As the confirmation hearing for Treasury Secretary-designate Steven Mnuchin gets started, there will be ample scrutiny—and rightfully so—of OneWest, the neighborhood-eviscerating foreclosure machine that he headed. But as the person on the verge of setting the new administration’s tax policy, Mnuchin should also be questioned about his pledge that “there will be no absolute tax cut for the upper class,” which he made on CNBC back in November.
“Any reductions we have in upper-income taxes will be offset by less deductions, so there will be no absolute tax cut for the upper class,” he said. “There will be a big tax cut for the middle class, but any tax cuts we have for the upper class will be offset by less deductions that pay for it.”
With this statement, he created a clear standard—the “Mnuchin test”—by which to hold the Trump administration: Any tax reform that comes to Trump’s desk must greatly benefit middle-class taxpayers and any tax rate cuts for the wealthy must be offset by closing tax loopholes and eliminating lucrative deductions.
The three main GOP tax plans—Paul Ryan’s “Better Way”, President-elect Trump’s own proposal, and the tax cuts that are central to the Republicans’ “repeal and delay” of Obamacare—miss Mnuchin’s mark by a long shot, as a timely new report from the Center on Budget and Policy Priorities makes clear. Each plan would generate lavish tax cuts for the rich while either increasing taxes on or bringing little relief to everyone else.
For starters, as I previously noted, the Republicans’ plan to repeal Obamacare would throw 18 million Americans off their health insurance while delivering a massive windfall of tax breaks to the wealthy. Millionaires and billionaires would receive 54 percent of repeal’s net tax cuts, getting an average tax break of $57,000 in 2025. At the very top, the richest 400 households in America—with average incomes of $318 million—would get about $7 million in yearly tax cuts from Obamacare’s repeal.
What about those in the middle class? Thanks to the loss of Obamacare’s insurance premium tax credit, those making between $40,000 and $50,000 would actually face a tax increase of about $100. Meanwhile, some seven million low- and modest-income families would lose tax credits worth about $5,700.
Repealing the ACA is a massive violation of the Mnuchin test.
Trump’s Tax Proposal
Trump’s tax plan, which Mnuchin helped craft, has gotten plenty of coverage for being an unmitigated disaster that would cost the government as much as $5.9 trillion. It would slash the top tax rate, the corporate tax rate, and the capital gains and dividends rates. It would also create a new bargain-basement-level rate for business partnerships and do away with the estate tax for those getting huge inheritances.
Even with limits on itemized deductions and other piecemeal measures like repealing the mortgage interest deduction, those at the top would reap the vast majority of Trump’s tax cuts. Millionaires would get an average tax break of $387,000—raising their after-tax income by a tidy 14 percent.
Those making between $40,000 and $50,000 would only see a bump of about $500. Tax cuts for those making less than $100,000 would be just one-fifth of the size of millionaires’ tax cuts.
Trump’s tax plan, too, is an absolute violation of the Mnuchin test.
Paul Ryan’s “Better Way”
The Republican House speaker’s vaunted “Better Way” tax plan is quite similar to Trump’s—it cuts the top income tax rate, the corporate rate, capital gains and dividends, creates a new business partnership rate, and eliminates the estate tax for the wealthy. Despite employing the “simplification” rhetoric of fewer tax brackets, don’t be fooled: It would bring about enormous targeted tax cuts to the top 1 percent while leaving crumbs for low- and middle-income households. In fact, those with incomes of more than $1 million would receive 96 percent of the Ryan plan’s tax benefits—giving them an average of $300,000 each. Those making between $40,000 and $50,000 would get just $120 in tax breaks.
If you haven’t caught on to the pattern yet, the Better Way does not meet the Mnuchin test either.
So at his hearing tomorrow, will Mnuchin denounce the repeal of the ACA or Trump and Ryan’s tax plan? Almost certainly not. But senators should hold his feet to the fire and insist that he explain why he supports trickle-down tax policies that are fundamentally antithetical to the pledge he made just two months ago.
That just might shed some light on the fact that “big” middle-class tax cuts aren’t coming, and that there aren’t enough deductions and loopholes in the entire tax code to cover the massive tax rate reductions at the top.