Trump’s Tax Plan Is for the Wealthy 1%. Why Don’t His Followers Care?

Donald Trump has hit upon a powerful campaign strategy no one else thought of. In his inconsistencies, his contradictory pronouncements, his saying one
If we double the debt, we can just print money, like some countries.
thing one moment and denying it the next, people can fasten on whatever strikes a chord in them and discard the rest. "That's the real Donald Trump", they seem to say when they hear something that resonates in their life. "He doesn't really mean the other thing he said".

How else to explain their voting for a candidate who last fall said, "Our wages are too high", that they need to be lowered to compete with other countries, and then denied that he said it. And doesn't he intend to use tariffs to eliminate competition anyway?

And why else would his followers pay no attention to a tax plan that would raise the lowest tax rate rate of 10% to 12%? That's a 20% increase that his lowest-income adherents certainly can't afford.

And why cheer a candidate who said said in a Bloomberg interview a year ago , “I want to lower taxes for people that are making a lot of money that need incentives”.

His first plan was to reduce the top income tax rate from 39.6% to 25%, cut the capital gains tax from 23.8% to 15%, and do away with the estate tax ("death tax" he now calls it, per Republican vernacular) altogether — a trifecta of enormous benefit to him and his family, first and foremost.

But self-serving did not bother his loyal flock because the plan would also exempt each person’s first $25,000, or each married couple’s first $50,000 from any income tax. That would be 33 million additional households in 2017 paying no income tax, bringing the total from 44% under current law to 63%. Remember a few years ago the Republican outrage that 47% pay no taxes (said Fox News always, ignoring payroll taxes), or, to be correct, no income tax?

In September of last year, the Tax Foundation knew enough of Trump's tax plan — a plan that would also cut the corporate tax rate from 35% to 15% — to estimate that it would reduce federal revenue by $12 trillion over a decade, causing massive deficits. The foundation is a conservative group, like a Russian who once said about a noted Communist theorist, "he sees so far ahead that what he predicts hasn't even happened yet", it assumes tax cuts will lead to growth, but even so, the foundation could only factor growth as reducing the shortfall from $12 trillion to $10.1 trillion. And they reminded us that deficit-financed tax cuts tend to boost interest rates, which would be likely to offset that growth.

Trump laid out his economic plan in greater detail just before Christmas. The Tax Policy Center at Brookings said it "would reduce federal revenues by $9.5 trillion over its first decade" and that was before accounting for added interest on the debt. Trump said his plan would somehow be revenue neutral.

"Don't believe the phony claim that it will cost $10 trillion over a decade", said two op-ed contributors at the Wall Street Journal who had signed on as Trump advisers, one a restaurant chain CEO somehow expert in macroeconomics, the other Stephen Moore, an economist for whom reality has made little inroads, has always believe that cutting taxes will reduce the deficit, and who has a history of inventing numbers to fit his arguments.

But what does it matter if the debt balloons. In May, Trump mused that he might reduce the national debt by persuading creditors to accept less than full payment. "First of all, you never have to default because you print the money". He told the cable network CNBC, “I would borrow, knowing that if the economy crashed, you could make a deal.” He added, “And if the economy was good, it was good. So, therefore, you can’t lose.”

Trump might be interested to learn that most of the debt is borrowed from Americans, not the foreigners he probably assumes, so, whether making a deal or printing extra money, he would be short-changing us.

Met with horror, two days later he said he wouldn’t try to alter the terms of the nation’s $19 trillion debt, an obligation which he called “absolutely sacred”, leaving his followers once again to read themselves into whichever scenario they preferred.

In early August Trump backed away from his own plan and adopted the Republican Party's plan, pretty much hewing to what House Speaker Paul Ryan has put forth every year. Trump's plan vanished from his website.

Did any of his supporters notice that his huge exemptions from any income tax on the first $25,000 (single) and $50,000 ( married) had vanished? Better to change the subject with a trip to meet Mexican President Nieto and a speech on his return that assured his base that he's for certain going to build that wall.

Under the revised plan, Trump raised the maximum income tax rate for individuals from 25% to 33%. That was hardly enough to roll back the 10-years of deficits of Trump's original plan, and it led Moody Analytics to issue a report that said his tax plan, coupled with his curtailment of trade, would lead to a prolonged recession and job losses of 3.5 million that would "fall hardest on low- and middle-income workers", said the Journal. "The U.S. economy will be more isolated and diminished”, said Moody's. The report’s lead author, economist Mark Zandi, is a Democrat, the paper pointed out, but three other Moody’s economists also worked on the analysis.

Clinton called Trump's plan "reckless and wrongheaded", said it would "bankrupt" the country. "Of course, Donald himself would get a huge tax cut from his own plan. But we don't know exactly how much because he won't release his tax returns".

But the faithful hear none of that. They listen to Trump say that his tax plan would cost him a fortune. Why? He points to his intention of closing the "carried interest" loophole that allows hedge fund operators and real estate moguls such as himself to be taxed at the lower capital gains rate even for income that does not derive from their own money invested at risk. Trump has said that paying so little — currently 23.8% rather than a top rate of 39.6% — is “getting away with murder”. It's "outrageous" how little tax some very rich people pay, he says.

That pleases his fans in the bleachers, but it hid his brashest pitch yet. A number of business structures allow proceeds to pass through to their owners, where they are taxed at personal income rates rather than the corporate rate of 35%. The Tax Foundation estimated that 60% of all business income stems from such forms, whether Subchapter S corporations, limited liability corporations (LLCs), or partnerships. Now that his plan would drop the corporate tax rate from 35% to 15%, Trump says why not sort out that business income apart from an individual's personal income and tax it at the 15% business rate?

Think about that. He would close the "carried interest" loophole's 23.8% tax rate but treat all business income — carried interest included — at an even lower rate. "The pass-through exemption is a bad policy,” said Kyle Pomerleau, director of federal projects at the Tax Foundation. We would see a mad rush to channel personal income through phony companies to chase after that 15% rate. We would see federal tax revenue crash.

The Trump clan would do splendidly, though. He is user of the pass-through option on a colossal scale, identifying "564 separate business entities in his financial disclosure forms, most of them LLCs and partnerships", The New York Times reported.

Yet miraculously, the foundation, which had predicted an apocalyptic $9.5 trillion shortfall before Trump announced his pass-through exemption, now thinks the Trump plan would only reduce revenue by $2.4 trillion across the next decade.

The Journal called it "progress" on taxes, but "he’ll have to be more specific about the deductions he would be willing to give up to finance his tax cut", forgetting that Romney discovered that every deduction in the tax code wasn't enough to pay for the 20% tax cut he promised in his 2012 campaign. No matter. "Growth would make up some of that $3 trillion", whereas Hillary Clinton's $1.3 trillion in tax increases would "yield less tax revenue" [!]. If tax cuts increase growth and therefore revenue according to the Republican canon, it follows that tax increases must reduce revenue, right?.

Clinton mocks the plan, concocted by a dozen affluent advisers, among them "six guys named Steve" (true). "He makes over-the-top promises that if people stick with him, trust him, listen to him, put their faith in him, he'll deliver for them. He'll make them wildly successful. And then everything falls apart, and people get hurt".