As you may have seen, Donald Trump released his tax plan on Monday. He promised to cut income-tax rates for virtually everyone, but especially for the ultra-rich, who would see their top rate reduced from 39.6 per cent to twenty-five per cent. He also promised to slash the corporate tax rate from thirty-five per cent to fifteen per cent, cut the capital-gains tax from twenty-eight per cent to twenty per cent, and abolish the estate tax. As for the Alternative Minimum Tax and the marriage tax penalty, they, too, would disappear.
In short, Christmas came early to Trump Tower. That’s where Trump unveiled his plan, which he called “Tax Reform That Will Make America Great Again.” Apparently seeking to downplay the regressive aspects of the plan, he presented it as an effort to simplify the tax code and help ordinary Americans. “These lower rates will provide a tremendous stimulus for the economy—significant G.D.P. growth, a huge number of new jobs, and an increase in after-tax wages for workers,” he said in a statement.
I say “apparently” because, with Trump, you can never be quite sure how many of the details he has internalized. Under fire a few weeks ago from his Republican opponents for being heavy on talk and light on substance, he promised to put out some actual policy proposals. These ones looked as though they had been ordered online from the Club for Growth, the Heritage Foundation, or Larry Kudlow’s consulting firm.
Far from challenging the trickle-down/supply-side fantasies that have become G.O.P. orthodoxy, the author of the Trump plan embraced them wholesale. In fact, he or she appears to have taken Jeb Bush’s plan, which is itself a testament to voodoo economics, and simply changed some numbers here and there. Bush would cut the top rate to twenty-eight per cent; Trump would go three percentage points lower. Bush would reduce the corporate tax rate to twenty per cent; Trump would cut it to fifteen per cent. Bush would seek to remove fifteen million low-paid workers from the income-tax rolls; Trump would remove thirty million.
As Jordan Weissman pointed out at Slate, Trump’s plan is simply an “extra-luxurious” version of Bush’s. It’s also extra-fantastical, extra-regressive, and extra-irresponsible. Trump claimed, for instance, that his tax cuts would be revenue neutral, because he would also abolish some loopholes exploited by the rich. But that claim defies arithmetic. According to a preliminary analysis released on Tuesday by the conservative-leaning Tax Foundation, the Trump plan would actually reduce over-all tax revenues by ten trillion dollars—yes, trillion—over the coming decade.
All of which amounts to a sad, if predictable, cop-out on Trump’s part. For months now, he has been going around the country promising to raise taxes on hedge-fund managers and other beneficiaries of the notorious carried-interest deduction in the tax code. “These are guys that shift paper around and they get lucky,” Trump said on “Face the Nation” in August. “The hedge-fund guys are getting away with murder. They’re making a tremendous amount of money. They have to pay taxes.” In September, again on “Face the Nation,” he extended his criticisms to C.E.O.s generally, saying that their high salaries were “disgraceful” and “a total and complete joke.” His populist rhetoric even won him plaudits on the left. Earlier this month, Senator Elizabeth Warren said, “Donald Trump and I both agree that there ought to be more taxation of the billionaires, the people who are making their money on Wall Street.” Paul Krugman wrote a column in the Times that was headlined “Trump Is Right on Economics.”
It turns out that Trump was either bluffing or being cynical. It’s true that, in abolishing the carried-interest deduction for hedge-fund managers, he would force them to pay a tax rate of twenty-five per cent instead of twenty per cent on some of their income. But, by reducing the top rate on ordinary income from 39.6 per cent to twenty-five per cent, he would give the hedgies and other members of the one per cent a huge break on the taxes they pay on income not covered by the deduction. In addition, he would introduce a new tax break—a rate of just fifteen per cent on “pass-through” income generated by small businesses—that hedge funds and other partnerships might well be able to exploit to their advantage. In the words tweeted out by Len Burman, the respected director of the centrist Tax Policy Center, “#Trump tax plan is huge tax cut on the rich. How huge is hard to say because details are scarce.”
Trump’s claims about the benefits of his plan for low-paid workers, some of whom would no longer have to pay any federal income taxes (they would still have to make contributions to Social Security and Medicare), were also accurate, in a sense. But the discrepancies between their projected savings and those of high earners are huge. According to an analysis by the liberal group Citizens for Tax Justice, households in the bottom twenty per cent of the income distribution would save about two hundred and fifty dollars a year. Households in the top one per cent would save, on average, nearly a hundred and eighty-five thousand dollars. So much for Donald Trump as the tribune of the masses.
Why did I refer to this cop-out as predictable? Because I doubted all along that Trump had the depth and gumption to be a genuine American populist—a Huey Long for the Internet age. Such a figure, if he had channeled worries about immigration, ISIS, and national decline, then combined these with some seriously populist proposals designed to exploit resentment of corrupt financial and political élites, could perhaps have emerged as a genuinely potent and dangerous force. But Trump isn’t that guy. A self-satisfied showman and self-promoter rather than a real insurrectionary, he ultimately hasn’t got much to offer. This tax plan makes it painfully clear.
