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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Anteater's picture

Hey ditwad. Trump's 2018 budget is $4 TRILLION.

That's $600 BILLION higher than Obama's. And he's

still running a YUUGE TRILLION deficit that nobody

can seem to get a correct audit off, because they're

RUNNING SCARED THERE IS NO MORE STOP-LOSS.

Trump isn't draining the Swamp. He's making the

Swamp into Royal Dynasties of 1,000 Years, by

cutting our paid-in SS/MC TRUST FUNDS to ZERO,

and eliminating AMT, Capital Gains and Estate taxes.

wisehiney's picture

And that give .gov more revenue how?

Break it.

 

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.

coast1's picture

So, I plan to put 1k of my cash into bitcoin..If I lose it I lose it, something I can afford to lose, but no more than 1k..So, I went to the coinbase website, and it seems all I have to do is connect bank account number and buy...Any suggestions from long time buyers?  I have cash/silver already, so thought I would diversify a bit more, see what happens.

question: what happens if bitcoin starts to tank tho?  Everyone deciding to sell at the same time...How would that work? Will bitcoin run out of money to pay back?

Scornd's picture

cheap advice: dont. it may double from here but anything u earn is a pittance compared to what you can earn if u buy something less inflated. buy food and meds and ammo instead.

coast1's picture

agree, but I have been prepping quite a long time already, but still never have enough really...Your point is well taken tho.

Osmium's picture

Not a long time buyer, just some thoughts on Coinbase.  If you want to place a limit order you will also need to connect GDAX with Coinbase.  That will work fine as long as you don't live in Minnesota, Alaska or Hawaii.  GDAX not set up to operate in those states.  If you are not able to place a limit order on Coinbase, you will be at their mercy as to what you fill price will be.  (Usually a shitty fill price)

resistedliving's picture

https://www.youtube.com/watch?v=5oQLf65N-AU

another "unbelievably complicated" clip on order

 

ReturnOfDaMac's picture

Bullish!  More money for stawk buybacks, fewer outstanding shares, higher prices, but never, never, ever more jawbs.  Because higher "productivity" and jawbs for the pleebs are expensive.  Another reason to BTFD.

Peak Finance's picture

Total Bullshit article, start to finish

"Dr. Doom" should know that corporations DON"T FUCKING PAY even close to 20% right now.

Only small businesses / tiny corporations without a lot of deductions pay EVEN CLOSE to the 35%

So he is either a liar or a shill

So fuck you Roubini

Mikeyyy's picture

By your reasoning then, a corporate tax cut won't be any way close to as stimulative as Trump, Mnuchin, Cohn and Ryan are saying it's gonna be, right?

Who's the liar(s) ?

Peak Finance's picture

No, it will be MASSIVELY stimulating, as the small businesses / tiny corps vastly outnumber the big guys and are historically the generator of job growth. 

This tax plan reduces the boot on my neck a lot. 

Mikeyyy's picture

Small businesses, small corporations, LLC's are generally just pass-throughs and pay taxes at the individual rate.  There are passingly few "tiny corporations" that pay a 35% rate.  

If you believie this will be MASSIVELY stimulating I've got a bridge to sell you...

silverer's picture

Maybe pull a Saudi Arabia move and confiscate all the wealth of the top 0.5% and jail them all for cronyism?

FORD_FIESTA's picture

I'm for that, except make it the top 25%,,,,,,,

arby63's picture

Because you can't figure out a way to make some decent money? I grew up with nothing but I make a good living. Hard work. Oh, and I didn't get stoned out of my mind in school. Oh, and I paid attention in class. Oh, and I can speak and write. 

Fuck off chump. Oh, and make sure my tacos are hot.

Jayda1850's picture

$20T in debt is so last year, don't these people know that Trump is gonna fix all that? Look at the stock market, it's up $5.2T. That basically erases most of it, Trump said so in his interview on Fox .

Says retarded Trump supporters who will fucking rationilze everything.

"The country -- we took it over and owed over 20 trillion. As you know the last eight years, they borrowed more than it did in the whole history of our country. So they borrowed more than $10 trillion, right? And yet, we picked up 5.2 trillion just in the stock market," Trump said during an interview on Fox News.

"Possibly picked up the whole thing in terms of the first nine months, in terms of value. So you could say, in one sense, we're really increasing values. And maybe in a sense, we're reducing debt. But we're very honored by it."

Dr. Acula's picture

Trump is trying to funnel all of the money into rich hands so he can then confiscate it, like the Saudi prince did, and then erase the US deficit.

Trump really wants to save America, the country he loves so much.

It's 69-dimensional shogi.

 

Jayda1850's picture

+1 for the nice satire. Hahahaha and people think the left are the communists!

arby63's picture

Do you or Jayda up there even pay taxes? It's rather unlikely.

Jayda1850's picture

I guarantee I'm paying a higher percentage than the multimillionaires  like Trump and his swamp ass cabinet are paying even before this BS giveaway of a tax reform plan.

arby63's picture

So, what you're saying, is that you really don't pay taxes. You clearly think Trump doesn't. He's a billionaire by the way. 

In any event, I trust that you pay very little in taxes. That doesn't really bother me at all. What bothers me, however, is how you want everyone else to pay for you. That's weak.

