Saturday, April 29, 2017

Trump's Tax Reform Proposal: A Gift Not To His Voters But To Himself And His Rich Friends

Have now been made available in the sense of a page or two of scribbles, without any impact calculations.  The shortness of those pages makes it fast work to conclude that the proposed tax reforms will shift even more money into the well-filled pockets of the top one percent of US earners.

The New York Times pointed that out in the title of its piece about the plan:

White House Proposes Slashing Tax Rates, Significantly Aiding Wealthy

The maximum federal personal income tax rate would be reduced.  That would aid the wealthy to become even wealthier.  The proposal would eliminate the estate tax which currently affects only 0.2% of American estates, the richest ones.  It would also eliminate the alternative minimum tax* which has been used to guarantee that the richest of the rich cannot avoid paying taxes altogether.

The Medicare 3.5% surtax on net investment income earned by wealthier taxpayers would be rescinded.

Corporations would see their tax rate cut to 15%. Trump is promising to also close all those loopholes which mean that large firms often pay actual taxes at a much lower rate than the current corporate income tax rate.**

Corporations would no longer have to pay tax on their foreign earnings!  Remember how Trump campaigned on forcing American firms to come back home?  This gives them the very opposite incentive.

It's like eternal Christmas for the top one percent, and an eternal orgasm for the top 0.1%!

The utter greed and lack of any shame by the Trump administration is stunning.  It literally stuns me, because the US income inequality has already grown to truly worrisome levels, the kinds of levels which might start presaging rebellions and riots, but instead of trying to reduce income inequality (the kind of approach those rabid Trump voters would want), Trump's tax reforms would speed up our process toward a banana republic.  And the winners, quite openly, are the richest among us, the very people who can't get much material enjoyment from even more money in their pockets, given that all their needs are already well satisfied.

The pittances he offers to the shrinking middle class truly does not matter in comparison to the extremely harmful effects of further wealth concentration into fewer and fewer hands.  Democracy itself is at risk if the so-called president of the United States is so blinded by his privilege that he doesn't see how vile and loathsome his proposal actually is.

Now watch a 2012 video about the wealth distribution in the United States, remembering two important points:  First, the situation is worse in 2017 than it was in 2012.  Second, although the video is about wealth and not about income, if wealth is the water in a kitchen sink then income is the water that flows into it from the faucets.  Thus, what happens to income inequality will ultimately be reflected in wealth equality, and the abolition of the estate tax will naturally work even more directly:

That's the background against which Trump's tax reform should be viewed.


*  Now this explains why Trump wants to get rid of the alternative minimum tax (AMT):

Though Trump refuses to release any recent tax returns, information from his 2005 return indicates that he paid nearly $37 million in federal income taxes that year.
But for the AMT, he would have only paid about $5.3 million.

** While the current corporate tax rate in the US is high, compared to other OECD countries, the actual taxes paid by US firms do not depend on that alone, but also on various accounting tricks and on the items that firms may deduct before taxable profit is calculated.  Thus, while the US corporate tax rate is 35%, a 2014 study by Citizens for Tax Justice using five years of data found that

Fortune 500 companies paid an average federal effective corporate income tax rate of only 19.4 percent, which is just over half of the nominal U.S. statutory rate of 35 percent. That same study found that many profitable, large U.S. corporations such as Boeing, General Electric and Verizon paid no federal corporate income taxes at all.

What the effective corporate tax rate (the rate actually paid) might be in the Trump sketch of a plan depends on whether all those loopholes are actually closed.  I very much doubt that they will be closed.