On Monday, Donald Trump unveiled a revamped economic proposal during a speech at the Detroit Economic Club. The new plan comes on the heels of an independent analysis warning Americans that a Trump presidency would “significantly” weaken the economy and result in 3.5 million lost jobs.
But while Trump claims that his updated proposal is aimed at “reaching out to everyone as Americans,” key provisions in the plan would disproportionately benefit the very richest Americans. Trump has claimed that these giveaways are necessary to create jobs, even though the best economic evidence shows that deficit-financed tax cuts for the wealthy do not grow the economy.
Trump’s plan would dramatically cut taxes for large corporations and Wall Street
Trump claims: “Under my plan, no American company will pay more than 15% of their business income in taxes. Small businesses will benefit the most from this plan.”
Fact: Trump’s tax plan is a giant giveaway to big businesses. Cutting the corporate tax rate to 15 percent would benefit large, multinational corporations. Trump has previously claimed that he could pay for the corporate tax cut by getting rid of loopholes for corporations. But he would insert a gigantic new loophole—known as immediate expensing—that would let corporations write off the cost of any new investment. This and cuts to corporate tax rates would line the pockets of the top 1 percent of households, which pay 47 percent of corporate taxes.
Donald Trump says that the tax cut would mostly help small businesses, but that is an assertion based on the false claim that all so-called passthroughs—businesses that do not pay the corporate income tax—are small businesses. In fact, 70 percent of income going to the leading type of passthrough—partnerships—goes to the financial industry, including private equity firms and hedge funds.
Trump’s plan would allow high-income earners to pay a lower tax rate
Trump claims: “I am proposing an across-the-board income tax reduction, especially for middle-income Americans. … My plan will reduce the current number of brackets from 7 to 3, and dramatically streamline the process. We will work with House Republicans on this plan, using the same brackets they have proposed: 12, 25 and 33 percent.”
Fact: Not only does Trump’s plan cut the top tax rate from 39.6 percent to 33 percent, but his proposed business tax rate is also a loophole that would create a gigantic incentive for the rich to classify their income as business income. Trump’s tax plan would lead to the creation of thousands of supposedly small businesses, as wealthy Americans would form limited liability companies, or LLCs, and S corporations; recharacterize their income as business income; and benefit from the 15 percent corporate tax rate promised by Trump.
Trump’s plan creates a new tax loophole for big business
Trump claims: “We will eliminate the Carried Interest Deduction and other special interest loopholes that have been so good for Wall Street investors, and people like me, but unfair to American workers.”
Fact: Donald Trump’s 15 percent business tax rate closes one loophole while creating a bigger one. Private equity managers would no longer have to claim they receive capital gains to receive a 23.8 percent tax rate—instead they could just claim business income and pay a 15 percent tax rate. It is no surprise that at least 5 members of his Economic Advisory Council work at LLCs or limited partnerships, or LPs—the very types of businesses that would benefit the most from Trump’s 15 percent business tax rate.
Trump’s plan delivers a special tax break for the richest 0.2 percent of Americans
Trump claims: “No family will have to pay the death tax. American workers have paid taxes their whole lives, and they should not be taxed again at death—it’s just plain wrong. We will repeal it.”
Fact: Almost no one—just the estates of 2 in 1,000 Americans—pays any estate tax. Repealing the estate tax would do nothing for middle-class families, but it could save Trump’s heirs—including Donald Jr., Eric, and Ivanka Trump—as much as $7.1 billion.
Trump’s plan offers a regressive solution for child care
Trump claims: “No one will gain more from these proposals than low-and-middle income Americans. … My plan will also help reduce the cost of childcare by allowing parents to fully deduct the average cost of childcare spending from their taxes.”
Fact: Trump’s child care proposal would do nothing for the families that need help the most—those making less than $50,000 per year. The plan also delivers far greater benefits to the rich than to the middle class because it is a deduction and its value goes up with their income.
And that assumes that middle-class families can even receive the deduction. Most middle-class and low-income families cannot take advantage of many deductions, such as the mortgage interest deduction, because they do not itemize their taxes. Under Trump’s tax plan, less than 5 percent of taxpayers would itemize. Trump has not specified whether the child care deduction is an above-the-line deduction that families who do not itemize their taxes can use.
Earlier this year, while trying to position himself as an economic populist, Trump told NBC’s “Meet the Press” that his economic proposal would increase taxes on the wealthy, arguing that “For the wealthy, I think, frankly, it’s going to go up. And you know what, it really should go up.” But in Monday’s speech, Trump again proved that he is more interested in coddling the rich than taxing them.
Brendan V. Duke is the Associate Director for Economic Policy at the Center for American Progress Action Fund. Igor Volsky is the Deputy Director of the Center for American Progress Action Fund.