Treasury Secretary Mnuchin’s Forked Tongue on Tax Cuts for the Wealthy

Treasury Secretary Mnuchin’s Forked Tongue on Tax Cuts for the Wealthy

Shortly before the inauguration, Steve Mnuchin discussed the incoming administration’s tax plans and announced the Mnuchin Rule–that “[a]ny reductions we have in upper-income taxes will be offset by less deductions so that there will be no absolute tax cut for the upper class.”   EXCLUSIVE: Steve Mnuchin says there will be ‘no absolute tax cut for the upper class’, CNBC Squawk Box (Nov. 30, 2016).  At the same time, he argued that those who foresaw a tax cut for the rich accompanied by a tax increase for many in the middle class were wrong:  “When we work with Congress and go through this, it will be very clear.  This is a middle-income tax cut.” Id.

Contrast that with the so-called “tax reform” “framework” that the Trump administration has put out with the GOP establishment in Congress and for which both the House and Senate have made provisions in their budget document by including a (likely significantly underestimated) tax-cut-caused federal deficit of 1.5 trillion dollars.

As this blog and many tax and economic experts have noted (see, e.g., Nunns et al, An Analysis of Donald Trump’s Revised Tax Plan, Tax Policy Center (Oct. 18, 2016), Trump’s tax plan has always favored the wealthy.  In fact, the recently released “tax reform” “framework” is heavily tilted in favor of the wealthy, because the corporate statutory rate cut from 35% to 20%, the elimination of the AMT, the elimination of the estate tax, and the 25% pass-through rate for taxpayers all represent huge tax cuts for wealthy taxpayers who are the ones most likely to have been impacted by those tax provisions.  Meanwhile, there is actually an increase in rate for the lowest-income taxpayers from 10% to 12%, and the elimination of personal exemptions (and possibly other provisions) which may or may not be entirely offset by the proposed doubling of the standard deduction and possibly some increase in the child tax credit.  Thus, some poor families who can afford it least may pay more in taxes, middle income families may get a small tax cut, and wealthy families who don’t need the money at all will get a huge tax cut.  See, e.g.,  earlier A Taxing Matter posts on this issue here and here.

And these “massive” tax cuts for the wealthy, combined with massive increases in the deficit (and borrowing) to fund the tax cuts, likely won’t even trickle down as more jobs for working Americans.  There’s very little support from past tax cuts for businesses and for the wealthy for any kind of economic stimulus, either in terms of more jobs or higher wages.  See, e.g., White House math on corporate tax cuts is ‘absolutely crazy’, Mother Jones (Oct. 17, 2017).   In fact, there is much more support for tax increases on the wealthy resulting in more jobs than vice versa.

A year after his claim that there would not be a tax cut for the upper class, Mnuchin has flipped.  He now says that there will be tax cuts for the wealthy (though he still hasn’t admitted the degree of his forked tongue on this issue).  His excuse now–“when you’re cutting taxes across the board, it’s very hard not to give tax cuts to the wealthy with tax cuts to the middle class.  The math, given how much you are collecting, is just hard to do.” See Steven Mnuchin: Of course tax cuts will help the wealthy!, (Oct. 18, 2017).

Sounds like Mnuchin just can’t do basic math, since it appears that Mnuchin wants to be able to claim that any tax reform that cuts taxes for the middle class will inevitably give tax cuts to the rich.  But that’s simply not true.

  • If you “cut taxes across the board”, you will give tax cuts to the rich (and much smaller tax cuts, at best, to the working middle class), but you don’t have to cut taxes across the board–in fact, they claimed a year ago that they would not do that.
  • If you gut the AMT, you will give tax cuts to the rich, but you don’t have to gut the AMT and you certainly can tweak the way the AMT works to ensure that the rich don’t benefit from the changes.
  • If you eliminate the estate tax, you will give tax cuts to the ultra wealthy and NO tax relief to the working middle class or lower income taxpayers. (And most of the assets in those estates that are taxed–usually much more than the $11 million in assets that are excluded from the asset tax for a couple–have been subject to no tax on the appreciation in those assets during the deceased person’s lifetime and are passed with stepped up basis to heirs, so the estate tax is not a double tax on those assets but rather the only tax that is ever charged on that appreciation.)  But you don’t have to eliminate the estate tax at all, since it is ONLY a tax for the wealthy.
    • The estate tax does not cause people to lose family farms (the very few family farms that may be subject to any estate tax after the preemption amount have 14 years to pay off any tax due out of the income of the farms).
    • The estate tax does not cause mom and pop stores to be lost.
    • The estate tax does not cause middle class families to have to sell the family china and silver that belonged to great-grandmother, because middle class families simply don’t have $11 million in assets and so all of the assets they do have are covered by the $11 million exclusion from tax.

Tax academics and other tax experts could tell Mnuchin how to cut taxes on the poor and middle class without giving any new tax breaks to the wealthy. Mnuchin just doesn’t want to hear.  Because it is quite clear that the goal of the purported “tax reform” is entirely to give huge new tax breaks to the very wealthy.

That fits perfectly with the rest of the actions that the Trump administration is taking:

  • scuttling financial regulations that protect ordinary people from predatory financial institutions and from the disasters that can result when “too big to fail” institutions get too much market power
  • scuttling environmental regulations that protect ordinary people from predatory industry pollution to the air, water, and land, that can result in disastrous illnesses, loss of America’s beautiful natural wilderness heritage, while providing faded and heavily supported polluting industries like fossil fuels the ability to rip off those resources and destroy the environment at almost no cost (sweetheart deals from the corrupt Secretary of the Interior Ryan Zinke, who rates corrupt corporate buddies over ordinary working Americans)
  • appointing backward-looking Supreme Court Justices like Neil Gorsuch, who appears to think the Supreme Court exists to empower corporate owners and managers to singlehandedly set workplace rules and deny employees rights to organize collectively (as the court already did in Hobby Lobby, in which it permitted a corporation to deny its workers  fair health coverage and the workers’ own individual religious rights based on the priority of the corporate owners religious beliefs that it would be a sin to allow their employees to be able to make their own religious decisions and use a certain kind of contraception coverage.

Working Americans, wake up!  Mnuchin doesn’t care about you or about a fair tax system.  Trump doesn’t care about you or a fair tax system. Nor do McConnell and Ryan.

This tax “framework” is all about payback to the denizens of the DC swamp–including themselves (first and foremost) and the wealthy lobbyists, wealthy corporate CEOs and real estate developers, and other wealthy buddies that have helped this wealthy cabal take over the federal and state governments through gerrymandering, vote suppression, and plain old lies that hide their own corruption and involvement in selling out the American people and, as a result, destroying the American dream.