After toiling away for months, the so-called “Big Six” gang of Republican architects have finally unveiled their initial tax proposal, with the feel-good slogan “More Jobs, Fairer Taxes, Bigger Paychecks.” Despite all the political spin in recent weeks from Trump and his lieutenants about how the plan won’t be a big giveaway for the rich (and might even raise their taxes!) and will be a boon for the middle class, the proof is in the paper.
As expected, the details of the plan show a proposal that was explicitly written for the rich, with provisions aimed at easing the tax burden of the wealthiest Americans. And for the middle class? Nothing but outright lies and murky promises to iron out the details in Congress.
The plan cuts the corporate tax rate from 35 percent to 20 percent, a move that Republicans claim will unleash a surge of economic growth. In fact, it will only serve to further fill up corporate treasuries and enrich shareholders. Big companies are not capital constrained—if they were, they would not be spending so much cash on stock buybacks that serve no economic purpose other than to pump up the share price.
On top of that, Republicans are calling for a “territorial” tax system that critics say will allow multinational corporations to effectively pay little to no taxes on their offshore profits—compounding the current epidemic of phony booking of profits in tax-haven countries.
Under the guise of helping small businesses, the plan cuts the tax rate for owner-operated pass-through entities from 39.1 percent down to 25 percent. In reality, this gives powerful business operations like the Trump Organization a huge tax break and creates a whole new opportunity for tax evasion. Meanwhile, small owner-operated firms get no relief, since they’re already paying lower rates.
In its push to purportedly “simplify” the tax system, Trump’s plan folds the current series of seven progressive tax brackets down to three, and in doing so slashes the top rate from 39.6 percent to 35 percent. It also eliminates the estate tax, which amounts to an average $ 2 million windfall for the top 0.2 percent and more than $ 20 million for the wealthiest families in the country. Furthermore, it repeals the alternative minimum tax, which ensures that the wealthy don’t get away with paying too little in federal taxes.
Clearly Trump and the Big Six have given a great amount of thought as to how to best secure tax cuts for the rich. So, one might assume that they’d have given at least a little thought as to how best to help the average American—since slashing the corporate and pass-through rates and repealing the alternative minimum tax and the estate tax do absolutely nothing for them.
Apparently not. Trump is actually calling to increase the bottom tax rate from 10 percent to 12 percent. Republicans say, “Don’t worry,” as they’re going to double the standard deduction, which will result in a big tax break for low- and middle-income Americans.
But if you look closely at the fine print, this promise to double the standard deduction is an absolute lie. As Josh Barro explains for Business Insider, the plan actually would only increase the standard deductions available to taxpayers by 15 percent (and even less for seniors).
Here’s how that math works. Let’s say you are single with no dependents, and you have a moderate income. Currently, you get to take the standard deduction ($ 6,350) and one personal exemption ($ 4,050). If you are 65 or older, you also get to take an additional standard deduction ($ 1,250). That adds to $ 10,400, or $ 11,650 if you’re a senior citizen.
The Republican plan would replace all these provisions with a single deduction of $ 12,000 ($ 24,000 for married couples.) That’s a 15% increase — except for seniors, who get a 3% increase.”
Meanwhile, middle-class taxpayers who benefit from the mortgage-interest deduction and state and local tax deductions would likely end up paying more in taxes.
Republicans promise in the plan that there will be “additional tax relief” that will be determined during the congressional committee process. That is to say, the middle class will likely not be getting additional tax relief. As corporate and special-interest lobbyists descend on Capitol Hill as they try to get their lucrative carve-outs from sympathetic committee members, the interests of the middle-class will fall by the wayside.
Don’t be fooled by Republican talking points that this simplifies the tax process and will put more money in the pockets of the middle class. And don’t buy it when Trump claims that he’s not giving a gigantic handout to the wealthy (including himself).
This is straight-up trickle-down taxation. The economic growth and jobs will not come, no matter how low the rates go. It’s just tax cuts for the rich and powerful, and fairy tales for everyone else.
Tax Cuts for the rich. Deregulation for the powerful. Wage suppression for everyone else. These are the tenets of trickle-down economics, the conservatives’ age-old strategy for advantaging the interests of the rich and powerful over those of the middle class and poor. The articles in Trickle-Downers are devoted, first, to exposing and refuting these lies, but equally, to reminding Americans that these claims aren’t made because they are true. Rather, they are made because they are the most effective way elites have found to bully, confuse and intimidate middle- and working-class voters. Trickle-down claims are not real economics. They are negotiating strategies. Here at the Prospect, we hope to help you win that negotiation.