The president says he cares about workers. What his administration wants to do on tax policy says otherwise.
Photos by Jessica Kourkounis/Andrew Harrer
On Wednesday, Donald Trump gave a speech on "tax reform," which is something he wants. He did not say exactly what tax reform would actually look like, other than a policy that is "pro-growth, pro-jobs, pro-worker, and pro-American" and helps the middle class. Which is to say he offered a melange of the vaguest, fluffiest sentiments any politician can offer. This vagueness might be the result of this being a "vision" speech, as White House officials told NBC News. Or it could be because there are no specifics to offer—because there's no real plan. Or it could be because Trump knows that to delve into specifics would be to highlight that the tax reform he's seeking is, like Republican tax plans for decades now, a massive giveaway to the richest people in America.
In his speech, Trump bemoaned the complexity of the tax code, high tax rates, and too many loopholes—common complaints among Republicans, though the loophole stuff is of course rich given the president's well-known use of loopholes in his business career. In particular, he focused his ire on America's relatively high corporate tax rate, which the president said he wants to bring down from 35 percent to 15 percent. That's part of Trump's "American model," a plan to encourage companies to stay in the US and grow, providing everyone with jobs and rising wages—which will, according to him, give people a sense of patriotism and pride, and improve race relations too. Everyone wins! (Well, everyone but the bottom line—reducing the rate to 15 percent could add more than $2 trillion to the deficit over the next ten years.)
Some proponents of reducing the corporate tax rate see it as a sort of stimulus—let companies keep more of their money, and they'll invest it in the country. But there's reason—a bunch of reasons, actually—to be skeptical. This month, the left-leaning Institute for Policy Studies released an analysis of corporations that turned a profit while paying fewer than 20 percent in taxes (thanks to various loopholes and tricks). It found that many of them actually cut jobs while boosting executive pay. Other economists believe that a lower corporate tax would just be a windfall to stockholders—primarily a boon for the wealthy, in other words.
Another policy Trump is apparently interested in is called "repatriation," an ostensible solution to the problem of companies keeping profits overseas, where they can't be taxed. Republicans want to encourage companies to bring that money back to the US by giving them a onetime tax break if they do. This was tried in 2004—and as Vox reported, it didn't encourage investment in American as much as proponents hoped, instead mainly serving to line the pockets of investors.
"Tax reform" isn't just about enriching companies and their shareholders; Trump also wants to cut income taxes for the rich, straight-up. In April, the White House released a rough sketch that remains the most detailed tax plan it has released to date. That plan would overwhelmingly benefit people who make more than $599,300 a year, the literal One Percent.
Given the enmity between Trump and Congress, the president's lack of legislative success thus far, and the complexity of tax policy a real reform is unlikely. But what's on the table shows where the GOP's head—and heart—is.
Some Republican proposals are so regressive they're almost comical, like the plan to repeal the estate tax, which only affects fortunes of more than $5 million and which White House adviser Gary Cohn reportedly said only "morons" pay. Or the tweak that would bar single parents from getting "head of household" status.
If you try, you can find some potential elements of Trump's proposed "reforms" that aren't tilted toward the superrich. There's talk of eliminating or reducing the mortgage interest deduction, which basically only helps people with expensive homes. It's one of several loopholes regarded as a bad idea by many economists, but the real estate lobby will cry bloody murder if it's wiped out. Issues like that—relatively small, yet hugely contentious—are why specifics on tax reform are so hard.
But in broad strokes—which is all we have, still—the Republican tax reform plan is about making sure wealthy people can keep more of their own money. A right-wing party headed by an alleged billionaire who surrounds himself with Wall Street–bred advisers is naturally going to favor the rich—that's no surprise. But given the populist rhetoric Trump spouted on the campaign trail and still invokes when it's convenient, it's an ongoing outrage.
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