As a candidate for president, Donald Trump ran as a populist. Throughout the campaign, he harnessed the power of his appeal to middle class Americans frustrated with the political establishment.
At odds with Trump’s appeal to his populist base are the actual policies that his administration proposes. Following the their failed repeated attempts at stripping Americans of healthcare coverage, Donald Trump’s Republican party now has it’s sights on passing tax reform, the details of which are anything but populist.
Study after study of the GOP-Trump tax plan shows the plan will ultimately benefit the wealthiest Americans. The non-partisan Tax Policy Center found that after the tax plan has taken full effect in 2027, 80 percent of the benefits would go to the top 1 percent. When it comes to tax cuts, the top 1 percent will get an average cut of $1,022,120, while the middle 20 percent will get an average cut of $420, eviscerating any notion that the middle class are the key beneficiaries of the Republican’s “Unified Framework for Fixing Our Broken Tax Code.”
In spite of this, the administration continues to pedal this to the American public as a tax plan designed with the middle class in mind.
ThinkProgress looked at tweets and transcripts of television appearances over the last month by key administration members including the president himself, Vice President Mike Pence, U.S. Treasury Secretary Steven Mnuchin, first daughter and outspoken child tax credit advocate Ivanka Trump, White House Press Secretary Sarah Huckabee Sanders, and chief economic adviser Gary Cohn for any mention of the tax plan benefiting middle class made through Twitter and television.
We found at least 84 instances of the administration advancing this dishonest talking point. Here is a sampling.
Trump: “It’s a middle-class bill.”
The president kicked off the party’s crusade for reforming the tax code at an event in Indianapolis, Indiana late September.
— Donald J. Trump (@realDonaldTrump) September 27, 2017
“We will cut the business tax rate from the highest in the developed world at 35 percent to no more than 20 percent. We are cutting taxes on small businesses to the lowest rate in more than 80 years. We are going to restore America’s competitive edge, rebuild America’s middle class — very much aimed at the middle class — and renew the promise of the American dream.”
(Sept. 27 Indianapolis, Indiana)
All three of these claims are problematic and effectively do not do much for the middle class.
America is not the highest taxed nation in the developed world and the argument that a lower corporate tax rate would result in more jobs and higher wages for middle-class Americans is not supported by evidence. A study by the Economic Policy Institute found that cutting taxes for corporations does not boost wages, calling the claim “clearly wrong.”
Trump pitched his tax plan as boon to American truckers in particular, this October. Parroting the plan as a middle class tax cut the highest earners won’t benefit from.
“Our framework ensures the benefits of tax reform go to the middle class, not to the highest earners. It’s a middle- class bill. That’s what we are thinking of. That’s what I want. I’ve had rich friends of mine come up to me and say Donald, you’re doing this tax plan. We don’t want anything. We don’t. Now, they gain when the economy gains. They gain when companies get better. They gain in lots of different ways. But they don’t want that so many people have come up to me and say give it to the middle class. Give it to people that need it. Give it to people who want to spend it. You’d be surprised.”
(Oct.11 Harrisburg, Pennsylvania)
Notwithstanding, the president himself said he would benefit from the tax plan after weeks of saying it would be “not good” for him.
“Well, what I say is that the, this whole concept, everybody benefits if the country does well,” Trump told Forbes in an interview. “We all do. You guys benefit. Everybody benefits if the country does well.”
Pence: “This is a middle-class miracle.”
“First and foremost, we’re going to cut taxes across the board for working families. We’re going to lower tax rates from seven brackets down to three. We’re going to increase the standard exemption by doubling it to some $24,000 so that for the average working family, your first $24,000 in income will be tax-free. And we’ll increase the per-child tax credit. So as the President says, this is a middle-class miracle.”
(Oct. 17 Lancaster, New York)
When Republicans are pressed on whether the tax plan benefits the wealthiest Americans, they are quick to mention the doubling of the standard deduction. And while doubling the standard deduction would allow the lowest rates to get a tax cut in a vacuum, when combined with other details in the plan, like eliminating personal exemptions, could actually end up raising taxes on middle class families.
In addition to tax reform, Republicans are also planning on overhauling the tax code to make it more “simple” for taxpayers. This includes a reducing the number of brackets and eliminating most personal exemptions. House Speaker Paul Ryan frequently says that tax simplification would award the American public the ability to file their taxes on a postcard. This is, for the most part, a gimmick, and consolidating seven brackets into three doesn’t make filing taxes any simpler.
Mnuchin: “This is about giving people a middle-income tax cut.”
“And we’re focused on closing the loopholes. This is about giving people a middle-income tax cut, this is about tax simplification and making our business tax to 20 percent and 25 percent for pass-throughs, very, very competitive with the rest of the world.”
