Donald Trump has just revealed some details about his tax plan. I worked on a state tax plan in 1964. I have researched, studied , considered and followed public finance issues ever since.
I want to make myself very clear. Trump’s tax plan is the worst proposal that I have ever seen come down the pike. I hope he is kidding. This terrible tax plan must have been written by the village idiot. It incorporates every trickle down, supply side, voodoo economics idea of the last 50 years in one ridiculous bundle.
Donald Trump promised to help the downtrodden middle class. That is a large part of why I have supported him. This tax plan indicates that Donald’s idea of the middle class must be those with net worth between one million and one billion. I guess the upper class in his view starts at two billion.
First of all, given the financial condition of the United States which I had hoped he had some knowledge of, any tax plan that is not revenue neutral should be tossed in the wastebasket unread. This joke of a plan would blow a hole in the budget large enough to sink the ship of state. This is a recipe for becoming a totally bankrupt third world nation. Way to go Donald!
Second, any tax plan should either be neutral or reduce income inequality. This gutter ball would trash the middle class and provide huge benefits for the upper class. Did anyone other than members of Donald’s country club even read this garbage.?
There is a mushy poem, “ How Do I Love Thee? let me count the ways.” Let me adapt that to the “Trump Tax plan, How Do I Hate Thee?”
This plan proposes to eliminate the inheritance tax. This is a bald faced ripoff that will benefit Donald, his family, his peers and his friends. Value to the middle class? Zero. The present law exempts estates of less than eleven million from Federal Estate Tax. This outrageous proposal would only benefit those whose estates are more than eleven million. That leaves me out, how about you? No one in the middle class has an estate worth more than eleven million but lots of Donald’s friends do. After all, what are friends for?
The revenue effect of this silly proposal would be to blow a huge hole in the federal budget. Offsetting revenue? Zero. Even the supply side policy mechanics cannot twist this one that far.
Details are vague but somehow Donald is going to let that oppressed group, the Hedge Fund Managers, continue to game the system by paying 15 percent income tax. That means a Hedge Fund Manager making millions of dollars a year will continue to have a lower effective tax rate than Warren Buffet’s secretary. Lets hear it for tax regressivity. Donald raises that to an art form.
Here is another rip in the budget. Hedge Funds are the most misnamed financial or governmental institution since Orwell’s Ministry of Truth. The name suggests images of financial prudence when in fact they are the most money grubbing leverage machines in history.
The proposal that has me the most red-necked is his arrogant, ignorant proposal to eliminate the deductibility of state and local income taxes from Donald’s Federal Tax. Lets take a close look at this vicious idea.
First of all, what states have the highest state and local income taxes? If you answered New York and California, you are absolutely correct. Who won the electoral votes of those two states in the last election? Hillary Clinton in a landslide. In fact her popular vote victory was cinched by her 4.5 million vote plurality in California. Who lost those two states? Donald Trump.
So this proposal is a payback in the most blatant way possible. This tax plan makes it clear that Donald Trump’s campaign promises to the middle class were just several bags of wind. It appears that Donald is comfortable with being a one term President. Proposals like this tax plan amount to the political equivalent of a smash and grab robbery. Donald is going to rip off the fisc for as much as he can, give the goodies to his buddies and exit stage right, laughing.
If Donald had even one real economist on his staff they would have told him that state and local income taxes are deductible from the Federal Income Tax to avoid imposing a tax on a tax. Dual taxation is considered poor public finance policy and a major screwing of the taxpayer. Trivial details like that do not bother our boy Donald.
This provision will increase the tax burden of the real middle class while reducing the tax burden on the upper class. That seems to be the plan. The idea is, if you reward the upper class, the benefits will trickle down to the middle class. Let me give an example of how that works. Donald’s friends will be easily able to afford another polo pony. The additional pony in the stable will create employment for someone from the middle class to muck out the stable. So the effect of Donald’s wonderful tax plan is the upper class gets the pony and the middle class gets the horse pucky.
The vast amounts of revenue lost by Donald’s giveaway tax plan is supposed to be replaced by some sort of smoke and mirrors future effect involving growth or black magic or some other voodoo stuff I fail to understand. The bottom line is the revenue goes away in this time period and nothing takes its place.
In summary, I do not like this tax plan. I think Donald should withdraw it.
Professor Joe Launie is a Professor Emeritus of Risk Management at California State University, Northridge. His latest book is “The Road to the Ox Carts”, where he warns that continued abuse of the middle class by the government may lead to an insurrection.