Author of Trump’s tax plan says math forced him to give big cuts to the rich

Mnuchin says "it’s very hard not to give tax cuts to the wealthy."

Credit: (AP Photo/Alex Brandon)
Credit: (AP Photo/Alex Brandon)

Treasury Secretary Steven Mnuchin acknowledged Wednesday that the GOP tax plan will ultimately benefit wealthy people.

During an appearance on the Politico Money podcast, Mnuchin said it is difficult not to create a tax plan wherein wealthy individuals receive a tax cut.

“The top 20 percent of the people pay 95 percent of the taxes. The top 10 percent of the people pay 81 percent of the taxes,” he said on the podcast. “So 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.”

This contradicts a statement Mnuchin made in September on CNBC’s SquawkBox, when he stated, “Any 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.”

Avoiding tax cuts for the wealthy, however, is not as difficult as Mnuchin believes it to be. All he really has to do is take closer look at the tax plan he helped create.

In the podcast interview this week, Mnuchin defended the party’s plan to repeal the estate tax by calling it “somewhat of an economic issue and somewhat of a philosophical issue” and asking, “Why should people have to pay taxes again when they die?”

President Donald Trump also kicked off his tax reform campaign by using a family farmer as a prop to prove that repealing the estate tax helps small business owners.

“Your family won’t have to run out and do a fire sale to try to get the money to pay the tax, lose the business, ends up going out of business, all of those jobs are lost,” said Trump. “The farmers in particular are affected. They have wonderful farms but they can’t pay the tax, so they have to sell the farm.”

Eliminating the estate tax has long been pitched to Americans by the GOP as a way to ensure family businesses can be passed down without being heavily taxed. The reality is, thought, that only a few thousand Americans will ever pay the estate tax and they all come from an absurdly wealthy cluster of the country which makes more money than the tens of millions of people at the bottom end of the national income distribution.

In order to qualify for the estate tax, an individual has to have an estate worth more than $5.5 million (or $11 million for a married couple). Half of the families worth that much money are not farmers or small business owners, but rather, suit-wearing plutocrats who live in states like New York, California, Texas, Florida, or New Jersey. In Indiana, where Trump kicked off his tax reform campaign, there are just 70 estates large enough to pay the estate tax next year, according to the IRS figures.

Trump and the 13 of his 24 cabinet members who qualify to pay the estate tax would collectively recieve a massive tax cut worth $1.5 billion.

The GOP plan also proposes eliminating the Alternative Minimum Tax (AMT), an anti-loophole backstop that was created so the wealthiest individuals couldn’t take so many deductions that would result in them paying little-to-no income tax. The AMT is the only reason Trump paid any income tax on his leaked 2005 tax returns. Without it, he would have only paid a tax rate of about 4 percent on an income worth $150 million.

Analysis from the Tax Policy Center at the Brookings Institute also found this tax plan would be a boon for wealthy individuals at the expense of the working and middle class.

80 percent of the plan’s tax cuts would go to the top 1 percent.

Conversely, some tax deductions claimed by middle class families, like the state and local tax deduction (SALT) are in jeopardy of being eliminated. This would harm middle and upper-middle class families in high-tax states like New Jersey, New York, and California.

New York Congressman Peter King (R-NY) is one of the 52 Republicans representing a district that use the state tax deduction disproportionately and has said he wouldn’t vote for any bill that would eliminate SALT.

“Without the SALT deduction, taxpayers in all 50 states and in the District of Columbia would be doubly taxed — they would pay federal income taxes on the money they pay to their state and local governments,” King and six other New York Republican lawmakers wrote in a June letter to Treasury Secretary Steven Mnuchin. “Such a policy is eminently unfair, as the federal tax code has recognized for the past 103 years.”

In the Politico interview, Mnuchin said he was aware of the concerns regarding the SALT deduction and planned to address it.

“We’re working on fixing that right now. We’re conscious of that issue,” Mnuchin said. “And look, I’m sympathetic to that issue. I’ve lived in two of the highest-taxed states, New York and California.”

Many Americans, however, are beginning to see right through the administration’s claims that the tax plan is a win for the middle class. A CBS News Nation Tracker poll released Sunday found that nearly 58 percent of Americans believe the proposed GOP-Trump tax reforms would favor the rich, with only 18 percent believing they would help the middle class.

A separate poll by CNN found that 52 percent of Americans oppose the Trump tax plan, with only 24 percent believing the plan will make them better off.