President Ronald Reagan, who honed his speaking skills as a Hollywood actor, knew how to make a good speech. But perhaps his most memorable line, spoken during a 1980 debate with the incumbent president, Jimmy Carter, was: “There he goes again.”
Those four words came to mind Wednesday as President Trump trotted out the framework of his promised tax reform plan, which is supposed to boost the middle class. There he goes again, Mr. Trump, trying to put lipstick on a pig of a proposal that in its present form won’t deliver what he promises.
Boiled down to its essence, this is just another iteration of the trickle-down theory, or “Reagnomics,” that the Gipper insisted would boost the economy 30 years ago. It didn’t work then, and it won’t work now. Trump proposes giving huge tax cuts to corporations, which he says will use the money saved to create jobs. But the theory always fails because corporations put profits before job creation every time.
“My plan is for working people and my plan is for jobs. I don’t benefit. Very, very strongly I think there’s little benefit for people of wealth,” Trump insisted Wednesday. And he said it with a straight face. A businessman as astute as Trump professes himself to be could not have missed the nuggets in his tax plan that will make the rich richer.
An analysis for Fortune magazine by Seth Hanlon of the liberal Center for American Progress details exactly how Trump’s plan would benefit the wealthy. The plan would create a new preferential tax rate for so-called pass-through businesses, including limited liability companies (LLCs), partnerships, and S-corporations, which are privately held corporations that choose to be taxed as partnerships.
These companies already benefit by paying taxes on a share of their profits at the personal tax rate, rather than the corporate rate. Trump’s plan would lower the highest personal tax rate they pay from 39.6 percent to 25 percent. Hanlon points out that Trump owns more than 500 companies that would benefit from the rate reduction. Other members of his family with companies that qualify, including Ivanka Trump and Jared Kushner, would also benefit.
The Trump tax plan would also eliminate the Alternative Minimum Tax, which would benefit him personally. His leaked 2005 tax returns showed he paid a tax rate of about 24 percent on $150 million of income. If the AMT had not been applied, he would have paid less than 4 percent.
As disingenuous as Trump is being about his tax plan favoring the wealthy, it is more disturbing that the document doesn’t include how he is going to replace the $2.2 trillion in revenue lost through his tax cuts. In addition to ending the AMT and reducing the number of tax rates from seven to three, he wants to cut the corporate tax rate, double the standard deduction for individuals and couples, and repeal the estate tax.
Republicans in Congress are desperate for a win after failing to kill Obamacare as they promised. But a more realistic tax plan than Trump’s proposal must be negotiated if the goal is to both help the middle class and pay this country’s bills.