President Trump’s administration released a one-page summary of its tax plan to widespread criticism yesterday.
Experts are saying the plan is vague and the available information illustrates a preference for the country’s wealthiest residents.
MIT economist Jonathan Gruber broke down the outline on Boston Public Radio today.
“He would cut the top rate for the wealthiest individuals in America, he would cut the tax rate that corporations pay on their earnings, he’d get rid of the estate tax paid by only 5,000 families each year but raising more than $10 billion a year, and he would allow pass-through corporations such as his own to pay taxes at a lower tax rate,” said Gruber.
One thing all these reforms have in common?
“The benefits are concentrated in the very richest Americans,” he said.
Gruber admitted a part of Trump’s plan, raising the standard deduction, would benefit the middle class. Still, he maintained that was a “tiny part of his proposal.”
Trump’s plan would allow wealthy citizens to drive more of their income into forms that are heavily subsidized, giving the rich a bigger tax break.
“For most of us, we earn income from our employer, that employer issues a W-2 at the end of the year with our wages on it, we pay tax on that, or we probably pre-paid and we get our refund,” Gruber said. “For the wealthiest Americans, they have a lot more flexibility over what is ‘wages’ and what is ‘other income.’ And what this [tax plan] does is just widen the loophole.”
He also explained that cutting the estate and alternative minimum taxes benefits the “very, very wealthiest” at the “top of the income distribution.”
“It’s literally about the 5,000 richest decedents each year pay this [estate] tax,” Gruber said. “The top tax rate that he wants to cut is paid by only people who earn over $450,000 a year.”
Trump himself would benefit from cutting the estate and alternative minimum taxes.
Gruber, like other economists, criticized the lack of information in the 250-word statement.
The New York Times editorial board, for example, called the plan “laughable” and “skimpy.”
“This is an unbelievably vague statement for such an important policy,” said Gruber.
Among the plan’s most drastic cuts is the reduction of the corporate tax rate from 35 to 15 percent. Gruber said big cuts like this would lose the government money.
“The bigger you open up those loopholes, which is what Trump would do,” he said, “the more tax revenue you lose and the bigger tax break the rich get.”
Jonathan Gruber is an MIT economist and a BPR contributor. To hear his interview in its entirety, click on the audio player above.
