Dr.Doom Exposes Trump's Tax Plan As "A Plot Against The 99%"

Tyler Durden's picture

Authored by Nouriel Roubini via Project Syndicate,

US President Donald Trump, in partnership with congressional Republicans, is pursuing tax cuts that will blow up the fiscal deficit and add to the public debt, while benefiting the rich at the expense of middle- and working-class Americans. Once again, Trump has not hesitated to betray the people he conned into voting for him.

After multiple failed attempts to “repeal and replace” the 2010 Affordable Care Act (Obamacare), US President Donald Trump’s administration now hopes to achieve its first legislative victory with a massive tax giveaway that it has wrapped in the language of “tax reform.” To that end, Republicans in the US Congress have just unveiled a bill that, if enacted, could vastly widen the deficit and increase the public debt by as much as $4 trillion over the next decade.

Worse still, the Republican plan is designed to funnel most of the benefits to the rich.

It would lower the corporate tax rate from 35% to 20%, reduce the tax on capital gains (investment profits), eliminate the estate tax, and introduce other changes that benefit the wealthy.

Like the Republicans’ health-care proposals, their tax plan offers little to struggling middle- and working-class households. Trump continues to govern as a plutopopulist – a plutocrat pretending to be a populist – who has not hesitated to betray the people he conned into voting for him.

Before releasing the current plan, congressional Republicans passed resolutions to reduce taxes by $1.5 trillion over the next decade. But the actual tax cut will likely be much larger. The proposal to lower the corporate tax rate to 20%, for example, implies a $2.5 trillion tax cut, once other tax cuts in the plan are considered. To keep the tax cuts below $1.5 trillion, one would have to keep the corporate rate at or above 28% and broaden the tax base.

To make up for this difference, the bill proposes a cap on the mortgage-interest deduction for homeowners, and on the deductibility of property tax, as well as eliminating other tax benefits for the middle class. It would eliminate or cap the income-tax deduction for state and local taxes – again, squeezing the middle class to cover tax cuts for the rich.

The problem is that eliminating the state and local tax deduction would provide just $1.3 trillion in revenue over the next decade. And because this change would hurt middle-income families, many epublicans in high-tax states such as New York, New Jersey, and California will oppose it. If congressional Republicans and the Trump administration end up keeping the state and local tax deduction, their tax cuts will add $3.8 trillion to the public debt over the next decade.

Moreover, Republicans want their tax cuts to be permanent. Yet they are trying to enact their bill through the congressional budget reconciliation process, which requires any tax cuts that add to the deficit after ten years to be temporary. Even if the Republican plan really did keep the cuts at $1.5 trillion, it still would not comply with this rule.

Trump and congressional Republicans argue that tax cuts will boost economic growth, and thus revenues. But standard dynamic scoring models show that increased growth would offset the cost by only one third, at most: the US would face $1 trillion, rather than $1.5 trillion, in lost revenues.

So, how will the Republicans fudge these fiscal rules? For starters, like President George W. Bush’s administration, they will set the personal income tax cuts to expire after ten years. This will give them plenty of time to enjoy the political gains of tax cuts – starting with the midterm elections in 2018 – long before the bill comes due.

But corporate tax cuts are another matter, because making them temporary would defeat the purpose. Companies operate with a much longer time horizon than households, and are unlikely to boost investment in response to cuts that last only ten years.

To get around this problem, Trump and the Republicans might decide to bend or manipulate congressional rules. Or they might rely on unorthodox and untested economic models to claim that their cuts actually are revenue-neutral, and will have a much larger impact on growth than what standard models project.

Most mainstream economists would estimate that a tax cut of the size being proposed would increase US potential growth by 20 basis points, at most, taking the growth rate from around 2% to 2.2% over time. Yet Trump and his advisers have clung to the false claim that growth will increase to 3% or even 4%.

If this far-fetched projection sounds like voodoo economics all over again, that’s because it is. Voodoo economics came into parlance in the 1980 presidential election, when George H. W. Bush criticized Ronald Reagan for claiming that his planned tax cuts would pay for themselves. Bush was vindicated just a few years later, when the Reagan administration’s tax cuts blew a huge hole in US public finances.

And yet Republican administrations have persisted in pursuing unsustainable and undesirable tax cuts benefiting primarily the rich, leading to ever-larger deficits and trillions of dollars of additional public debt. The Republicans’ eagerness to pass reckless tax cuts once in power gives the lie to their claims of fiscal rectitude.

