Tax cuts are the political equivalent of truth serum.
A typical politician can often get away with spinning wildly about economic growth, the budget deficit or even the long-term financial prognosis for Medicare and Social Security.
Donald Trump carries this hyperbole to levels unimagined by the King and Duke who floated down the Mississippi with Huck Finn claiming to be European royalty. With typical mendacity, Trump has been claiming lately that only a phantom hospitalized GOP senator prevented the successful repeal of Obamacare.
Peddling the bunkum and ballyhoo of tax reform in Indianapolis on Wednesday, Trump claimed, “There’s never been tax cuts like what we’re talking about.” In the Neverland of Trump rhetoric, Ronald Reagan and George W. Bush never existed.
Trump portrayed his tax proposals, developed with congressional Republicans, as the greatest boon to the middle-class since the invention of credit cards.
“By eliminating tax breaks and loopholes,” Trump declared, “we will ensure that the benefits are focused on the middle class — the working men and women, not the highest-income earners.”
Since the Trump plan is still only an outline rather than an actual legislative proposal, there is a degree of fuzziness surrounding all estimates of its costs and benefits. But it is hard to argue — even for this White House — that slashing corporate taxes, eliminating the inheritance tax and reducing the highest personal tax rate to 35 percent would be a bonanza for working men and women struggling to pay their bills.
In fact, a preliminary analysis by the mainstream Tax Policy Center suggests that the wealthy would reap the largest benefits from Trump’s largesse. According to the think tank report released Friday, taxpayers in the top 1 percent would see their after-tax incomes jump by more than 8 percent. For everyone else, the benefits — if they exist at all — would be chump change.
Democrats, of course, will decry “tax cuts for the rich.” Every Democratic speechwriter can steal lines from the early 1980s when liberals first mounted this attack against Reagan’s tax cuts. It is safe to predict that mocking “trickle-down economics” will be a centerpiece of almost every speech opposing the Trump plan.
While the Democratic arguments are shopworn, they may hit a chord in this era of populist anger. A recent Washington Post-ABC News Poll found 62 percent of Americans oppose reducing taxes for the wealthy and 65 percent believe businesses pay too little in taxes.
But self-interest may trump envy when it comes to tax cuts. In the past, voters have often been more concerned about their own tax bills than the windfalls handed out to the wealthy. And that is why Republican political strategists have been banking on a tax bill as their best hope for a winning issue in the 2018 congressional elections.
By this standard, the plan unveiled by Trump fails abysmally.
In 2018, according to the Tax Policy Center, 12 percent of all taxpayers would have to pay more under the Trump plan, with an average tax increase of $1,800. As the center’s report put it, “More than a third of taxpayers making between $150,000 and $300,000 would pay more, mainly because most itemized deductions would be repealed.”
These are affluent voters whom the Republicans cannot afford to lose. In 2016, according to exit polls, the 34 percent of the electorate with family incomes above $100,000 split roughly evenly between Trump and Hillary Clinton — as did the 10 percent with incomes over $200,000.
Trump is president, in part, because Clinton failed to convince college-educated Republican women in affluent suburbs to jettison the GOP nominee because of his crude and hateful behavior. Clinton’s charge that some Trump supporters belonged in a “basket of deplorables” was designed to shock these upscale voters into abandoning their traditional GOP allegiance.
Their reward for sticking with Trump? A tax plan that will stick it to many of them.
Let’s talk about the heart of the middle class — Americans earning less than $100,000. Asked on ABC’s “Good Morning America” whether the taxes of some middle-class families might go up, Trump economic adviser Gary Cohn said honestly, “I can’t guarantee anything.”
Cohn contended “a typical family of four earning $55,000” would see its tax bill decrease by $650 to $1,000. Cohn’s math is impossible to check, since the Trump plan does not make clear at what income taxpayers would switch from the new 12 percent bracket (up from 10 percent in current law) to a new 25 percent bracket.
But even if Cohn is right, a $650 tax cut means a whopping additional $13 in a weekly paycheck. And the Trump plan would do nothing for those Americans who earn too little to pay any income taxes, but still are saddled with a hefty payroll tax bill for Social Security and Medicare.
The political importance of tax cuts is that — once approved by Congress — they can take effect immediately. A swoosh of Trump’s pen at a signing ceremony and the withholding schedules for tens of millions of working Americans could be changed almost instantly.
That’s why, if the tax bill passes, all of Trump’s claims about his compassion for the middle class would face the ultimate fact-check. Either voters would feel significantly richer because of the Republicans — or else they would feel betrayed by a president whose true belief has always been “Billionaires First.”