BY STATE SENATOR JAMES SANDERS JR.
As a lover of all music, particularly the classics, I could not start this piece without quoting from The Beatles song appropriately titled “The Taxman,” – ‘Let me tell you how it will be, there’s one for you, nineteen for me ’cause I’m the taxman.”
Last week, President Donald Trump unveiled a one-page tax proposal, containing what his administration called “historic tax cuts,” but the devil is in the details, and upon closer inspection, the plan would do more to help wealthy Americans, leaving the middle class to struggle and hardly make America great.
While it is true that the middle class would benefit from a modest tax rollback under Trump’s plan, the cuts would primarily benefit corporations. They would see their rates decrease from 35 percent to 15 percent. Businesses that are usually taxed at the individual rate would also see a reduction to 15 percent.
So what does that mean?
Mom-and-Pop stores would not benefit financially from the tax cuts unless they are doing a high volume of business, like lawyers, doctors, consultants and hedge fund managers. Even a small percentage for a hedge fund manager could mean hundreds of millions or even several billion dollars. Such seemingly egalitarian cuts in fact shift massive amounts of money back to the wealthiest Americans.
Trump’s tax plan benefits top earners in several other ways too.
It would eliminate the alternative minimum tax, designed to make sure the very wealthy pay their fair share after deductions. Additionally, it would repeal the estate tax, which takes a portion of a wealthy person’s property upon their death, and do away with Obamacare’s 3.8 percent surcharge on investments.
It should come as no as no surprise to those familiar with Trump’s style that all of these cuts would massively benefit wealthy businesspeople like himself.
Trump’s tax plan also proposes eliminating all itemized deductions while increasing standard deductions for individual earners. That would be another modest tax cut for the middle class – but not necessarily for New Yorkers. The middle class residents here already get a deduction for the taxes they pay to the state because the rate is relatively high compared to other places, covering services like mass transit and public housing, as well as the social safety net and a public education system guaranteed by our state constitution. In this sense, Trump’s tax plan punishes blue states that invest in their residents more than red states.
Finally, the most fundamental question: How much does this tax cut cost, and who is paying for it? Early estimates suggest the plan would cost $7 trillion over 10 years. Treasury Secretary Steven Mnuchin claims that the cuts would spur enough economic growth to pay for themselves. Even the most conservative economists see that claim as dubious.
Trump’s only revenue generating idea is to invite corporations to bring home money that they had stowed abroad to avoid tax, by offering a one-time only lower tax rate. But after that, all money U.S. corporations earned abroad would be permanently exempt from taxation. So, true to form, Trump has not yet offered any sincere intentions on raising anything near $7 trillion.
Proposing something without any way to pay for it…hmm… sounds like a wall someone recently tried to sell us.
