Federal Reserve leaders should be representative of the country’s population. If they don't understand us, they can't represent us.
Wall Street had a bang-up week in Washington.
Two of their own, former Goldman Sachs executives Gary Cohn and Steve Mnuchin, had the honor of unveiling the outlines of President Trump’s tax plan on Wednesday. Cohn now heads up the National Economic Council and Mnuchin is Treasury Secretary.
Not surprisingly, the tax plan is a huge giveaway to the big banks and corporations.
That same day, House Republicans held a hearing on their big Wall Street deregulation bill. The Financial CHOICE Act would roll back many of the 2010 Dodd-Frank provisions aimed at preventing another financial crisis and shielding consumers from abuse. Less than a decade after the worst financial meltdown since the Great Depression, Wall Street is once again riding roughshod over the public interest.
The choice of Cohn and Mnuchin as the faces of Trump’s tax plan really says it all. Their former employer, Goldman Sachs, is already a champion tax dodger.
When Cohn stepped down as the bank’s president to join the administration, Goldman had $31 billion in untaxed offshore profits and 987 tax haven subsidiaries, according to the Institute on Taxation and Economic Policy.
If President Trump has his way, banks and corporations will enjoy a deep discount on such offshore funds if they shift them to the United States. While the Cohn-Mnuchin duo declined to say just how deep this discount might be, the plan Trump released during his campaign proposed a 10 percent tax on “repatriated” earnings, less than a third of the current 35 percent corporate tax rate.
That would save Goldman Sachs an estimated $4.4 billion on their IRS bill.
Cohn is also a poster boy for Wall Street rigging the rules to pocket taxpayer-subsidized pay. Current law allows U.S. corporations to deduct unlimited amounts of executive compensation from their taxable income — if the pay is “performance based.”
[pullquote]Wealthy hedge fund mangers would be the big winners from a steep cut in the tax rate on ‘pass-throughs.'[/pullquote]
The rest of us get stuck with the bill, while banks have an extra incentive to perpetuate the reckless Wall Street bonus culture that was a key factor in the 2008 financial crisis.
In 2016, Cohn received more than $72 million in fully deductible performance pay, cutting Goldman Sachs’s IRS bill by an estimated $25 million. It should come as no surprise that Trump’s plan would not close this bonus loophole.
Mnuchin worked at Goldman Sachs for 17 years before starting his own hedge fund, where he was able to take advantage of the outrageous “carried interest” loophole. By allowing hedge and private equity fund managers to misclassify the bulk of their earnings as capital gains, this loophole allows billionaires to pay a lower tax rate than many teachers and firefighters.
Although candidate Trump promised to eliminate this loophole, the White House plan effectively blows it wide open by slashing taxes from nearly 40 to 15 percent on so-called “pass-through” entities.
While this is dressed up as a benefit to small businesses, the real winners are the same hedge fund managers whom Trump once accused of “getting away with murder.” And indeed, they are.
One hundred days into the Trump administration, it’s clear that the president has abandoned his populist message. And the tax plan is only part of his Wall Street giveaway scheme.
Earlier this month he told a group of CEOs that “the bankers in the room will be very happy” with his plan to gut the Dodd-Frank law.
There is a better way. Instead of helping big banks and billionaires further avoid taxation, we should make sure Wall Street is paying its fair share. A tiny tax on Wall Street speculation could raise tens of billions of dollars per year.
[pullquote]A tax on excessive leverage at ‘too big to fail’ banks could raise billions per year.[/pullquote]
Or how about a tax on excessive leverage at “too big to fail banks,” which could raise billions more?
At a bare minimum, we should close the loopholes that have helped make the Gary Cohns and Steven Mnuchins of the world even richer while most families still worry about how to afford their child’s education.
Each of these alternative policies would raise much-needed revenue to create jobs, make college affordable, and fix public infrastructure, while discouraging Wall Street greed and recklessness.
Passing anything like Trump’s tax blueprint would be nothing short of a punch in the gut to Trump’s working class base — and a powerful rallying cry for those politicians who do have the courage to take on Wall Street.
Originally published in The Hill.
Jon Green is the campaign manager of Take on Wall Street and Sarah Anderson directs the Global Economy Project at the Institute for Policy Studies. They are co-authors of Republican Tax Plan Giveaways to Wall Street.