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.