This just in: Trump just put forth a Tax Plan that will be hugely good. Or so he says.
Here is what it looks like to me…
First of all, I wrote a blog post called The Schrodinger President a few days ago. I explained how Trump puts out a promise and then basks in the afterglow as if he has actually accomplished something. When we peek at his plans, we see they are empty but by that time, he has move on to another false promise and another self-congratulatory session…for doing nothing.
This tax plan is a lot like that.
It’s 1 page long and has the same amount of content that you’d find in a high school freshman’s English theme for an assignment of “In 500 words or less, what did you do last summer.”
My guess is that Trump slapped this together in about 15 minutes.
He then marched it out and is taking credit for major tax reform in his first 100 days.
Aside from the fact that this plan means nothing and contains almost nothing, let’s look at a few issues.
First, we have a very high corporate tax rate (35%). However, once you factor in tax credits and loopholes, the realized rate is actually between 12% and 17%. This is based on a Study by the Government Accounting Office in 2010.
The Republican Party knows this. So, when they are saying “35%” they are lying directly to you.
I don’t mind a corporate tax cut but it must be offset by eliminating loopholes. If you don’t do this, then a new tax rate of 15%, as proposed by Trump, will result in an actual tax rate near zero.
Trumps tax plan is going to cost about $7 trillion over the next 10 years. That’s how much less money we will collect from corporations.
However, the Republican Party has switched our accounting system over to something called “Dynamic Scoring.” This means that if we need to make up $7 trillion in the next 10 years, the Republicans just make up a GDP growth number that will generate that figure. There is no data needed. This is really just a guess. They reach into thin air and say “GPD will grow at 3% or 7%” or whatever balances the books.
If they did use data, they would find that historically, tax cuts result in short term growth in the GDP followed by an ongoing loss of revenue and a higher debt. Just look at Kansas if you want to see how tax cuts work.
Second, loopholes actually serve a purpose. These are rules that are created to incentivize companies to behave a certain way. San Francisco wants investment south of Market Street. They tell Twitter they will give them a tax break if they build a building there and hire a certain number of people. This is an effective use of the tax code.
So, don’t get rid of all loopholes. Just get rid of the ones that are being abused or that are no longer needed.
Third, the GOP is stuck on Trickle-Down economics (aka Supply Side economics). According to them, if you give a rich person more money, they will hire more people. This is nonsense and possibly the most thoroughly disproven economic policy of all time. The truth is that consumers create jobs. In the United States, the middle class makes up 2/3 of our consumers. If you want to create jobs, give the middle class more money. GM will build another plant when people can afford to buy more cars, not because of a tax cut.
Forth, The United States has far more job openings than we have people to fill them. Sending home immigrants is making this even worse. The H-1B visa program is needed simply because we don’t have enough skilled people at home so we need to import them. Trump keeps saying “Make American Great Again by bringing back jobs.” How come no one is asking, “Why will that make us great when we can’t fill the need for jobs right now?”
Fifth, Eliminating the Estate Tax and the Minimum Alternative tax is a gift. Specifically this is a gift to Trump and other members of the 1% that benefit from this tax elimination. It won’t affect you or me; aside from increasing our debt.
I would love to pay less in taxes. However, I expect tax reform to be meaningful, not some sort of propaganda stunt without substance. It’s time we started taking care of the 99% and stop worrying about whether or not Trump’s heirs will have to pay too much in tax once he finally bites the dust.
There you have it.
I think the probability is very high that the 20 minutes I spent writing this post if more time than Trump put into his Tax Plan.
Up, up and away…