(Sept. 28, Fox Business Network)
The GOP-Trump tax plan would lower the tax rate of “pass-through” businesses, which include partnerships, hedge funds, and LLCs, to 25 percent — not necessarily the “small businesses” Trump has said will benefit from this provision. These businesses don’t pay the corporate rate; rather, their owners pay taxes on their share of the profits from the business at their own personal rate, which would be lowered to 35 percent under the Trump plan. This would effectively cap the rate on income from pass-through businesses at just 25 percent, allowing for some pass-through business owners to re-characterize their income to receive this special low rate. Trump himself owns over 500 pass-through corporations.
Mnuchin backtracked recently on a statement he made in September while on CNBC’s SquawkBox. During the interview he said, “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.”
On the Politico Money podcast last week, Mnuchin said it is difficult not to create a tax plan wherein wealthy individuals don’t get 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.”
Ivanka Trump: Tax plan would provide “much needed relief to middle-income American Families.”
Great to be on the Hill today talking #TaxReform & the importance of providing much needed relief to middle-income American families. 🇺🇸
— Ivanka Trump (@IvankaTrump) October 25, 2017
The first daughter has been on the road selling her father’s tax plan to middle class Americans. Her main goal has been to increase the child tax credit, currently at $1,000, to $2,000. This, however, is currently not included in the GOP tax framework.
On Monday she spoke in Bucks County, Pennsylvania to promote the child tax credit.
“Every parent has to manage the competing demands of raising a family and their passions, whether it be professional or otherwise, and I, too, had to manage that, but I’m far more fortunate than most and I had help,” she said. “I wouldn’t be able to do even a small fraction of what I was doing professionally or as a parent, just being so tired and over-tasked, if I didn’t have access to the means to be able to put myself my children in a secure and safe and protected and nurturing environment.”
She did not mention that the elimination of the estate tax and the the reduction on rates for pass-thru income could save her and her families billions.
Sanders: The “focus” and “priority” of the tax plan is on the middle class.
“That focus, as we’ve said, time and time again — the focus and the priority of the framework that the White House has laid out is to benefit the middle class, and that’s what the priority is.”
(Oct. 24, White House press briefing)
What would your family do w/ a $4,000 raise from the President’s tax cut plan? REPLY & I’ll share your family’s story in the press briefing
— Sarah Sanders (@PressSec) October 23, 2017
White House Press Secretary Sarah Huckabee Sanders wrote a series of tweets touting a popular provision of the Trump-GOP tax plan that claims will give middle-class Americans a wage raise of four thousand dollars.
Trump first announced this claim during his tax reform speech in Pennsylvania. It was created by the administration’s Council of Economic Advisers (CEA), led by Kevin Hassett, a conservative economist and author of the book “DOW 36,000.” According to Hassett’s analysis, reducing the corporate tax rate would
“increase [the] average household income in the United Sates, by very conservatively, $4,000 annually.”
Economist after economist have debunked this claim, most notably, former U.S. Treasury Secretary under President Clinton, Larry Summers, who called it “some combination of dishonest, incompetent and absurd.”
Furthermore, the corporate tax cuts would not only help corporations stay flush with cash, but it would help foreign investors too, according to new analysis out of the Urban-Brookings Tax Policy Center.
Analysis by Steven Rosenthal, a senior fellow at the Tax Policy Center, found that roughly 35 percent of U.S. corporate stock is owned by foreign investors. Slashing the corporate tax rate to 20 percent would translate to a tax cut for these investors worth $70 billion dollars, a cut three times the tax break that households in the middle income quintile would get under Trump’s tax plan.
Cohn: “We can have them pay lower taxes.”
“We’re — our objective here is to continue to give middle class, middle-income families a tax cut. Allow middle-income families to keep more of what they earn. They still are paying taxes even though the wealthier people are paying more taxes, middle-income families are still paying taxes and yes, we do believe as an administration, we can have them pay lower taxes.”
(Oct. 1, Fox Business Network)
As the initial Tax Policy center analysis, suggested, this isn’t true. The wealthiest Americans would reap most of the benefits from the Trump-GOP tax plan.
In 2018, 12 percent taxpayers will get a tax hike and by 2027, 25 percent will. More than a third of taxpayers with incomes between $150,000-$300,000 would be paying higher taxes in 2018, and 60% of them by 2027. The analysis notes that, “the number of taxpayers with a tax increase rises over time.”
After the plan has fully taken effect in 2027, taxpayers in the bottom 95 percent will see a 0.5 percent increase in after-tax income, while the top 1 percent will see after-tax income increase of 8.7 percent.
Cohn, however, seems disconnected from the economic realities of middle class Americans, having recently suggested that taxpayers who receive a $1,000 tax cut can use that money to buy a new car or renovate a kitchen.