Making matters worse, America’s pluto-populist president is peddling a tax plan that will further increase economic inequality at a time when income and wealth gaps are already widening, owing to the effects of globalization, trade, migration, new labor-saving technologies, and market consolidation in many sectors.

Given that the rich tend to save more than middle- and working-class people, who must spend a larger proportion of their incomes on basic necessities, the Trump tax plan will do little for economic growth; it may even decrease it. And it will add far more to the US’s excessively high public-debt burden. It is fake reform, brought to us by an alt-fact administration and a party that has lost its economic bearings.

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hawaiian waverider's picture

Hillary fan?  He hosted high dollar fundraisers himself for Hillary.  Posted on his Twitter account.  Dr. Doom is more like Dr. Broom.. sweep him under the rug already. 

Oldwood's picture

"How many times do liberals think we need to be bent over?"

How many times are you willing? THAT is their ultimate question, the thing they are dying to know. Aside from simply controlling people, our dominators will continue push the extremities to find out....it's what makes life tollerable for them. Ask Weinstein...he knows.

ejmoosa's picture

And with low interest rates and high standard deductions, many people do not even bother to itemize their deductions any longer.

Trogdor's picture

Given that there were stabs taken at Trump AND Bush - without a single mention of the parasitic Obama and his "healthcare mandate" that rat-fucked the entire middle-class, it's pretty obvious that this guy is looking at the world through Red-tinted glasses.

And to JimmyJones' comment: Yes, not too many people that qualify as "middle class" are in $500K+ homes - and even if they are, they STILL get to write off interest on the first $500K...

Now, how long before the million-dollar-house folks start claiming that because there is a kitchen in the basement, they actually have TWO $500K houses with the same address? - lol.

medium giraffe's picture

Who said anything about Obama?  Please don't tell me that you think because I'm critical of Trump, that somehow makes me some sort of Obama fan.....  

What kind of crazy 2D thinking is that? 

Don't you think it's possible to hold another viewpoint, like, say, 'fuck politicians', for example?

Oldwood's picture

There are just two sides. Standing in the middle of the road will get you killed. Lesser of evils is what constitutes life on this planet. Pick a side and make it as good as you can make it.

medium giraffe's picture

Rather the road than hitch my wagon to a whore.

Rakshas's picture

ugh this guy again .....

 

Bay of Pigs's picture

The tax plan is DOA. Does he pay any attention to these things?

Roubini is fucktard.

buyingsterling's picture

Thanks to McBrain. His cancer has AMPLIFIED his hatred for Trump and the 'crazies' who support Trump. McBrain knows that he will be DEAD before Trump is gone, and that fact has pushed him over the edge. If only we could see him call his wife a 'CUNT' in front of reporters again before he dies, just so that we have a final reminder of the true nature of what an evil POS he truly is.

Oldwood's picture

Had a guy worked for me years ago....a serious chain smoker. He was the most difficult SOB there was, and only seemed to get worse with age. He was diagnosed with brain cancer and they subsequently cut it out. He was VERY nice after that...till he died a year later.

Maybe Trump should push for McCain's surgery and while there do a lobotomy. Trump might finally get some bills passed.

Jim in MN's picture

More concise and objective analysis:

http://thehill.com/opinion/finance/359374-gop-tax-bill-good-for-business...

GOP tax bill: good for business, bad for debt, meh for middle class

 

Oldwood's picture

Well normally good for business might be good, but given how few of us seem to need jobs anymore...fuckem, right? It seems perfectly logical that we attempt to derive the bulk of our tax revenue from businesses, especially when businesses are fleeing like before Noah's flood. On top of that it also makes perfect sense that given we need these cheap foreign imports as an alternative to american made goods, we should do NOTHING to tax or tariff those imports. We wouldn't want to raise our consumer costs, nor piss off our GREAT Chinese friends....especially given we depend on them to not only sell to us on credit but to buy our infinite government debt.

Nope. I say Fuck the golden egg laying goose....too much trouble to pluck it when we can just go to Popeyes for some good spicy chicken!

Jim in MN's picture

You may be right.  I just think this Roubini piece is a shitty place to start analyzing.

geo_w's picture

anddddd...wait for it........drum rollllll.......hillary still isn't president.

