Thursday, September 28, 2017

Death And Taxes: The Trump Administration Tax Plan

Jared Bernstein has written a good long-form article which explains Trump's "tax reform" proposal in some detail, tells us that the Democrats really should create their own tax reform proposal, explains the reasons for that, and also explains, in a fairly simple and chatty style, the economics of various tax plots.  Despite the label "long-form," the article is not hard reading at all, and serves to clarify many basic issues to a non-economist.  Or so I think.

I especially like the bit about the Kansas experiment which seems to be the role model for this new plan the Trump administration has hatched, and which ended in disaster.

The title of this post is a riff on the idea that only two things are unavoidable: death and taxes.  But it's also about one aspect of the Trump tax plan: To eliminate what's left of the federal estate tax.

Currently 99.8% of estates owe no federal estate tax at all.  This might suggest, to a rational person, that repealing it is not a particularly urgent task or one which would truly make the lives of most Americans easier.  That impression should be strengthened when we learn that those 0.2% of estates which do owe federal estate tax owe it only on the part that exceeds a fairly sizable exemption.  In 2017 that exemption is $5.49 million per decedent.

But the repeal of the federal estate tax and the elimination of the alternative minimum tax are high on the wish-list of the Big Money Boyz (such as the Koch brothers) whose influence on American politics has grown immense ever since the Citizens United decision of the Supreme Court which, in my opinion, gave every dollar the same power in political speech.  Those who have more dollars can speak much louder, of course.

What we have so far learned about the Trump administration "tax reform" is that one of its intended consequences is to increase income inequality in the United States, even though it's already very high, and even though a new Pew survey tells us that the majority of Americans don't want to see corporate taxes lowered and a plurality wants to see the taxes on high incomes raised: