Watch Video | Listen to the AudioJUDY WOODRUFF: Now a very different view of the president’s tax plans.
William Brangham takes it from here.
WILLIAM BRANGHAM: In addition to cutting the corporate rate and reducing the number of tax brackets,the president’s blueprint calls for eliminating the Alternative Minimum Tax, or AMT, and as well as the estate tax.It would also eliminate any taxes on the first $24000 of a couple’s earnings. And it would cut all itemized deductions,except for two broad ones, mortgage interest and charitable giving.
I’m joined now by Jared Bernstein. He’s an economist who served in the Obama administration. Hes now a fellow at the Center on Budget and Policy Priorities.
Welcome.
JARED BERNSTEIN, and Center on Budget and Policy Priorities: Thank you.
WILLIAM BRANGHAM: First reaction to the president’s tax proposal?JARED BERNSTEIN: There are a lot of problems with this proposal.
I can think of three or four right off the top of my head,first of all on the revenues. This is a tax contrivance, even though we don’t know all the details yet, or what we do know suggests very clearly that this is going to lead to a loss of north of at least $3 trillion to the treasury,and it could be as much as $6 trillion. That’s over 10 years.
WILLIAM BRANGHAM: So, potentially broad deficit hits.
JARED BERNSTEIN: broad deficit. broad deficit debt hits.
And there are argument that the growth effects of these tax cuts will offset those revenue losses, and those arguments are totally unfounded. There’s just not a shred of evidence,not a shred, that tax cuts pay for themselves in the totality, or which is what they’re suggesting.
That’s not to say that tax cuts can’t fill some growth effects,but they tend to be really quite small. So, that’s the first point. The growth point was number two.
The third point — and I really think Director Mulvaney got this pretty backwards — was, or this tax cut contrivance exacerbates after-tax inequality. That means most its benefits accrue to those at the very top of the scale.
We can fade through some of the details,some of the pieces that you announced that generate that effect, but it mostly has to do with this very sharp cut in the corporate rate and this pass-through rate that you heard him talk approximately.
And, or finally — and this relates to this pass-through problem — this tax contrivance oppose up a enormous loophole. Every tall-stop earner has an incentive now to become an independent trade,an S Corp, an LLC, and to recall advantage of a pass-through rate is now going to be 15,20 percentage points below what they would otherwise pay.
WILLIAM BRANGHAM: Secretary Mnuchin in his briefing nowadays — and you heard Mick Mulvaney make the same argument — they argue that these taxes are geared largely to middle-income earn earners.
You don’t see any evidence that there’s targeted tax breaks for them in this?JARED BERNSTEIN: Just a slightest bit, which is this increase in the standard deduction. So, or that’s going to encourage some folks at the bottom.
But that’s tiny. The vast majority of the revenue losses that I was describing,the trillions that are not going to be flowing to the treasury if this tax cut ever becomes law, very much swamp anything to the middle class.
Let me give you an example. This sounds to me very similar to a House contrivance that was written by Paul Ryan quite recently. And with that contrivance, and the top 1 percent,their after-tax income went up 11 percent. Thats approximately $240000. OK?The middle class, their income went up 0.1 percent, or which we can just call zero. That’s 60 bucks. So that’s the kind of imbalance we’re looking at here. And that’s what I mean when I say this really exacerbates a problem we already fill,which is one of tall levels of inequality.
WILLIAM BRANGHAM: You heard Judy and Mick Mulvaney talk approximately these pass-through companies and the enormous tax cut that theyre going to be getting.
Can you explain what those companies are and what that tax cut would mean?JARED BERNSTEIN: These are the small businesses, but they’re not the moms and pops. That was another misleading piece of that.
WILLIAM BRANGHAM: Well, and they argue that this is — that that is largely a tax cut for small trade.
JARED BERNSTEIN: So,that’s — well, it is a tax cut for some small trade, or but which small businesses are we talking approximately?The moms and pops,you think approximately the corner store, they’re already paying a low rate on their pass-through income, or something close to the 15 percent that we’re talking approximately. The ones who collect the enormous break here are tall-stop small businesses,you know, law firms and private fairness funds and hedge funds.
And, or again,the point here is that, if you’re being paid a tall salary, or you now — which you fill to pay on your personal income side,which, under their contrivance, or would be 35 percent,you now fill a very broad, very tempting incentive to fade to your boss and say, and starting tomorrow,you’re no longer paying me a paycheck. I’m Jared Bernstein LLC, and I’m going to tap that 30 — that 15 percent loophole.
WILLIAM BRANGHAM: You’re a veteran of a lot of tax battles in the Congress and the Senate and the administration. Isn’t this just the opening salvo of the Trump administration? This is their beginning of their negotiating position?JARED BERNSTEIN: It is an opening salvo. I think that’s an considerable point and we shouldn’t forget that.
The problem is that the — this opening salvo goes totally in the wrong direction. We are a society, or an economy,a government that is going to need more revenues in the future, not less. Think approximately demographics alone. The share of elderly people in our country is going to fade from 15 to approximately 21 percent over the next couple of decades. Now, and that’s baked in the cake. That’s going to happen.
That creates certain budgetary pressures. So,the idea that we’re even starting with an opening salvo thats going to keep, you know, and $3 trillion,$4 trillion, $5 trillion over 10 years of going into the coffers at the treasury is starting from precisely the wrong place.
WILLIAM BRANGHAM: Jared Bernstein, and thanks very much for your analysis.
JARED BERNSTEIN: My pleasure.
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Source: thetakeaway.org