Trump would win big under his tax plan. But the betrayal runs much deeper than that.
THE MORNING PLUM:
With the Senate GOP tax plan hitting crunch time, President Trump has taken to amplifying one of his biggest lies: that he, personally, would lose out bigly under the plan. Post fact-checker Glenn Kessler has a new piece blowing up this falsehood. As Kessler shows, it’s likely that Trump and his family will save tens of millions of dollars, and quite possibly a lot more, if this plan becomes law.
But this provides an occasion to reconsider just how much of a betrayal of Trump’s campaign promises this plan truly embodies, in a sense that goes well beyond his bottom line. That betrayal does not merely consist in Trump reversing course on his promise to help the middle class while sticking it to elites. No, the betrayal is more complicated, and runs much deeper, than that.
During the campaign, Trump told a story, mainly aimed at working-class whites in places that have gotten pulverized amid the globalizing economy and the brutal aftermath of a financial crash caused by reckless elite financial gamesmanship that left the top 1 percent relatively unscathed. That story went like this: I’m not like other politicians (Republicans included) or like other members of that financial elite. They have conspired with one another to fleece you blind. I got filthy rich milking the system. I will put my knowledge of how we elites engorged ourselves to work for you.
This is what Trump meant when he openly admitted during the campaign that “I fight very hard to pay as little tax as possible,” when he said that not paying income taxes “makes me smart,” and when he flatly declared that big donors “are in total control” of the presidential candidates, his GOP rivals included. “I was on the other side all my life and I’ve always made large contributions,” Trump said, “and I’m the only one up here that’s going to be able to fix that system.” In other words, people like me have gotten rich by buying the politicians and getting them to rig the system in our favor, and I have the inside knowledge of the scam to put things right.
Now Trump and the politicians, working together, are set to pass a tax plan that will lavish enormous benefits on people like Trump — and in key ways further rigs the system on their behalf.
In a big speech yesterday about the plan, Trump declared that “this is going to cost me a fortune” and added: “I have some very wealthy friends” who are “not so happy with me.” But as Kessler’s fact-check shows, this is nonsense. Both GOP plans repeal the estate tax or make the exemption vastly larger (which would benefit Trump’s family after he shuffles off to account for his life to his maker). They repeal the Alternative Minimum Tax, which is designed to ensure that the rich pay at least something. They both give preferential treatment to “pass-through” income, the vast bulk of which goes to the top 1 percent, and Trump owns an untold number of pass-throughs.
We don’t know precisely how the final plan would apply to him now, but this is because Trump has not released his tax returns (his argument is basically, “I’ll lose out bigly, believe me”). But based on 2005 Trump tax returns that have leaked, Kessler shows, under the plan Trump would have saved anywhere from $35 million to $42 million that year.
But this is not just about Trump. The Senate tax plan is basically a huge permanent corporate tax cut, tailored to fit within deficit and procedural constraints by setting the benefits for the working and middle class to expire, making it possible to pass entirely on party lines a large permanent tax cut overwhelmingly benefiting the top 1 percent, facilitated by a tax hike later for as many as 50 percent of less-fortunate taxpayers. This sort of legislative chicanery is, at bottom, just what Trump decried — very wealthy donors benefiting from politicians cleverly gaming the system on their behalf. It’s the very scam Trump vowed to put to an end.
Meanwhile, Sen. Ron Johnson (R-Wis.) is demanding even more generous treatment of pass-through income. But as one tax analyst explains, this may encourage more wealthy people — who are more prone to having the resources and know-how to work the tax system — to reclassify their income as pass-through and lower their tax burden further. Both bills are meant to have safeguards against such gaming. But as Dylan Matthews points out, good lawyers are already hatching ways around this, meaning these new tax breaks “will create a big new loophole for the rich.” In other words, still more system-rigging.
In a sense, then, Trump’s claim that he — and people like him — will personally take a financial beating from this plan represents the culmination of the false story he made absolutely central to his campaign, and serves as a reminder of just how massive a betrayal of that story he and Republicans are now set to pull off.
* ANALYSIS OF TAX PLAN MYSTERIOUSLY FAILS TO APPEAR: The New York Times reports that Treasury Secretary Steven Mnuchin had promised to release an analysis showing that the GOP tax plan would pay for itself with explosive growth. But:
Just one day before the full Senate prepares to vote on a sweeping tax rewrite, the administration has yet to produce the type of economic analysis that it is citing as a reason to pass the tax cut. … An economist at the Office of Tax Analysis, who spoke on the condition of anonymity so as not to jeopardize his job, said Treasury had not released a “dynamic” analysis showing that the tax plan would be paid for with economic growth because one did not exist.
What a shocker. You’d think this would be of interest to Sens. Bob Corker, Jeff Flake and John McCain, who say they don’t want to support tax cuts that explode the deficit.
* GOP LEADERS SCOFF AT RON JOHNSON’S THREATS: Sen. Ron Johnson (Wis.) is demanding even more generous treatment of “pass-throughs,” 70 percent of whose income go to the top 1 percent. But The Washington Examiner reports:
Senate Majority Leader Mitch McConnell, R-Ky., and his lieutenants, accustomed to Johnson’s bluster, aren’t that worried. The senator often fumes about key aspects of major legislation and complains about being excluded from the drafting process, only to vote “yes” upon final passage.