Juggernaut x2's picture

tmosley has got it all wrong- the Trumptards are actually the Peanutz

Shitonya Serfs's picture

The only peanuts tmosley likes are the ones in my sheeeaat. Joker

arby63's picture

Roubini's got this wrong. The plan, as last written, would appear to save small business a lot of money. It's too easy to claim "the rich" will reap all the benefits. Let's be perfectly honest: Half of Americans don't pay a single dime in taxes. There's something wrong with that in my book.

Scornd's picture

you are welcome
to
pay as taxes are voluntary.

I Write Code's picture

I agree, better if everyone has some skin in the game.

Even if it costs more to collect than its worth.

Probably the only way to get there is to eliminate the separate SSN tax, which is regressive and a ponzi scheme in any case.

Kayman's picture

12.8 % Social Securtiy Tax means everyone has skin in the game.  The SST alone is more money than a Mexican or Chinese laborer.

arby63's picture

You pay half. Your employer pays that other half. If you're self-employed, you obviously pay both. 

buyingsterling's picture

You pay it all because in a competitive labor market the employer would pass their 'contribution' on to you in higher wages.

And the SS tax doesn't really fund the government; income tax payers expect no money back when they pay their taxes. SS payers are promised it will all come back to them.

Oldwood's picture

That can't be true because they say that by reducing taxes on business, it will only raise their profits, profits that they will not share with their employees or customers, THUS, equally employer costs could NEVER reflect on, or effect employee pay or consumer prices.

Costs and profits have no impact on wages...or even business viability or survival. Businesses are simply thieves set upon the world like locusts stripping away every shred of middle class prosperity. I have I got that right????

See how that works?

aliens is here's picture

If they pay taxes we won't have DIMS in the office now.

True Blue's picture

Yet they still manage to get an equal voice in how the money extracted from taxpayers (at gunpoint) gets spent.

And to the author of this tripe: 'corporations' do not pay taxes you encephalitic brain-dead moron -the people who buy their products do.

HRClinton's picture

That's right: "Half of US Residents do not pay taxes."

And yet we're supposed to shiver and quake at the mind/spirit-hijacking claim that "They're gonna tax your Crypto."  Crypto, that's living on the Global Cloud -- and whose anonymity (ID link to taxable individuals) is actually a function of the individual's caution/carelessness on the Internet and tradecraft.

All this FUD around CCs, when they could just tax your 401k and IRA accounts, and collect much bigger sums. 

ROTF, LMAO. That's some serious dope/meth that someone is using or selling. Where can I get some? LOL.

renaissance2008's picture

Half of Americans don't pay taxes on their income because they make peanuts. They pay taxes by consuming and spending the little money they make. 

You want them to pay more taxes ? Give them a raise...

Corporations are drowning in money and pay very little taxes so yeah lets give this guy a break.. it's not just the US, it's glonal. If you want to blame somebody, look way up not down.

 

Oldwood's picture

I thought corporations were NOT people. If a corporation has profits, how can it spend those profits on anything beyond regular business expenditures which would NOT be normally taxable, OR pay their employees and officers...of which they receive W-2s or 1099's....which are taxable? 

Exactly WHO do you think ultimately PAYS those corporate taxes? Are they not part of their cost of doing business, their overhead? And are not those costs covered by the cost to their consumers....or do you believe business costs have nothing to do with prices consumers pay? You could only be correct in that assumption if those coprprations had no competition in their given markets, and THAT can only happen with the large hand of government.....Anti-trust as a big No no...supposedly (but NOT).

We are watching as many of our corporations die or move away due to COST and COMPETITION. Those that do not either control their markets or they buy protection from government through monopoly or through favorable tax rules....favorable to only them. We hear how corporate taxes, while the highest in the world are not really...only averaging 19%. What they fail to mention is that it is an AVERAGE....meaning while we know SOME are paying ZERO (like GE and GM), others are paying the full amount of 35%....and it is THEY that are dying or leaving.

Lets just be honest about WHO really pays the tax.

NiggaPleeze's picture

Half of Americans don't pay a single dime in taxes.

45% don't pay income tax - they still pay the following taxes:  (i) property, (ii) sales, (iii) social security/Medicare/Medicaid, (iv) gas/fuel tax, (v) cigaratte/liquor tax, (vi) car / phone tax, ... etc.  Plus all the indirect tax they pay (e.g., when hiring a laborer, the laborer's taxes are included in the price).

