Toe the Line: Penn Democrats | A millionaire's tax plan with a populist disguise

By Erin Farrell 10/02/17 12:20am

“No, I don’t benefit. I don’t benefit. In fact, very, very strongly, as you see, I think there’s very little benefit for people of wealth.” In a statement that is glaringly anathematic to essentially every aspect of the Trump presidency — from his administration, to his appeals to dismantle the Affordable Care Act, to his general demeanor and handling of his own wealth as a public figure — it’s not hard to imagine the deception underlying this claim. It becomes even more laughable, still, when considering it in the context of his proposed tax plan.

To say that this proposed tax plan does not benefit the wealthiest Americans is one of the grandest lies of the Trump administration this week. From the scant nine pages of jargon emerge a few clear, early points that promise that Trump’s garbled statement of “not benefiting the wealthy” is entirely false. To begin, the tax plan reduces the number of tax brackets from seven to three, with a “tentative” fourth tax bracket among the highest earners — a proposition that analysts suspect is unlikely to come to fruition. 

From a superficial perspective, the promise of tax cuts for all seems good for every income level, dropping the tax rates to 12 percent, 25 percent and 35 percent, respectively, on federal income tax. However, beneath the administration’s eagerness to focus on these three numbers lurks the harsh truth that these numbers are deceiving, and the fact that the plan is riddled with loopholes and cuts that disproportionately benefit the elites who fill the Trump administration: it is critical to note that this is a wealthy man’s tax plan guised by populist rhetoric — and lower-income supporters will not see the same kinds of benefits that high earners will.

For example, the corporate tax rate is set to drop 15 percent. During a period of economic expansion, and not depression, this Reagan- and Bush-style tax cut for the wealthy and high-earning companies does not bode for a healthy period of economic growth, and it spells disaster for the national debt without the promise of encouraging increased investment. Simply put, Reagan and Bush enacted these plans in times of economic depression — when interest rates were not as low as they are now — and when Republicans hoped for an increase in investment with the extra incentive from a corporate tax cut. However, in a period of sustained economic growth as the United States currently finds itself, many analysts say that these sorts of cuts will only aggravate the national debt and fail to increase investment, and they will simply benefit the wealthiest corporations and continue to unnecessarily bolster the wallets of Trump and other corporate elites. 

Likewise, groups labeled “pass-through entities,” a vague term that includes high-performing law firms and real estate companies, will see a tax cut from 39.6 percent under the Obama administration to 25 percent under Trump. The plan also eliminates the estate tax, something that the vast majority of Americans likely are unfamiliar with, considering it affects only the slimmest minority of the uber-wealthy whose properties are worth more than $10.9 million — a few of these families have members serving in the Trump administration, including Trump himself. 

Thus, it’s easy to see that this plan will generate a huge boost for Trump and people like Trump, saving his family nearly $1 billion in tax cuts if the plan is approved. What is also clear, in the finer details, is that this plan will do little for anyone else.

What a plan like Trump’s neglects is the third of the country that does not really benefit from any form of federal income tax cuts due to their income level. What would benefit these lower-income Americans, the likes of whom turned out for Trump and the Republican Party in comparatively high rates, would be any reduction in payroll taxes. And yet, nothing of this nature is to be seen in the nascent proposals. The Earned Income Tax Credit, which is largely used to help lower-income Americans reduce their tax bill and get returns from the government, is in limbo, while many continue to speculate the plan is in grave jeopardy as it moves into its final stages. If Trump truly wanted to make a tax plan that would benefit this strata of the United States, any movement toward improving the EITC would be a critical place to start.

As for the middle class, there are still many questions and holes in the plan, with many details in deliberative Congressional purgatory. While it is clear that there will likely only be three tax rates, it’s not totally evident what earners of $80,000 or $60,000 will pay in taxes since the additional standard deduction is also set to be eliminated, as will be the personal exemption, negating any possible benefits that earners of this level might have seen from an increase in the standard deduction. 

The glaring disconnects between Trump’s language of populism, of the middle class, of being a champion for those who are not the “1 percent” falls drastically short of reality. And yet, uneven benefits aside, another thing becomes clear: that this tax plan comes as a result of almost no political knowledge and, singularly, a desire to please his constituents at the expense of the very good of the country. The very premises that the plan is predicated upon position us to reduce federal revenues by $2.4 trillion in its first 10 years, thanks to its business provisions and the repeal in the estate tax (which, alone, would accumulate to the loss of $240 billion in federal revenue in 10 years). Like Trump, this plan shows two things: a blatant disregard for anyone who is not like Trump, and almost no foundation in fact whatsoever.

ERIN FARRELL is a College junior and the Penn Democrats communication director.