BY MARTIN KICH
An alternative title to this post might be “’Redefining The Takers.’”
The New York Times has reported the possibility that Donald Trump may have avoided paying federal income taxes for more than two decades because of a $913,000,000 loss reported in 1995.
In response to the story, Trump has asserted that he has paid hundreds of millions of dollars in state and local and property taxes.
In 2012, when Mitt Romney made his damaging observation on the 47% of Americans who would never vote for him because of their dependence on the government, Trump doubled down on the observation by opining that both the ballooning federal deficit and the crumbling infrastructure could be attributed to the high percentage of Americans who were not paying federal income taxes.
Many progressive think tanks countered such arguments by pointing out that the poorest Americans are paying a much higher percentage of their incomes on taxes—including sales taxes of basic items—than the wealthiest Americans are paying. And those arguments were dismissed by Romney’s surrogates as beside the point.
So, Trump’s surrogates are asserting that the same argument that Trump dismissed in 2012 should not be accepted in his defense now.
To add irony to irony, Trump surrogates are now making these arguments:
(1) The New York Times cannot say anything definitive about Trump’s taxes because they have only very fragmentary information—ignoring that Trump has refused to release his tax returns.
(2) The 100+-page financial statement that Trump provided to the Federal Election Commission is much more revealing than his tax returns would be—even though that financial statement includes information on none of the information on his financial dealings that investigative journalists for several newspapers have uncovered over the last several weeks.
(3) The fact that Trump may have paid no income taxes for several decades is the fault of those who wrote the tax codes, and does not all reflect badly on him. In fact, his avoidance of taxes is an indication of his “business genius”—even though the entire issue stems from a nearly billion-dollar business loss that he claimed in a single year.
And (4) Trump would be the ideal person to be charged with reforming the tax system because he has more intimate knowledge of it than any candidate who has ever been a major-party candidate for president—even though his ongoing business interests would be severely damaged by tax reform that actually eliminated the loopholes from which he has been benefitting so extensively.
So, we are being asked to trust that the most self-interested, untruthful, and privilege-assuming candidate in the history of presidential politics will, for the benefit of his working-class supporters, act against his own self-interest—will sacrifice his own self-interest to the greater interests of the nation.
If you think that’s possible, do some reading on who will actually benefit from Trump’s tax plan. Here are the opening paragraphs of a report written by William G. Gale, Hilary Gelfond, and Aaron Krupkin for Brookings Institute:
“Donald Trump has put forth some really novel (and poor) ideas – his immigration and trade policies come to mind. His tax reform ideas are misguided, too, but they are not novel. They share essential elements with Ronald Reagan’s tax cuts in 1981 and George W. Bush’s tax cuts in 2001 and 2003, as well as with Mitt Romney’s plan in 2012 and Paul Ryan’s, more recently.
“His plan would drain government coffers of revenues. Coupled with his promise to avoid cuts to Social Security and Medicare – two big parts of the budget – it would boost public debt to all-time record levels.
“Trump’s plan would provide massive tax cuts for the richest Americans and undercut every progressive feature of the tax code. It would slash top income tax rates, eliminate the estate tax – which only a tiny fraction of the population pays – and cut corporate and business tax rates by more than half. The plan would encourage massive amounts of tax avoidance by setting the top business tax rate at 15 percent and the top rate on wages at 33 percent.
“The plan aims to encourage firms to create new jobs in the United States by offering a 10 percent tax rate on the repatriation of funds that are currently parked overseas. But we tried a similar policy in the Bush (43) Administration and it had no effect on jobs or investments. Nor should it be expected to today – corporations are already sitting on lots of cash reserves in the U.S., and they are not investing more.
“The plan won’t generate economic growth. We’ve been down this road before. For example, Reagan’s tax cuts did not boost the long-term growth rate, according to authorities like conservative economist Martin Feldstein, who was a Reagan appointee, and Douglas Elmendorf, former head of the Congressional Budget Office.
“No one even proffers the suggestion that George Bush’s tax cuts-–featuring lower income and estate taxes, like Trump’s plan–-helped the growth rate, and for good reason. There is simply no evidence that it did.
“Other countries have tried cutting top tax rates, too. The evidence shows that tax cuts for the rich help the rich accumulate more wealth, but don’t do anything much for economic growth.
