by Ron Wyden
The Trump administration is weighing bypassing Congress to give the rich more tax breaks instead of protecting Medicare, Medicaid and Social Security.
An IRS tax form
(Photo: Jenny Kane/AP)
News broke last week that Treasury Secretary Steven Mnuchin and his department are considering a massive, permanent tax handout to the wealthy. Before I explain further, let me clear up any potential confusion. This is not an accidental reprint of an op-ed from the last Trump handoutto the most fortunate. That one, you’ll remember, became law only a few months ago. You’re right to be feeling a sense of déjà vu.
This time around, the Trump administration is mulling whether to take administrative action — bypassing Congress — to index capital gains to inflation, which means investors would get a special break on income from playing the market. If you earn a paycheck for a living, you need not apply. In total, according to projections by the Penn Wharton Budget Model, the handout would cost more than $100 billion over the next decade. The top 1 percent of earners would take 86 percent of the benefit. The top tenth of a percent of earners would take more than 63 percent.
The rank unfairness of this proposal seems obvious on its face, but a casual observer might not be blamed for asking whether an idea like this one could do some good in the long-term. The answer? No, it would not. A recent analysis by the Congressional Research Service, the non-partisan think tank embedded within the Library of Congress, concluded “it is unlikely … that a significant, or any, effect on economic growth would occur” from what the administration is considering. Finding additional legitimate, up-to-date economic analysis is difficult. The idea is a favorite of Trump adviser Larry Kudlow, but few reputable economists on the right or left support it.
Trump is breaking his promises to workers
So there you have it. The Trump administration is on the verge of showering $100 billion on the wealthy. Doing so will not spark any new economic growth. It will not do a lick of good for the overwhelming majority of Americans, who work hard to earn a salary or an hourly wage to make ends meet.
There may be no purer distillation of Trumpian economics. It would be another violation of the president’s promises that his tax reforms would focus on the middle class, not on people like him and his family. Furthermore, this is frustratingly emblematic of decades of conservative economic policy-making, which has repackaged supply-side tax cuts again and again with alarming success.
Indexing capital gains is in line with so many Trump administration policies that enrich and empower special interests, while trampling all over working Americans and their families. Except in this case, it’s not a matter of allowing industry to poison our air and water, letting grifters who run for-profit universities rob unsuspecting students, or green-lighting junk health insurance policies that are barely more substantial than outright scams.
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In this case, the Trump administration would be throwing away funding that’s sorely needed to pay for Medicare, Medicaid and other government functions. That’s because Republican deficit hawks have suddenly rediscovered their hawkishness that disappeared in the first year of the Trump presidency, only to target programs typical families count on every day. They’ve opened the door to cuts in Medicare and Medicaid, as well as food stamps and Social Security.
White House Press Secretary Sarah Sanders confirmed last week that Trump, not Mnuchin, instructed Treasury to consider the change. “This is something that has a lot of support from various people,” she told reporters. Paving Wall Street in gold would have a lot of support from various people, too, but that doesn’t mean it’s a good idea.
If the Trump administration decides to proceed with this useless handout to the wealthy, it will be met with fierce headwinds. There are compelling reasons to believe it would be illegal for the administration to take this action unilaterally. That’s the conclusion the first Bush administration reached in 1992 when it considered indexing capital gains. Trump’s action would surely face immediate challenge.
Another colossal handout to the wealthy
Democrats in Congress also would fight back. We would explore any and all options to overturn the Trump administration’s position. If Republican members wish to stand by such a massive gift for the narrowest, richest slice of the population, they’d have a rough time defending the indefensible to constituents back home. More likely, they’d simply refuse to hold town halls to avoid the tough questions completely.
The first Trump tax law is already far too wasteful. By the end of 2027, it will have cost nearly $2 trillion. The vast majority of its tax handouts go to corporations and the mega-wealthy. It kicked off an unprecedented wave of stock buybacks, which also overwhelmingly benefit high-flying investors, not workers. And after Republicans promised their tax plan would lead to a $4,000 raise for the average employee, figures from the Bureau of Labor Statistics show that real wages this year are nearly pancake flat.
Lawmakers ought to be working together, Democrats and Republicans, to give those who are struggling more opportunity to get ahead. The fact that Trump is considering another colossal handout to the wealthy shows yet again he is uninterested in that kind of expansion of opportunity.
Sen. Ron Wyden, D-Oregon., is the senior Democrat on the Senate Finance Committee. Follow him on Twitter: @RonWyden