Trump’s “Big League” Tax Reform

“We have a once-in-a-generation opportunity to do something big,” announced Gary Cohn, Trump’s top economic advisor, when unveiling the administration’s new tax plan. That “something big” is the transfer of up to $7 trillion into the pockets of the capitalists in tax breaks over the next decade.

With the US currently sitting on its highest level of debt since WWII, the only answer to how everything would be paid for was that “the plan will pay for itself”—as long as the economy maintains a sustained growth rate of 4.5%—a level not seen in decades.

To accomplish this feat, the proposal aims to slash the corporate tax rate by more than half—from 35% to 15%—and eliminate taxes targeted at the wealthy, such as the estate tax, which targets only the wealthiest 0.2 percent. But high taxes don’t cause economic slumps, and lower taxes aren’t a guarantee for investment and growth. This hastily assembled plan is an attempt to square the circle of capitalist crisis.

Swiftly approaching the 100-day mark and under pressure to show that he was fulfilling his campaign promises, Trump revealed that he would be announcing a new tax plan within five days. Just days earlier, Treasury Secretary Steven Mnuchin said he expected an “aggressive agenda” could deliver reforms by August. While this may explain the incomplete nature of the proposal, the announcement reflects the growing pressure of the more mainstream wing over the “economic nationalist” wing of Steve Bannon and Peter Navarro, a “trade skeptic.”

The announcement decisively put an end to the debate over the “border adjustment tax.” This would have applied a tax on imports in an effort to “level the playing field” for American-made goods and “bring back jobs” by exporting unemployment. While this “America First” approach might benefit a handful of American manufacturers, it also fires a shot into the delicate trade balance and opens the possibility of unleashing a trade war. The capitalists might allow him to erect a wall along the border to stem the flow of people, but a tax wall restricting the free flow of profits is another matter!

Trump’s refusal to release his tax returns has poured oil on the flames. When he was accused of not paying any federal taxes during the debate he blurted, “That makes me smart!” His administration decries the fact that the US has the third-highest tax rate in the world, but ultimately, these rates are optional for the bourgeoisie who can hire armies of lawyers and accountants to find and exploit loopholes. 258 of the largest 500 companies in the US paid zero in taxes in at least one of the last five years!

The released plan reads like a wish list for Trump and his heirs. For instance, it eliminates the alternative minimum tax, which forced Trump to pay an additional $31 million in 2005, according to leaked tax returns. Without the AMT he would have paid a tax rate of just 5%. The proposal would also allow business entities called “pass-throughs” (like Trump’s) to be taxed at the newly slashed corporate rate of 15% instead of the individual rate which tops out at 39.6%. And eliminating the inheritance tax will ensure his heirs inherit his fortune free of any tax burdens.

Trump also promises to simplify taxes, reducing the number of tax brackets from seven to three, and doubling the standard deduction. To pay for these cuts, Trump is eliminating nearly all other deductions—including a popular federal deduction for taxes paid at the state level which would cost workers an estimated $1.1 trillion in taxes. The “‘populist” overhaul of the tax code is, in reality, a massive tax cut for the bourgeoisie with the working class footing the bill. One columnist dubbed it a “private stimulus” allowing the corporations to spend instead of the government—but where will they spend it? The only meaningful investment that will stimulate the economy is production, but the market is already unable to absorb the goods that are being produced now.

If a bit of spending by corporations was all the economy needed, they wouldn’t be sitting on trillions in uninvested cash, let alone the estimated $2.6 trillion stashed in overseas accounts doing nothing more than evading taxes. Instead, as before, we can expect a wave of corporate bonuses, buybacks, and speculation. This “private stimulus” will prove no more effective at resolving the contradictions of the system than previous ones.

As Marx explained, the bourgeois state is “but a committee for managing the common affairs of the whole bourgeoisie,” which requires the ability to levy taxes. Nonetheless, some aspects of the state can become a strain on the ruling class, especially in times of crisis. Tax revenue comes from two sources: either cut into the profits of the capitalist class or cut into the wages of the working class. While there can be all kinds of secondary causes, the crisis of the capitalist system is a crisis of overproduction. All attempts by the ruling class to restore balance to the economic equilibrium will only upset the political and social equilibrium.

Years of austerity and a weak recovery have left no shortage of kindling that could spread like wildfire with any spark. It was the imposition of taxes the Stamp Act that set off the events of the first American Revolution—there’s no saying exactly when or what will set off the next one.