Incoming Treasury Secretary Steven Mnuchin made waves this week with his announcement that the tax plan proposed by his boss, President-elect Donald Trump, will not cut taxes for the wealthy, promising “no absolute tax cut” for upper-income families.
This statement flies in the face of every available analysis of Trump’s tax plan, from the truly huge high-end tax cuts Trump proposed during the 2015 primary battle to the trimmed-down high-end tax cuts he proposed earlier this fall. A September 2016 analysis by our partner organization Citizens for Tax Justice found that Trump’s plan would cut taxes for the best-off 1 percent of Americans by an average of over $88,000 if fully implemented in 2016. The CTJ analysis also showed that by any standard measure, the tax cuts going to the top 1 percent under the revised Trump plan would far exceed the cuts going to any other income group: the top group’s tax cut clocked in at 5.1 percent of that group’s personal income, more than double the tax break going to any other group. All of which is to say that giving an “absolute tax cut for the upper class” is the main feature of Trump’s plan—rather than, as Mnuchin implies, a bug to be fixed—and that only a complete rewrite of the Trump tax plan could possibly make Mnuchin’s claim true.
A comment from Trump advisor Stephen Moore suggests (disturbingly) that Mnuchin may have simply misunderstood, or mis-stated, the nuances of the Trump plan. Moore told the Wall Street Journal that Trump’s plan “was designed so that the [itemized] deduction cap offsets the revenue loss from lowering the top tax rate on ordinary income from 39.6% to 33%.” Of course, this seems like a pretty arbitrary goal: why seek to achieve revenue neutrality between two discrete provisions of the Trump plan if you’re then going to lard on an assortment of other high-end giveaways, from estate tax repeal to ending the alternative minimum tax?
Unfortunately for Moore, it turns out that his explanation doesn’t hold water either. A new ITEP microsimulation analysis shows that even if the Trump tax plan was limited to dropping the top tax rate and capping all itemized deductions in the way Trump has proposed, the best-off 1 percent would still see, as a group, tax cuts averaging over $12,400 in 2016. Which means that there is simply no way that Mnuchin’s statement can be seen as anything but a outright falsehood when applied to Trump’s September tax plan.
It is, of course, possible that Mnuchin’s statement reflects Trump’s intention to once again completely rework his tax plan in the runup to the 2017 legislative session. But prior revisions of the Trump plan have only pared back its cost, without meaningfully changing the tax fairness impact of the plan. Trump and his advisers have consistently failed to identify enough loophole-closers to pay for his proposed reductions in the personal and corporate income tax rates. This strategy of enthusiastically answering the easy questions and dodging the hard ones is sadly all too familiar to observers of tax politics.
Unless President-elect Trump is now willing to abandon core features of his plan, such as dropping the top tax rate to 33 percent or repealing the estate tax, Mnuchin’s comments must be seen as either an admission that the next Treasury Secretary has a poor grasp of the nuances of tax policy, or that Mnuchin isn’t especially wedded to the truth.