Trump’s tax proposal: A kleptocratic scam
Donald Trump at the Treasury Department April 21, where he signed an executive order to review tax regulations. | Susan Walsh/AP

WASHINGTON — Wednesday, Donald Trump issued an outline of his dream tax system, demonstrating beyond a shadow of a doubt that the Trump administration is a kleptocracy.

First and foremost, the plan benefits himself and his family.

Trump said the purpose of the plan is to create jobs, but tax cuts for the rich never have.

He called his proposal a tax reform plan. It’s not. It’s a scam to give trillions of dollars away to millionaires and billionaires.

For example, the plan calls for repealing of the alternative minimum tax (AMT), which was enacted to make sure the rich pay their fair share.

According to Frank Chaparro, writing in Business Insider, in 1966 “the Department of the Treasury found that about 150 [super wealthy] people legally paid zero federal income tax … by claiming deductions and not including certain kinds of income.”

There was massive public outrage.

As a result, Chaparro writes, Congress enacted the “minimum tax,” and then the AMT.

The AMT is a parallel code through which the federal government calculates a flat minimum tax rate for wealthy Americans even if they could get away with paying zero or very little taxes in the regular system.

Business Insider’s Jim Edwards reports that the AMT “accounted for most of the $38.5 million in taxes” Trump paid in 2005.

Repealing the AMT is sure to help Trump’s bottom line, but it would cost the federal government $412.8 billion, according to the Tax Policy Center.

Trump’s plan does not include a workable proposal for filling that gap. In fact, it offers no workable proposal for preventing the American economy from collapsing due to the trillions we will lose if all of his tax cuts are adopted.

Corporate tax cuts

The other major proposal in Trump’s plan is to cut the tax rate for corporations and “pass-through” businesses from 35 percent to 15 percent.

Drew Harwell and Jonathan O’Connell explain in the Washington Post that “pass-through businesses do not pay corporate taxes; instead, their income passes through to the owner’s personal income taxes, skipping the corporate-tax rate altogether.

“That income is then taxed at the owner’s income-tax rate, which now is capped at 39.6 percent. Trump’s proposed drop would essentially cut pass-through business owners’ top tax rate from 39.6 percent to 15 percent.”

Harwell and O’Connell continue, “That could prove to be a windfall for the Trump Organization, the private umbrella company for hundreds of Trump real estate, licensing and other companies, many of which qualify as pass-through businesses.”

The Trump Organization itself is a pass-through business.

Moreover, they say, “the pass-through rate cut proposal could also benefit Jared Kushner, Trump’s son-in-law and a White House senior adviser. In financial disclosure forms, Kushner reported owning a stake in nearly 300 different assets or companies collectively worth hundreds of millions of dollars, most of which he still owns. Hundreds of those companies classify as pass-through businesses.”

Harwell and O’Connell add that the loss in revenue due to cutting taxes for pass throughs would “cost government budgets an estimated $1.5 trillion over the next decade, according to the Tax Policy Center.”

Trump says he wants to reduce the U.S. corporate tax rate so that American corporations can better compete with foreign firms that pay less taxes.

This is, to put it politely, a bunch of hooey.

According to The New York Times, a 2014 survey by the Government Accountability Office found that profitable American firms were paying, on average, less than half the statutory 35 percent rate.

The Times says, “Contrary to the often made claim that the American corporate tax rate is uncompetitively high, that effective rate is below that of most of our international competitors.”

The “growth” scam

In unveiling Trump’s tax proposal, his Treasury Secretary Steve Mnuchin said, “What this is about is creating jobs and creating economic growth.”

However, Douglas Holtz-Eakin, president of the American Action Forum and former director of the Congressional Budget Office from 2003 to 2005, wrote in The Washington Post that “Proposing trillions of dollars in tax cuts and then casually asserting that such a plan would ‘pay for itself with growth,’ is detached from empirical reality.”

In fact, trickle down economics – giving the wealthy tax breaks so that working people will benefit through job creation – has been proven over and over again not to work.

Corporations rarely use the money they save because of tax breaks for new capital investments that produce jobs.

They use the money in ways that yield more money with the least outlay.

That’s what will happen if the Trump tax cuts are adopted. Jon Schwarz writes in the Intercept online newsletter that “Corporate executives are telling Wall Street analysts what they’ll actually use [the tax cut] money for: enriching their shareholders and buying other companies.”

Schwartz continues, “The Intercept’s examination of dozens of earnings calls and investor conference talks since Trump won the presidential election finds that many executives are telling analysts at large banks that they are eager to take the money to increase dividends and stock buybacks as well as snap up competitors.

“They demonstrate considerably less, if any, enthusiasm for going on a domestic hiring spree.”

This is nothing new.

As Max Ehrenfreund reports in the Washington Post, “In the experience of two other Republican presidents, Ronald Reagan and George W. Bush, … reductions in taxes were unable to pay for themselves, instead leaving the nation to deal with increasing federal debt.

“After his 1981 tax cut, Reagan was forced to raise taxes several times. And Bush’s tax cuts put the nation on vulnerable fiscal footing, depriving the government of revenue … ,” and contributing to the Recession of 2008.

Even though over the years Trump himself has seen that tax cuts for the rich hurt the nation’s economy, he is proposing yet another tax cut scheme.

He knows that regardless of how much it fails to improve the economic life of the nation, it can’t help but succeed in improving the economic life of the Trump family.

Trump’s proposal fits the dictionary definition of “scam.”


CONTRIBUTOR

Larry Rubin
Larry Rubin

Larry Rubin has been a union organizer, a speechwriter and an editor of union publications. He was a civil rights organizer in the Deep South and is often invited to speak on applying Movement lessons to today's challenges. He has produced several folk music shows.

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