Gary Cohn, Donald Trump’s top economic adviser, told CNBC’s John Harwood that the President had laid down “two really important principles” to guide the lawmakers and officials putting the legislation together.
- “Number one is we have to deliver middle-class tax cuts to the hardworking families in this country,”
- “Number two, our corporate tax system just is not competitive with the rest of the world. We have to create a corporate tax rate, and along with that a pass-through tax rate, that makes us competitive with the rest of the world so we can attract businesses back to the United States.”
.. Trump’s two principles have run into conflict with each other.
.. the Ryan bill would give taxpayers in the middle twenty per cent of the income distribution in 2018 a tax cut of eight hundred and forty dollars, or $16.15 a week, on average.
.. Compared to the $37,440 break that taxpayers in the top one per cent would receive
.. Over time, the modest tax breaks these people would initially receive would erode—and ten years from now many of them would be paying more money, not less, to the federal government.
.. the Republican tax proposals, which Trump has promoted by promising the biggest tax cuts in history, isn’t much of a tax cut at all in the sense that most Americans understand the term.
.. It’s really designed to reduce the tax burden on businesses and wealthy individuals, and it could only be justified if, defying history, it delivered the economy-wide upsurge in G.D.P. growth, capital investment, and wages that the White House has promised
Cutting Taxes with Borrowed Money
But it turns out two can play at that game. The Penn Wharton study is dynamic, too, and its results are shockingly different. It finds that there would be some economic growth by 2027 . . . but not much: GDP would be a whopping 0.33 to 0.83 percent bigger. By 2040, the study estimates that this growth will have faded out entirely, and indeed that the economy might be slightly smaller than it would have been otherwise. It puts the ten-year revenue loss in the range of $1.4 to $1.7 trillion.
.. Why do the GOP’s tax cuts fail to boost the economy in Penn Wharton’s analysis? Because they’re funded with deficit spending, and in this version of dynamic scoring, deficit spending reduces investment.
.. When the government borrows money, by definition it has to find people to lend it that money. Some percentage of the time, these people will lend the government money that they otherwise would have invested in the American private sector. Thus the deficit “crowds out” private investment, counteracting the pro-investment effect of cutting the corporate tax.
This tax reform thing won’t be as easy as Republicans think
Despite all that trickle-down propaganda, about three-quarters of Americans — and more than half of Republicans — believe that wealthy households and big corporations pay too little in taxes
.. That said, Republicans’ main problem isn’t what the little people think. It’s what the lobbyists want and, more significantly, what complicated budget rules allow.
.. Fitting a $2.4 trillion peg into a $1.5 trillion hole will be tricky. Proposals to cut the corporate income tax rate to 20 percent and repeal the corporate alternative minimum tax alone cost $2 trillion, according to the Tax Policy Center. Republicans will have to find more offsets, or make the cuts less generous, or both.
.. As a result, Republican lawmakers are even more likely than usual to deploy budgetary gimmicks, such as ludicrous-speed economic growth or pretending that a corporate tax break will expire in five years when everyone knows it will be renewed... “statutory PAYGO,” that hasn’t gotten much attention.This legislation has been on and off the books (it’s been on since 2010) since 1990. It says that if all of the bills passed by the end of the current calendar year have the net effect of increasing deficits, then automatic, immediate, offsetting cuts to certain non-discretionary spending programs — including (yikes) Medicare — go into effect... If Congress successfully passes a $1.5 trillion tax cut before going home for Christmas, $28 billion would get automatically slashed from Medicare between January and September of next year. And that’s just in Medicare. Other popular programs, such as mandatory spending on student loan administration and farm subsidies, would be wiped out entirely
.. But here’s the key: A bill to override these cuts would require 60 votes.
.. Republicans seem to believe they can get the votes by threatening to cast Democrats as killing Medicare. But what’s to stop smart Democrats from pointing out that Republicans put Medicare at risk in the first place?
The Little-Known Pragmatist Who Is Shaping the Trump Tax Cuts
Mr. Muzinich, a 39-year-old newcomer to Washington, has emerged as a central player in the Trump administration’s tax overhaul effort. The former investment banker and hedge fund manager is the Treasury point man on taxes, accompanying Mr. Mnuchin into “Big Six” meetings with top Republican lawmakers drafting the tax plan and laying out the administration’s positions on which taxes and deductions to cut or preserve.
.. He fits the mold of Mr. Trump’s top economic advisers, Mr. Mnuchin and Gary D. Cohn, the director of the National Economic Council, both of whom made a career on Wall Street. While not a Goldman Sachs alumnus, as they are, he brings an extensive background from the world of finance, having been a banker at Morgan Stanley and the president of Muzinich & Co., an international investment firm founded by his father.
.. His Wall Street brashness sometimes shines through when he gets into deal-making mode.
.. Mr. Muzinich, who holds an M.B.A. from Harvard and a law degree from Yale
.. In a 2007 Op-Ed article in The New York Times, Mr. Muzinich and a co-author, Eric Werker, called on Congress to offer tax credits to companies that build factories in developing countries and to offset the lost revenue with reductions in foreign aid.
.. “I think that he is pragmatic,” said Glenn Hubbard, the dean of Columbia Business School, where Mr. Muzinich taught before joining the Treasury Department. “He’s looking for good policy solutions, not policy positions.”
.. Some economists have scoffed at Mr. Mnuchin’s promises that tax cuts would more than pay for themselves because of the robust economic growth he says they will create. The department came under fire for removing from its web site an economic study that contradicted the secretary’s analysis of the benefits of corporate tax cuts.