How Stupid Do the GOP Tax Reformers Think Americans Are?
Here is the Trump Tax Plan in a nutshell (minus the actual earnings thresholds for the tax brackets)
Both the POTUS, his NEC Chairman Gary Cohn and Treasury Secretary Steven Mnunchin have told the American public in televised interviews "This tax plan does not help me", "This tax plan does NOT benefit the rich", "Most of the tax benefits go to the middle class tax payers" and "We think this tax plan will cut down the deficits by a trillion dollars."
To which I say "get out a calculator and Trump's tax returns and prove it you morons!" Witness the promises/lies made right to our face by perhaps the worst salesman for tax reform ever--you could not invent a worse advocate for the middle class than Goldman Gary.
These claims are of course fantastical and economically delusional and easily disproved with back-of-the-napkin math. Here is a video sample of the "middle class beneficiary" and "solving for the good of the country" delusion--roll tape.
Dude really...how ignorant or plain stupid do you think Americans are?
#IncomeTaxReality: 95% of ALL federal and State income taxes are paid by the wealthiest 20% of Americans. 100% of Alternative Minimum Tax (AMT) is paid by wealthy Americans. 100% of the pass-through income taxed above 33% marginal rate goes to top 10% income earners. 100% of estate taxes are paid by wealthy people.
#EconomicFactsMatter: Let's do the 5th grade math. If you
- cut the highest marginal income tax rates (which start at $477,000 AGI for households in 2017) 10% from 39.6 to 35%
- eliminate Alternative Minimum Tax (AMT) which is primarily paid by high income households (e.g., the lone Trump tax return in 2005 showed he paid $31.2 million in AMT vs. $3 million he owed without AMT applied)
- lower LLC/Sub-S business pass thru taxes to 25% from 39.6% (which lowers tax rate from highest 39.6% marginal rate to 25% for >$446,000 AGI households)
- eliminate Estate Tax (which only estates >$5.6 MILLION pay/$11.2 if married)
- still allow itemized deductions for mortgage interest and charitable deductions
so the real tax benefits ONLY go to the 25% of households who file a tax return that includes itemized deductions. Of the 25% of itemize, 94% of the benefits go to the top 1%. It's math...try it.
Even if you eliminate the state tax deduction (which they HAVE to do or we would have to borrow another $1.1 trillion) the vast majority of the top 20% of current tax payers (who again pay 95% of income taxes) will, via simple napkin math, pay less income tax and (as a per capita percentage) and receive about 80%-90% of the total tax benefits from the Trump "middle class" tax plan.
According to Secretary Cohn, "the average $100,000 middle class family with 2 kids should see $750-$1000 a year in lower taxes." The problem? The middle aka median household income in America is $59,000 not $100,000 ok? Manhattan is not America.
The clear losers in the plan? $150,000-$307,000 AGI (adjusted gross income) households. According to the latest analysis IF they derive their income from salary income (not business LLC/pass-through income) they will pay $3,000-$8,000 more a year in Federal taxes because of elimination of State income tax deduction.
But again, latest independent analysis shows . . . NOT shockingly . . .
- 80 percent of ALL the Trump Tax Plan tax benefits accrue to those in the top 1 percent
- To be certified as a one-percenter according to statistical data from the Internal Revenue Service (IRS), the top 1% had an adjusted gross income of $465,626 or higher for the 2014 tax year. The Washington Center for Equitable Growth put the average household income for this group at $1,260,508 for 2014. Allow me to play the world's smallest violin.
- The 1% household will save $2 million in Federal taxes over the 10-year period
- America will undoubtedly have to borrow >$2 trillion MORE than the $700+ billion a year we already are budgeted to borrow over the next 10 years to pay for our fixed entitlement, interest and military deficit spending
FACT: Using the income brackets from the latest House plan, top 1% households making more than about $466,000 AGI a year would see their taxes drop by more than $200,000 on average.
Under TrumpTax The top 1% of households by income on average save $200,000 in annual Federal Taxes or $2 million during the 10-year cycle
So Who Pays Income Tax in America Anyway?
Here are the facts as to who pays income tax in America. According to Treasury Department data, the top 10 percent of income earners in 2016 paid 80 percent of individual income taxes. The top 20 percent American households by taxable income paid 94.8 percent of every income tax dollar.
And the top 0.1 percent? They paid an astonishing 24.5 percent of taxes.
For context take 2014, the latest year Internal Revenue Service data is available. Just the top 400 U.S. taxpayers alone — with a staggering $127 billion of income — paid $29.4 billion in income taxes (not NEAR the top 39.6% rate BTW), or more than 2 percent of all income taxes.
Fact: The Top 400 taxpayers in 2014 paid more taxes paid than the ENTIRE bottom 70 percent of American taxpayers paid combined.
Catch your breath...this all gets nuttier than a baby squirrel's diaper.
There is NO Free Lunch: Under The Trump Tax Plan We Borrow $2.4 Trillion More to Pay for Tax Cuts for Top 10% Households
We have not yet mentioned that the Federal Budget is NOT proposed to be cut by the $1.5 trillion tax cut. Unless there is magically $1.5 trillion additional tax collection (see below) we will be borrowing about $250 billion more each year or about $2.4 trillion to pay for the tax cut to business and the top 1% earning households.
This borrowing is of course on TOP OF the $700 Billion+ we are already budgeted to borrow to fund our deficit spending on entitlements, military and interest payments.
