Team Trump made its opening bid on tax reform this week with a parade of lies spewed by everyone from Donald Trump to his chief economic adviser, Gary Cohn, to his Treasury secretary, Steve Mnuchin.
Though Trump's tax "plan" hasn't actually materialized in bill form yet, the broad brush strokes of what Republicans intend to do is clear enough to render some of their biggest claims about the plan pants-on-fire fabrications.
"The wealthy are not getting a tax cut under our plan." —Gary Cohn, Good Morning America, Sept. 28, 2017
The Washington Post absolutely destroys that claim:
The Trump tax plan drops the top bracket from 39.6 to 35 percent, and allows for the possibility of a 25 percent top rate through a pass-through entity. It presumably would also eliminate a 3.8 percent Obamacare tax on investment income that hits only upper-income taxpayers.
So, on its face, this is a ridiculous statement to make for any plan that includes reductions in tax rates. That’s because federal income taxes are paid mostly by the wealthy. So when you cut income tax rates, it results in lots of dollars for the wealthiest taxpayers.
Most Americans—loosely, the 99 percenters—pay payroll taxes on programs such as Social Security but pay almost nothing in income taxes. "The top 10 percent of income earners in 2016 paid 80 percent of individual income taxes. The top 20 percent paid 94.8 percent," writes the Post.
But that doesn't even account for the plan's intent to eliminate the estate tax—a tax that affects a very small number of estates worth more than about $5.5 million. So that provision is nothing but a boon for the wealthy.
"We think there will be $2 trillion of growth. So we think this tax plan will cut down the deficits by a trillion dollars.” —Steve Mnuchin, Fox News, Sept. 28
That was Mnuchin's response to the nonpartisan Committee for a Responsible Federal Budget estimate that under Trump's $6 trillion tax cut revenues would go down by $2.2 trillion over the next decade.
Gary Cohn was even more optimistic than Mnuchin, telling reporters Thursday that the plan would boost GDP by $3 trillion. So Cohn and Mnuchin don't even agree on the numbers, but they're both wildly optimistic, projecting that the plan will goose the economy enough to substantially make up for the revenue shortfalls and then some.
No serious economist believes that a tax cut boosts economic growth so much that the tax cut pays for itself.
The Congressional Budget Office, under Douglas Holtz-Eakin, a Republican, in 2005 estimated that a 10 percent reduction in federal income tax rates would have macroeconomic feedbacks of between 15 and 30 percent. In other words, a $1 trillion tax cut might yield $150 billion to $300 billion in additional revenue. That still means a reduction in revenue of as much as $700 billion. [...]
As Holtz-Eakin put it earlier this year in an opinion column for The Washington Post: “Proposing trillions of dollars in tax cuts and then casually asserting that such a plan would ‘pay for itself with growth’ … is detached from empirical reality.”
"… it's not good for me. Believe me." Donald Trump, Indianapolis rally, September 27
Sorry, the New York Times estimates that Trump could save more than $1 billion under his new plan.
Finally, Team Trump's claim that the cut is aimed squarely at the middle class is preposterous. Trump himself dubbed the plan a "middle-class miracle" Wednesday while Cohn repeatedly told reporters Thursday that the plan was "aimed" squarely at ensuring a tax for the middle class. He wagered that a "typical" American family taking about $100,000 would save $1,000 then proceeded to fantasize about them buying a new car with those newfound savings. But Business Insider's Josh Barro did some math on that typical family and found differently.
Ann and Bob don't have a weird, outlier financial situation. They own a home with a mortgage, have two kids, pay income tax in a state with moderate tax rates, and give to charity in an amount proportionate to their income. They take tax deductions accordingly. And President Donald Trump's "massive tax cut" would appear to increase their tax burden by about $600.
It's hard enough to buy a car for $1,000. Ann and Bob definitely won't be able to buy one for negative $600.
Indeed, as almost every tax story notes given what we know now, the middle-class tax benefits are extremely modest at best and some upper-middle-class households even stand to lose money. The New York Times writes:
The tax plan that the Trump administration outlined on Wednesday is a potentially huge windfall for the wealthiest Americans. It would not directly benefit the bottom third of the population. As for the middle class, the benefits appear to be modest.
If by "middle-class miracle," Trump meant that real middle-class savings would be a miracle under his plan, then we have to rate that statement mostly true. Otherwise, Team Trump's entire sales pitch appears to be a sham based on what we know now.