A new report offers Chicago a financial blueprint for the city its residents deserve.
On the campaign trail, Donald Trump promised the biggest tax cuts since the Reagan era and proposed reforms that would drastically increase our country’s already extreme levels of inequality. Now the Republican-controlled Congress is considering ramming through tax reforms in the first half of 2017, using a “fast-pass” process called reconciliation that requires just 51 votes in the senate. If Trump’s plan becomes the blueprint for this reform, these would be the six worst features.
1. Gives huge tax breaks to the rich and corporations, loses $6.2 trillion over 10 years, and if paid for will require deep cuts to domestic services. Three-quarters of lost revenues are from corporate and business tax breaks largely benefiting the rich. The top 0.1 percent of households, which includes Trump’s, will get an annual tax cut of about $1.1 million each. Nearly half (47 percent) of the tax cuts will go to the top 1 percent of households; each one will get an average tax break of nearly $215,000 a year. The bottom 20 percent will get a tax cut of $110. Trump’s plan will increase the deficit by $7 trillion, unless massive cuts are made to benefits and services that working Americans depend on.
2. Slashes corporate tax rates by nearly 60 percent—from 35 percent to 15 percent — losing $2.6 trillion over 10 years. Corporations are already dodging their fair share of taxes at a time of record profits. Only $1 out of $9 of federal revenue now comes from corporate taxes. Sixty-five years ago, it was $1 out of every $3.
3. Gives multinational corporations with profits stashed offshore a tax cut of more than $550 billion. Big American corporations hold $2.5 trillion in earnings offshore on which they owe more than $700 billion in U.S. taxes. Trump would cut the tax rate on those offshore profits from 35 percent to just 10 percent on cash and only 4 percent on other assets, raising less than $150 billion. This would give tax-dodging multinational corporations an undeserved tax break of more than half a trillion dollars.
4. Increases taxes on nearly 9 million families while reducing the top tax rate on the wealthy from about 40 percent to 33 percent. Trump lowers and consolidates tax brackets, which would cost $1.5 trillion over 10 years.Even as taxes would decline a lot for the rich, they would increase for 8.7 million mostly low-and middle-income families with children, including more than half of single parents.
5. Cuts taxes on hedge funds and other “pass-through” businesses by $900 billion — personally benefiting Trump—and allows high-wage employees to dodge another $600 billion. Many Wall Street firms, law practices and other big-money outfits organize as partnerships or other business entities that allow them to pay their business taxes at individual rates. Trump would cut the tax rate on the owners of these so-called “pass-through entities” by as much as two-thirds, to just 15 percent. Owners of larger pass-throughs would be taxed at the dividend rate of 20 percent. These special low tax rates are expected to entice half of high-paid wage earners to call themselves contractors in order to be treated as pass-through entities. Trump is the sole or principal owner of 500 pass-through entities. He would personally benefit from this massive tax giveaway that’s been appropriately dubbed the “Trump Loophole.”
6. Eliminates the estate tax to boost the inheritances of millionaires and billionaires — which could give Trump’s heirs a tax break of billions of dollars. Trump would eliminate the federal estate tax, which is only paid by very wealthy families. Just one in 500 estates is affected today, those worth at least $5.5 million. The estate tax is a small curb on the accumulation of dynastic wealth and a key tool in reducing economic inequality. Eliminating the estate tax (while taxing capital gains of large estates at death, as Trump also proposes) would lose $174 billion over the next decade. Assuming Trump is worth the $10 billion he claims, his heirs could gain billions if his plan is adopted.
Frank Clemente is the Executive Director of Americans for Tax Fairness, which unites national, state, and local organizations in support of a tax system that works for all Americans.