“A major feature is tax collections would shift dramatically, from businesses to individuals,” said Eric Toder, a co-director of the Tax Policy Center.
No shit. By their estimation the Trump tax plan would increase the deficit by $2.4 trillion over the first decade.
“One thing I find troubling about big, deficit-financed tax cuts is it kind of looks like a free lunch,” said Len Burman, a fellow at the Urban Institute who formerly worked at the non-partisan Congressional Budget Office. Burman pointed out that the burden of the postponed taxes could fall on lower-and middle-income people in the future, either through
- tax increases or
- cuts to programs that benefit those groups.
Onto to the next fantasy. Secretary Mnuchin made this statement in response to an observation that the nonpartisan Committee for a Responsible Federal Budget (CFRB) has estimated the tax plan would reduce Federal tax revenue by $2.2 trillion over 10 years. (Including additional interest on the debt, CRFB estimated the deficit would increase by $2.7 trillion.)
Mnuchin argued that instead there would be an ADDITIONAL $2 trillion in revenue from economic growth, resulting in a $1 trillion reduction in the deficit.
Cohn, briefing reporters at the White House a few hours later, offered a different estimate: “We know that 1 percent change in GDP will add $3 trillion back (in income tax revenue over 10-year period). So if they’re right, we’re only going to pay down $800 billion of the deficit. I’ll live with a $800 billion pay down.”
Net Net Mnuchin is anticipating $2 trillion in revenue and Cohn is anticipating $3 trillion in revenue. Of course they are.
Key Fact: NO serious economist I have talked to believes that a tax cut boosts economic growth so much that the tax cut pays for itself.
Why? Because tax cuts cannot outrun the daily deterioration of America's economic demographics aka age and population mix and our secular decline in productivity (output per hour).
Here is the chart the White House definitely does NOT want you to see.
11,000 Baby Boomers turn 60 everyday/6000 turn 70 every day. About 10,000 Millennials turn 21 each day...see a problem? You don't need a PhD in Economics to understand the central premise of the tax plan is complete horseshit.
In 2005, the Congressional Budget Office under my old friend the staunch conservative Douglas Holtz-Eakin estimated that a 10 percent reduction in federal income tax rates would have (as us economists say) "macroeconomic feedbacks" of between 15 and 30 percent. In other words, a $1 trillion tax cut might yield $150 billion to $300 billion in additional revenue. That still means a reduction in revenue of as much as $700 billion.
As Holtz-Eakin put it earlier this year in an opinion column for The Washington Post: “Proposing trillions of dollars in tax cuts and then casually asserting that such a plan would ‘pay for itself with growth’ … is detached from empirical reality.”
Indeed, contrary to popular perception, even Ronald Reagan predicted revenue would fall as a result of his big 1981 tax cut that reduced tax rates. That is shown in Reagan administration and Congressional Budget Office scores of the Reagan tax plan reproduced in a 2011 article for Tax Notes by Bruce Bartlett, who helped craft the 1981 tax cut as a congressional aide at the time. FYI--the estimates turned out to be wrong because the 1981-1982 recession was deeper than expected and inflation fell more rapidly than expected, so Reagan boosted taxes just one year after his tax cut.
Would someone please share this with Cohn and Munchin?
William A. Niskanen, chairman of Reagan’s Council of Economic Advisors, co-wrote a paper in 1996 that defended Reagan’s economic record but also said it was “an enduring myth” that Reagan officials believed tax cuts would pay for themselves. “This was nonsense from day one, because the credible evidence overwhelmingly indicates that revenue feedbacks from tax cuts is 35 cents per dollar, at most,” Niskanen wrote, noting that “the Reagan administration never assumed that the tax cuts would pay for themselves.”
A Treasury Department study on the impact of tax bills since 1940, first released in 2006 and later updated, found that the 1981 tax cut reduced revenue by $208 billion in its first four years. George W. Bush’s 2001 tax cut led to a revenue loss of $91 billion, the Treasury paper calculated. (The figures are rendered in constant 2012 dollars.)
And let's not forget that Mnuchin believes that blue collar and middle class wages will go UP because of corporate tax reform. Mnuchin insisted that a corporate tax cut would lead to higher wages, since workers bear the cost of corporate taxes. “Most economists believe that over 70 percent of corporate taxes are paid for by workers,” he said.
Bullshit. At the same time he uttered his final economic fantasy, a Treasury paper that concluded that actually, labor only winds up paying 18 percent of corporate taxes was removed from the department’s website. (Like nobody would notice?)
Bottomline: When it comes to the actual historical/empirical data on tax cuts, it appears that a bad case of Trumpian delusional logic and mendacity has infected his economic leadership team.
Forecast: WHEN the unambiguous reality that the Trump Tax plan is really this: borrow $2.4 trillion to pay (on average) $200,000 in tax savings or $2 million over ten years to the top 1% income households and $1,000 a year to the middle class, the moderate GOP and DEM Senators from the high income tax states (CA, NJ, NY, CT, IL) are going to scream bloody murder.
THEN the real negotiations will begin. This is an existential event for the traditional GOP legislators--no pass equals no political future. But if Trump's coattails remain under a 38-40% approval rating, budget hawk GOP members and "soak the rich" left of center Dems could kill Trump Tax Reform in the 36 legislative days remaining.
PS: Here is Gary Cohn's negotiating tactic on generational Tax Reform: "This is our opening and final offer!" Maybe he should Donald Trumps book "Art of the Deal"?