Friday, April 28, 2017

Trump's conjured tax plan defended by Treasury Secretary Munchkin

The NY Times reports on Trump’s tax plan: White House Proposes Slashing Tax Rates, Significantly Aiding Wealthy.

WASHINGTON — President Trump on Wednesday proposed sharp reductions in individual and business income tax rates and a radical reordering of the tax code that would significantly benefit the wealthy, but he offered no explanation of how the plan would be financed as he rushed to show progress before the 100-day mark of his presidency.

Munchkins
Gary D. Cohn, left, & Steven Mnuchin

Mr. Trump’s skeletal outline of a tax package, unveiled at the White House in a single-page statement filled with bullet points, was less a plan than a wish list. Treasury Secretary Steven Mnuchin and Gary D. Cohn, the director of Mr. Trump’s National Economic Council, laid out the bare bones to reporters, part of a mad dash toward the administration’s 100th day on Saturday that has included the resurrection of a health care bill and near-daily signings of executive orders.

But they offered none of the standard accouterments of such rollouts, such as detailed charts showing the cost of each provision, phase-in periods, the impacts of the proposals on people and testimonials on the program’s potential benefits.

What’s in it for Trump

The proposal envisions slashing the tax rate paid by businesses large and small to 15 percent. The number of individual income tax brackets would shrink from seven to three — 10, 25 and 35 percent — easing the tax burden on most Americans, including the president, … The president would eliminate the estate tax and alternative minimum tax, a parallel system that primarily hits wealthier people by effectively limiting the deductions and other benefits available to them — both moves that would richly benefit Mr. Trump.

Questioned about that repeatedly on Wednesday, Mr. Mnuchin said that Mr. Trump, the first president in four decades not to disclose at least a portion of his tax returns, had “no intention” of releasing them now.

“I can’t comment on the president’s tax situation since I don’t have access to that, O.K.?” Mr. Mnuchin said when asked how large of a tax cut the president would receive under his own plan.

The rest of the American people “don’t have access” either.

Here, from John Cassidy (New Yorker) is an answer to Mr. Mnuchin’s lack of access, Trump wants to give himself a tax cut and undermine the tax code.

… Trump wants to give himself a big tax break, and not just by slashing the tax rates that high earners and business owners face. Thanks to a leaked tax filing, one thing we know about Trump’s tax history is that in 2005 he paid the federal government thirty-eight million dollars on income of about a hundred and fifty million dollars. But, because Trump had so many deductions, and exploited so many loopholes, his initial tax liability that year was much lower: $5.3 million. The only reason he ended up paying thirty-eight million is that he got caught by the Alternative Minimum Tax (A.M.T.)—a fallback mechanism that the Internal Revenue Service uses to prevent people like him from paying too little.

If Trump’s plan goes into effect, the A.M.T. will be eliminated. Why? Mnuchin’s explanation was that the tax code is too complex. “The A.M.T. is just another example of a … complicated set of rules,” he said. If Trump gets his way, he and other rich people won’t have to worry about the A.M.T. With the help of their accountants, they will be able to minimize their tax exposures in the knowledge that the I.R.S. won’t be able to undo their handiwork.

And what about the small businesses that are supposed to benefit?

Those who stand to benefit the most from Trump’s proposal, however, aren’t local businesses or owners of mom-and-pop stores—they are hedge-fund managers, private-equity moguls, real-estate investors, and other wealthy groups that organize their businesses in “pass through” partnerships specifically to take advantage of the tax code. “About half of all pass-through income flows to the top 1 percent of households (those with incomes above $693,500 in 2016),” the Center on Budget and Policy Priorities said in a February report. “About 27 percent goes to the bottom 90 percent of households.”

So much of what Trump proposes is aimed at more benefits for the already wealthy. At what cost to the rest of us?

Magical thinking

In a brief session with reporters, Mr. Cohn and Mr. Mnuchin said they had been toiling for weeks on the proposal, much of which closely resembles the plan Mr. Trump championed as a presidential candidate. They argued that it would spur robust economic growth that would — along with the elimination of deductions — cover the potentially multitrillion-dollar proposal entirely, a prospect that even many Republicans privately concede is virtually impossible.

“This will pay for itself with growth and with reduction of different deductions and closing loopholes,” Mr. Mnuchin said, repeating his optimistic estimate that the plan would spur the economy to grow at a rate of 3 percent annually. “The economic plan under Trump will grow the economy and will create massive amounts of revenues, trillions of dollars in additional revenues.”

What they don’t tell you about are the effects on the deficit. Here’s the NY Times’ listing of what components of Trump’s tax plan will add to the deficit, What Trump’s Tax Proposal Will Cost.

Here’s John Cassidy’s take at the New Yorker, Trump’s tax plan looks like a plutocrat’s dream.

According to the nonpartisan Center for Tax Policy, cutting the corporate rate to fifteen per cent would cost about $2.4 trillion over ten years. If you add in all the personal-income-tax cuts that Trump proposed during last year’s campaign, the tab comes to about $6.2 trillion.* Even the original Voodoo Economists in the Reagan Administration would have blanched at claims that more rapid economic growth could close a fiscal hole of this size. If the White House persists with its flaky argument, it will have trouble selling its plan to deficit hawks in the Republican Party, let alone to Democrats.

NY Times:Democrats rejected what they described as magical thinking behind the plan and condemned it as a giveaway to the rich masquerading as a tax overhaul.”

Finally, there is the basic unfairness of it all. In his address to Congress at the end of February, Trump said that he would provide “massive tax relief for the middle class.” But, from everything we know, the primary beneficiaries of his plan will be the very rich. As highly paid executives, they stand to reap big gains from a cut in the top income-tax rate. As owners of so-called pass-through businesses and investment partnerships, they stand to gain from the cut in the corporate tax rate. And as major owners of corporate equities, they stand to gain from the profit-repatriation scheme, the proceeds of which are likely to be largely used for stock buybacks and other financial-engineering schemes.

Munchkins
Munchkins in 1939 Wizard of Oz

Shortly after the press briefing Scriber’s usually unreliable sources observed Sean Spicer, Gary Cohn, and Steven Mnuchin, disguised as a troup of Munchkins, making for the back door while eating some cakes.

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