The 1 percent can breathe a small collective sigh of relief says Peter Eavis in today’s NYTimes
Hillary Clinton’s platform contains many new taxes for the wealthy, and in recent days it seemed that Donald J. Trump might be moving in the same direction. When asked Sunday on “Meet the Press” about taxing the rich, Mr. Trump said: “For the wealthy, I think, frankly, it’s going to go up. And you know what? It really should go up.”
He now says he wasn’t talking about the current income tax rate for people in the highest bracket, which is 39.6 percent. If he had been, it would have been a big move for Mr. Trump, the presumptive Republican nominee, to push that rate higher. His official tax plan envisions a top rate of 25 percent.
In a phone interview on Monday, I sought clarification from Mr. Trump on his remarks about raising taxes on the rich. I asked him whether the highest earners would be paying more than 39.6 percent if he were president.
“No, in fact, you’d be lower than that,” Mr. Trump said.
But how, given that he had said that taxes would be going up for the wealthy? Mr. Trump explained that he meant he might have to accept a top tax rate that is higher than the 25 percent his plan calls for. To get his tax plans through Congress, he would probably have to compromise, but even after such concessions, the top rate would be lower than it is now, he said.
Congress has not passed some of President Obama’s more ambitious tax proposals, and it may be only slightly more receptive to the next president. Mr. Trump, for instance, would find it particularly hard to slash tax rates if the Democrats controlled the Senate after November. And Mrs. Clinton is highly unlikely to get all she wants if the Republicans keep majorities in both houses.
That doesn’t mean that tax issues won’t be prominent in the election. Mr. Trump and Mrs. Clinton can use their tax plans to define themselves — and their opponent — as they woo undecided voters.
Mr. Trump’s tax cuts may help win over voters who are concerned about his other ideas or the tone of his campaign.
Still, some of his support comes from people whose economic prospects have dimmed as the wealthy have gotten richer. And according to tax analysts, the rich would have a bigger tax windfall than the middle class under Mr. Trump.
The Tax Policy Center, a joint project of the center-left Urban Institute and Brookings Institution, calculates that Mr. Trump’s policies would on average give the top 1 percent of taxpayers a federal tax cut of $275,000, or 17.5 percent of their after-tax income, while middle-income households would get a $2,700 tax cut, equivalent to 5 percent of their after-tax income.
So, I asked Mr. Trump, why not tax the rich at higher rates than they are subject to today?
“I really want to keep taxes for everybody as low as possible,” he said. “When you start making them too high, you are going to lose people from the country, and oftentimes these are the people who create the jobs.”
Mr. Trump’s tax plans could leave him vulnerable on another front. Budget analysts say that slashing taxes by the amounts he envisions would lead to a sharp drop in revenue. The Tax Policy Center estimates a drop in revenue of $9.5 trillion over 10 years. To put that sum in perspective, the federal government took in revenue of $3.2 trillion last year. If spending were not cut in response, and a much faster-growing economy did not provide a lot more revenue, the federal government would have to borrow to cover the shortfall, pushing up the national debt.
These predictions of a big shortfall allow Mrs. Clinton to promote herself as a sound fiscal manager, which could help in her efforts to attract moderate Republicans put off by Mr. Trump. Mrs. Clinton’s tax increases would in theory mostly offset her spending, according to a study by the Committee for a Responsible Federal Budget, a bipartisan policy organization.
Mr. Trump, for his part, disputes the notion that steep declines in revenue would result from his tax cuts. “Those numbers are crazy,” he said, noting that the economy grew strongly after the big Reagan tax cuts. (It’s worth noting that the economy also grew strongly after tax increases by Bill Clinton.)
And what if Mrs. Clinton says she is the fiscal conservative and he is not? “But she’s not going to get the economy going,” Mr. Trump said.
By focusing her tax increases almost entirely on the wealthy, Mrs. Clinton says she does not have to squeeze more from the middle class. That stance helps her strike a chord with voters who are concerned about income inequality and, if she locks up the nomination, could help her pull in Bernie Sanders supporters in November.
In Mrs. Clinton’s tax plan, a large chunk of the extra revenue would come from limiting how much high earners can deduct from their taxable income. People would pay an extra 4 percent of tax on income over $5 million. And those with income over $1 million would face a minimum tax of 30 percent, called the Buffett Rule. Mrs. Clinton’s proposed changes to estate taxes would also lead to the rich paying more.
Mr. Trump, in addition to cutting income taxes for the rich, intends to get rid of the estate tax altogether.
Still, there are elements of his plan that he might highlight if he is accused of favoring the wealthy. Like Mrs. Clinton, he wants to reduce or eliminate deductions for the rich. When I asked Mr. Trump what type of deductions he intended to limit, he said, “We are preparing a list of the various deductions and we are going to release that next week.”
Maybe then the 1 percent will be able to see if there is anything to fear from Mr. Trump.