Somewhere in my distant past there was a silly television advert with a character dressed up like Mad Max. Someone asked him what was wrong — he looked pained. He replied: “I’m worried.”
Road Worrier — get it?
That’s the last bit of levity for me today.
If someone asked me how I feel about the recently announced Trump/Republican Party tax reform plan, I’d say: I’m angry.
Angry Ted. That’s what one of my mentors in this business called my voice when I complained about out-of-control government or civil liberties violations.
It’s been a while since I wrote in that voice. But the monstrosity that is this tax “plan” deserves anger. It deserves scorn and rejection.
It deserves defeat.
The fact is that under the plan your taxes are more likely to go up than down … while pouring fuel on the financial fire that is burning away America’s economic infrastructure.
Politics Trumps the Common Good
It’s no secret that the Trump/GOP coalition is desperate for a “win.” (Yes, it’s a coalition — the president isn’t really a Republican except on paper. It’s just a marriage of convenience.)
Other than stuffing the cabinet and the executive branch with people committed to undermining various federal programs, and appointing lots of judges with odd ideas about the Constitution, the Trump/GOP coalition has accomplished precisely nothing.
No major bills passed. No fence.
It’s so bad that senators openly admitted to reporters that they needed to pass the recent Obamacare repeal for no other reason than to say they had accomplished something. They acknowledged that it would leave most people worse off than under Obamacare.
The national good clearly isn’t what motivates legislation these days. Instead, it all comes down to scoring a “win.”
“Deficits Don’t Matter”
$5.5 trillion. That’s how much the Trump/GOP tax plan could add to the 10-year federal deficit.
As one wag put it: “President Trump may have been on to something when he breezily referred to himself as the ‘king of debt.’”
The Committee for a Responsible Federal Budget said: “The Trump tax plan could push the country’s accumulated debt to 111% of gross domestic product by 2027, higher than any time in U.S. history and far above the 89% currently projected.”
That’s the combined result of massive tax cuts at the top of the income ladder, slashed corporate tax rates — and an insane plan to encourage everybody and their brother to turn into an independent contractor with an LLC to slash their tax rate to 25%.
Republicans have been ranting and raving about the federal deficit for years. Under former President Barack Obama, we were poised for national financial ruin, they said.
Now they apparently agree with former Vice President Dick Cheney, who once said that “Reagan proved deficits don’t matter.” ABC News said:
Republicans, once fiscally demanding but now desperate for a legislative win after a yearlong drought, shrugged off the specter of adding billions to the federal deficit. Failure on taxes, after the collapse of health care repeal, could cost the GOP dearly in next year’s midterm elections with its House majority at stake. “This is a now-or-never moment,” said House Speaker Paul Ryan, R-Wis., who built his reputation on tax and budget issues.
In other words, all the hoo-ha about deficits under Obama was just politics … not a real, value-based policy position to be pursued once in power.
Your Taxes Go Up to Pay for Cuts at the Top
Here’s a hypothetical tax scenario, before and after the Trump/GOP plan. It assumes a retired couple filing jointly earning $185,000 a year and living in a high-tax state like New York. (Information is sketchy, so it’s a little rough.)
| Now | Trump/GOP | |
| Itemized Deductions | $35,000 | $9,500 |
| Standard Deduction | $12,700 | $24,000 |
| Personal Exemption | $8,100 | $0 |
| Senior Exemption | $1,250 | $0 |
| Taxable Income | $140,650 | $161,000 |
| Tax | $35,163 | $40,250 |
| Net Income | $149,838 | $144,750 |
In other words, under the Trump/GOP plan, you’d lose almost $5,000 of your precious income to extra tax. All so various taxes on high earners and corporations can be slashed.
Of course, the resulting hyperdeficits will be used as an excuse to eliminate tax-deductible retirement savings — it might even be included in the final tax bill this year! — and almost certainly to slash Social Security and Medicare down the road.
Not Tax Reform
True federal tax reform would simplify the tax code and eliminate perverse incentives and reasons to cheat. Above all, it would collect enough taxes to pay for the things Americans say they want.
The Trump/GOP plan does none of these things.
It is a return to the “voodoo economics” of the 1990s, in which a magical fairy makes businesses use tax cuts to invest in capital and jobs instead of increasing dividends and already bloated executive salaries.
To make matters worse, it would produce another massive gusher of excess cash into financial speculation, which is already out of control … a runaway chain reaction ready to blow at any minute.
I like a tax cut as much as anyone, but under the Trump/GOP plan, my taxes would go up … a lot.
What about yours? You better find out and quickly.
Kind regards,
Ted Bauman
Editor, The Bauman Letter
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