.
The abolition of all taxes on corporations’ future foreign earnings.
Unlike the president, the House GOP has actually made some effort to offset its desire for rate cuts with revenue increases. And its signature idea for doing so is the border adjustment tax: a revision to the corporate code that would abolish all taxes on American exporters’ foreign profits, while increasing taxes on imports. Since the United States imports more than it exports, this adjustment would raise $1.2 trillion in new revenue over ten years — while also advancing the president’s protectionist agenda. Most other nations don’t make their companies pay taxes on their overseas sales. By bucking that trend, America (arguably) puts its companies at a competitive disadvantage.
But the retail industry, and arch-conservative interest groups, don’t want a new import tax. And so, Trump has decided to do the border-adjustment-tax thing — without that whole “tax” part. As the Journal reports:
White House officials also have agreed to propose a territorial tax system …In such a system, favored by large multinational firms, U.S. corporations would pay little or no tax on future foreign earnings. The nation’s current worldwide tax system levies all corporate income, regardless of where it is earned. Companies get credits for paying foreign taxes and can defer U.S. taxes until they repatriate foreign profits.
A one-time tax on corporations’ past foreign earnings.
Right now, American companies are hoarding trillions of dollars in untaxed foreign profits, overseas. Trump’s plan would offer said companies the opportunity to repatriate those profits at a discount rate. This would amount to another large corporate tax cut, but one that would provide the government with a relatively small, one-time infusion of revenue.
The abolition of Obamacare’s capital-gains taxes.
The Affordable Care Act levied a 3.8 percent tax on the net-investment income of the very rich, so as to finance medical care for non-affluent sick people. Freeing America from that bit of socialist tyranny was the animating goal of the GOP’s crusade against Obamacare. But after discovering that giving the rich a tax break — while simultaneously condemning poor cancer patients to death — makes his party’s more moderate members nervous, Trump appears resigned to just eliminating the taxes.
A child-care tax credit.
In an ill-conceived bid to court Democratic support (and/or to bolster Ivanka’s brand as an uplifter of women), Trump’s plan includes a version of the child-care tax credit he proposed on the campaign trail.
The campaign version of Trump’s proposal was structured so as to gift affluent families with a substantial discount on their live-in-nanny bills — while providing working-class ones with a mere pittance to defray the costs of day care. As Bryce Covert of Think Progress explains:
According to a new analysis by the Center for American Progress (CAP), for the typical family of four in the areas that swung most strongly in Trump’s favor in the recent election — those living in Appalachia, the Midwest, and northern Plains — his plan would yield just an extra $5.55 a year to cover the cost of childcare. These families make about $68,500 a year and spend about $6,000 on childcare — so five dollars isn’t likely to make much of a dent.
A reduction in individual rates.
Trump’s plan would lower the top marginal rate on individual income, while consolidating the number of brackets from seven to three: a top rate of 35 percent, a middle one of 25, and a bottom one of 10. The precise income threshold for those rates has yet to be determined.
To fund that tax cut for the highest earners, the plan would eliminate all itemized deductions save those for charity, mortgage interest, and retirement savings. Which is to say: It would screw over blue states, by eliminating state and local tax deductions.
In sum, Trump’s plan is a blueprint for a raid on the federal treasury — one that would deliver the lion’s share of its spoils to the wealthiest individuals and businesses in the United States, while tossing a few bucks in hush money to the witnesses in the middle class.
It is also a plan that has (virtually) no “pay-for” beyond the assumption that redistributing vast sums of money upward will induce rates of growth unseen since the postwar era (an assumption contradicted by historical experience, but supported by several economists who are paid to invent rationales for redistributing vast sums of money upward).
To pass anything resembling this plan, Trump would need to put a ten-year expiration date on it: To evade a Democratic filibuster in the Senate, Republicans will need to pass the bill through reconciliation, a process that can only be used on legislation that doesn’t increase the deficit ten years after passage.
But that time limit is the least of the plan’s problems. Any Republican tax-reform plan was bound to be temporary. You can’t offset a giant, unpopular tax cut for the rich without even more unpopular tax hikes on the non-rich. So, the only politically feasible way of realizing the GOP’s overriding goal is to run up the deficit, and then throw a tantrum about it the next time a Democratic president wants to fund clean drinking water for low-income kids.
Trump’s plan, however, amounts to such an irresponsibly opulent gift to himself and his fellow plutocrats, his own administration can’t quite defend it with a straight face. As Politico reports:
We were up on Capitol Hill and worked our White House sources yesterday, and they all see this not as a line in the sand or as a serious proposal, but as an opportunity to get the conversation started. No, Congress won’t be able to lower corporate and passthrough tax rates to 15 percent. The professionals in the White House realize this – and also realize that they’re beginning to irk Capitol Hill committees by releasing this.
Paul Ryan, himself a high priest of supply-side voodoo, reportedly views Trump’s proposal as “‘a magic unicorn’ that will never clear the House.” Which raises the question: Why, exactly, is the White House releasing this monstrosity?
The short answer is that Trump decided to tell the Associated Press that he would release his tax plan Wednesday, thereby forcing his aides to hastily adapt his ludicrous campaign proposal for public consumption in a matter of days.
But that explanation elides a larger question. Why, nearly 100 days into its tenure, does the Trump administration lack a detailed, politically tenable plan to achieve one of its top policy goals?