Indeed as a percentage of income, that 45% pay about the same share of their income in taxes as the oligarchs like Trump (even though the real rich ones don't even pay nearly 30% in income taxes as they get capital gains treatment at 15% and have massive loopholes / exclusions, so effectively pay a far lower rate than the poor - as Buffet famounsly observed).  In other words, the allegedly "progressive" income tax is so "progressive" if you are myopic and consider only that one class of taxes; it's a far different story if you consider all taxes, which is, of course, the only rational way to look at it.  (Otherwise you can also point out, quite fairly, what a far higher rate of income a poor person pays in every other single category of taxes, from gasoline to phone to Medicate, than does a rich one.)

See the tables/charts at http://ctj.org/pdf/taxday2015.pdf.

Since I am currently working as an employee with a decent income I obvously pay a FAR HIGHER percentage of my income in taxes than say Trump, Buffet, Gates or Fuckerberg.  The tax code is obviously written by the rich for the rich, and our government is obviously by and for the oligarchs.

 

Umh's picture

You left out EIC. You left out EBT, medicaid... You are fundamentally correct in that less than 45% of people pay no taxes, but a sizeable portion of people are paying their sales taxes and such with money taken from others by the government.

Oldwood's picture

We ALL pay taxes in some way. The ISSUE is perceptions by those who believe they are NOT payng taxes, allowing them to turn a blind eye towards ANY tax increases in the belief that it is OTHERS who pay, not them. If they had a stake in this, payed at least some token amount, MAYBE they MIGHT think twice before supporting tax and spend governments. AS I have said elsewhere, this is NOT simply isolated to low income people. The perception that we can derive our taxes from mostly businesses completely ignores that those taxes are inclusive to every product and service we buy tfrom them. How much of a new car is payrolll taxes, corporate income and property taxes and god knows how many more? Of course the Chinese don't suffer that problem...tariff free baby.

And as a small business owner I can promise you I pay a lot more than you do as an employee. Our problem is one of opacity. No body really knows what there actual costs and income are as everything is manipulated and distorted by government. Given the pitful sate of math education, we ain't got a chance. We simply buy into the notion that we was robbed and everyone else is the thief.

dark pools of soros's picture

Good good good i dont care if it all goes to three kings as long as the progs explode

alangreedspank's picture

do progs explode like frogs when you stick a cigarette in their mouths ?

adamas's picture

All governments will continue to squeeze everything that they can from a despairing electorate until the system explodes in a crack up boom , it has started,  I'm looking forward to the final curtain.

FORD_FIESTA's picture

Collapse early, avoid the rush.....

I Write Code's picture

Maybe it's not quite that bad, but it's still the same question I posted to Newt's board - if business profits increase, who says it gets to the workers?  Cuz that's not how it's gone in the last twenty years.

arby63's picture

Bullshit I say. Don't trust the charts (they say whatever the presenter wants). Wages appear to have increased significantly for a large chunk in that $30K - $60K range. It's definitely not easy for anyone in the lower half of the income spectrum but younger people are supposed to have these jobs. 

Juggernaut x2's picture

Wages have been flat for 40 years,  yo-yo, cars and houses cost 5X what they did 40 years ago and yet $50K is still a good wage?

Umh's picture

I wish I had been making $50,000 40 years ago.

ToSoft4Truth's picture

Warren Buffet only paid $31,500 for his house (in 1958).

arby63's picture

 

Flat according to whose charts? Whose math? I employ 25 folks and they are not flat at all. I don't believe a stat I read anymore. It's all bullshit. 

yo-yo? What in the fuk is that? You some ghetto rat complaining because "whitey" is keeping you down? Go fuk yourself. 

Shit, plumbers working at a small shop are making $65K a year. Kids working at a Home Depot and going to college FULL TIME are making $25K a year. 

Sweet Chicken's picture

Taxation is theft. Fuck (((Roubini)))

Juggernaut x2's picture

Roubini is arguing within the current framework- it should be "Fuck the IRS"- but Trumptards are not know for being too bright

alangreedspank's picture

"tards are not know for being too bright"

You're quite astute.

Jim in MN's picture

What's a stute?  Is it like a sloat?

wisehiney's picture

It scrubs scumbag roubini's ass raw

To see someone starve the fucking beast