Steven Mnuchin, President-elect Donald Trump's nominee for Treasury Secretary, gets on an elevator after speaking with reporters in the lobby of Trump Tower, Wednesday, November 30, 2016, in New York.
Last week, Trump’s nominee for treasury secretary, Steve Mnuchin, went on CNBC’s Squawk Box—the preferred news program of Wall Street financiers—and made headlines with a bold declaration that the Trump administration would not slash taxes for the rich.
“Any reductions we have in upper-income taxes will be offset by less deductions, so that there will be no absolute tax cut for the upper class,” he said. “There will be a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it.”
Which tax plan is he talking about?
Experts on the left and right agree: Trump’s tax plan—which Mnuchin helped craft—is a massive giveaway to the wealthiest 1 percent, leaving middle-class and low-income Americans with the crumbs. The uber-rich would see a 14 percent increase in after-tax income—by far the largest cut. After-tax income for the bottom fifth would go up just .07 percent; .09 for the next fifth.
All told, Trump’s plan would give his wealthy friends 51 percent of the entire tax cut, according to Chuck Marr, the federal tax policy director at the Center on Budget and Policy Priorities. The entire bottom 60 percent of taxpayers would get less than 10 percent of the cuts.
Mnuchin’s assertion that tax cuts for the rich will be offset with a crackdown on their myriad loopholes and deductions doesn’t pencil out. Yes, Trump’s plan would limit itemized deductions for well-heeled taxpayers at $100,000 for individuals and $200,000 for joint filers. That alone is not nearly enough to outweigh the tax cuts. Mnuchin was, of course, vague about just how Trump would offset the cuts, noting only that capping the mortgage interest deduction was under consideration
But consider the proposed cuts: In addition to slashing income and partnership taxes for the wealthiest few, Trump also calls for reducing the tax rate on capital gains and dividends, and wants to do away with the estate tax. He also wants to cut the corporate tax rate from 35 percent to 15 percent. All this makes you wonder if there are even enough limitable deductions in the tax code to make up for the titanic giveaways.
Mnuchin’s rationale for the cuts may be worse than the cuts themselves.
“By cutting corporate taxes, we’re going to create huge economic growth and we'll have huge personal income," Mnuchin said. “Our most important priority is sustained economic growth, and I think we can absolutely get to sustained 3 to 4 percent GDP, and that is absolutely critical for the country. To get there, our number one priority is tax reform. This will be the largest tax change since Reagan.”
To be crystal clear, Mnuchin is talking about a return to the Reagan era’s trickle-down economic dogma where outsized tax cuts and regulatory rollbacks for the wealthy and corporations shifted income and wealth to those at the top and set in motion the deregulatory frenzy that led to the crash of 2008.
Still, as David Leonhardt writes for The New York Times, Mnuchin’s insistence that “There will be no absolute tax cut for the upper class” should set a simple standard to which we should hold the Trump administration. “Call it the Mnuchian standard. Any plan that cuts taxes for the rich falls short and deserves to fail,” Leonhardt suggests.
For articulating that standard and doing everything to violate it, Mnuchin is our first Trickle Downer of the Week.