“Or, ask the people of Kansas how their income tax cuts have worked out. Listen to the stories about having to cut education and other spending and raise regressive taxes to make up for the absence of the promised growth miracle.
“Indeed, because of the massive rise in debt, Trump’s tax plan may actually hurt growth.”
The complete article is available at: https://www.brookings.edu/blog/up-front/2016/08/10/making-americas-debt-great-again/?utm.
Here is some additional insight on the tax plan that Jim Tankersly has reported for the Wonkbook newsletter of the Washington Post:
“A little-noticed provision in Donald Trump’s tax reform plan has the potential to deliver a large tax cut to companies in the Republican presidential nominee’s vast business empire, experts say.
“Trump’s plan would dramatically reduce taxes on what is known in tax circles as ‘pass-through’ entities, which do not pay corporate income taxes, but whose owners are taxed at individual rates on their share of profits. Those entities are the most common structure for small businesses and increasingly popular for larger ones as well. They are also a cornerstone of the Trump Organization. On his 2015 presidential financial disclosure report, Trump listed holdings of more than 200 limited liability corporations, which is a form of pass-through.
“There is no indication that Trump designed his tax plan to benefit his own companies. ‘It wasn’t something we took into consideration when we made this plan,’ Trump economic policy adviser Stephen Moore said.
“Still, the provision highlights the tensions between Trump’s policy proposals and his personal financial interests.”
I could site any number of reports from progressive think tanks, but since those would automatically suspect, I will cite a “billionaire investor.”
Here is a summary from Business Insider of what Howard Marks has said about Trump’s economic and tax plan:
“Howard Marks, the billionaire co-founder of Oaktree Capital Group, thinks Republican presidential nominee Donald Trump is delusional.
“In his latest memo dubbed ‘Political Reality,’ Marks dedicated a section to Trump’s statements on America’s finances.
“’It’s fair to say that [Hillary Clinton] hasn’t been anywhere near as guilty as Trump of defying economic reality on the campaign trail, and that’s my subject here,’ he wrote.
“Here is Marks:
“’[Trump] built his net worth in part by borrowing money and not paying it back, and he seems proud of his companies’ repeated use of bankruptcy as a strategic tool. But Trump doesn’t have an ongoing need to tap the world capital markets, as the U.S. does (he now operates under an asset-lite business model that emphasizes licensing fees rather than asset ownership; perhaps this is because his multiple defaults have caused the credit window to be closed to him). The United States could refuse to pay its debts in full–that’s called “rescheduling” or “default”–but we’d be unlikely to have the same access to the credit markets, and we would certainly cease to enjoy the benefits of a high credit rating and resulting low interest rates.’
“Marks also skewered Trump’s comments on imports and job losses from trade, pointing out that increased tariffs could cause prices to rise for US consumers:
“’As for economic reality, never has Trump said anything like this: “We may be able to increase manufacturing jobs by imposing protective tariffs, but that would require all consumers to pay higher prices for their purchases of goods from abroad.” What would the average American’s everyday shopping experience be if imported goods were barred, discouraged or heavily taxed?’
“He then highlighted the potential impact of Trump’s protectionist policies if other countries responded with their own tariffs, and how his campaign is mainly eyeing people ‘who fear being left behind by globalization’:
“’Further, Trump doesn’t point out that, in response to the adoption of protectionist measures by the U.S., other countries could retaliate with increased tariffs on U.S.-made goods, costing some Americans their jobs. Here’s what Moody’s Analytics says about his original economic agenda (I haven’t yet seen analysis of the plan he announced on August 8):
“’Broadly, Mr. Trump’s economic proposals would result in a more isolated U.S. economy. Cross-border trade and immigration will be significantly diminished, and with less trade and immigration, foreign direct investment will also be reduced. While globalization has created winners and losers in the U.S. economy in recent decades, it contributes substantially to the ongoing growth of the U.S. economy. Pulling back from globalization, as Mr. Trump is proposing, will thus diminish the nation’s growth prospects.’
“This isn’t the first time Marks has touched on politicians’ tendency to overpromise. He warned in May that readers shouldn’t expect magical solutions to appear.”