You that weak?

Jayda1850's picture

You got some Gary Cohn, Steve Mnuchin, Dina Powell, Steve Bannon Goldman Sachs cum on your lips. You might wanna wipe that off before you try to spittle out a response while still sucking on the Donald's orange dick.

Apeon's picture

You are as helpful as a 3 legged horse.

ZeroPoint's picture

"who has not hesitated to betray the people he conned into voting for him".

Would you have preferred Shitlery got in? I only voted for the Donald because the alternative likely would have landed me in a FEMA camp when they pull the plug.

Can't we just do a Saudi style going out of business liquidation sale like they just had?

 

Anteater's picture

A 'choice' (sic) between ZioWarPig A and ZioWarPig B?

"You have no choice! You are owned. They own you!"

George 'The Man' Carlin

To Hell In A Handbasket's picture

Would you have preferred Shitlery got in?

What kind of fucking defence is that? The choices was a bullet to the left temple=Killary vs A bullet to the right temple=Trump. You cannot claim victory in "hey, its better than getting shot in the left temple Killary" In happiness that you got shot in the right temple by trump and call that **Winning** 

flemsnopes's picture

While the Trump tax cut plan is mostly BS, so is this analysis, because both are based on conventional thinking.  That ship has sailed.

Anteater's picture

Wait, Congress looted $1.5 TRILLION from our PAID IN

TRUST FUND for Medicare, to fund elimination of all

Capital Gains and Estate Taxes, as well as the AMT?

 

Quelle surprise! The New Goldman:Pentagon Elites

don't work on W-2s. They work on REITs, SBEs and

Capital Gains investments. All will be untaxed! With

no AMT to capture them, and no Estate Taxes, then

Congress has just COMMITTED TREASON by creating

New American Century Dynasties of 1,000 Years.

"We won, you lost. It's just business, get over it!"

 

"And now they're coming for your Social Security (/MC).

And you know what? They'll get it. They'll get all of it!"

George 'The Man' Carlin

 

Peak Finance's picture

LOLZ this guy thinks there was an actual "Trust fund"

hahahahahhaahahahahhahhahahhaha

 

Apeon's picture

You have to speak DC

 

Trust-----YOU trust US

 

We will have the Fund

Peak Finance's picture

Really guys, please raise your fucking hands if you DON'T KNOW that Clinton and The Newt CLEANED OUT all of the trust funds in the 90's??? Like 20+ Fucking Years Ago???? 

falak pema's picture

Dr Doom goes "boom" on the Duck. 

But does he say that WS is doomed too?

 

ToSoft4Truth's picture

We should pay more taxes.  It's for the empire!

Hkan's picture

Trump moral compass steady!

Dr. Acula's picture

>Trump continues to govern as a plutopopulist

Another name for Pluto is Hades, which is probably where Trump's god Jabulon (Baal) lives

Apeon's picture

Stay in the Dark Fracula

Dr. Acula's picture

Keep a-pe'n, guy.

Were you part of the dossier?

Or are you from France? 'Cuz you're-a-pe'n.

 

Deep Snorkeler's picture

Great Warlord Trump

Super-corporatist warmaker,

our Kabuki Admiral of the Great White Fleet, 

a big defense budget balloonist,

the subject of every cartoonist.

Our middle class future is lost in

endless wars, mismanagement

and a global fraud network.

 

arby63's picture

Your prose sucks. Your grammar is horrible. You display a lack of overall intelligence. 

Apeon's picture

He still has nitrogen overload in his cranium from deep snorkeling.

Dr. Acula's picture

Arby's, we have the meat(head)s

bluskyes's picture

Are those "standard models" the same ones that show <2% inflation?

DFCtomm's picture

This corporate tax rate issue is bullshit. The left says GE, and other large multinationals dont pay any tax at all, and the right says that we have one of the highest corporate tax rates in the world. Who is right? They both are. The big corporations don't pay shit, but that tire dealer that you went to yesterday to get some new tires before winter, well, he pays 35%. The obvioius answer is that we reduce the overall tax rate from 35% to 20% and we close the loopholes so GE pays at least some tax, and we lower the tax burder on small businesses. Dr. Doom can fuck right off.

Apeon's picture

You are also wrong

 

 

ONly ONE Person pays taxes---THE CONSUMER

DFCtomm's picture

I agree with you in theory, but there is no place called theory. It doesn't exist in the real world. If you think you're ever going to get a fair tax or a flat rate, then you're too naive to talk to.

Umh's picture

I smile evry time I hear someone (usually a leftist) talk about raising business taxes. The money collected by businesses from their customers to pay business taxes is as close to a flat tax as we will have in this lifetime.

DFCtomm's picture

I use to hate the lottery because it was a tax on the poor, but then I realized it was a VOLUNTARY tax on the poor, and I learned to love it. If only we could finance the whole government on lottery schemes.

Harry Vederchi's picture

In a way you owe me everything you own, Nouriel: I never stole it from you.

There is a huge difference between "giving" and "not extorting".

Oh and BTW, the 99% are robbed through monetary inflation, which is required because of gvt debt, which is a direct consequence of exponentiel gvt spending, of which Obamacare is the latest major cause.