Representing the White House in the “Gang of Six” writing President Donald Trump’s tax plan are Goldman Sachs vets Gary Cohn and Steve Mnuchin.
And while details about the plan are hard to come by, both men have dropped hints about their contributions to its shape over the past few weeks.
Based on their hints, it sounds like their Goldman friends — and indeed Wall Street in general — will be rather pleased with how it all shakes out.
For a fun exercise, I recommend googling the term “Mnuchin walks back” for a children’s treasury of statements the Treasury secretary has boldly made — and then meekly attempted to unmake. Most of them have to do with populist economic or fiscal policies, anything that may appeal to the working and middle classes. Anything Steve Bannon may have added to the agenda while still serving in the White House, if you will.
Cohn, Trump’s top economic adviser, in his most candid moments, is not that far behind Mnuchin in handing out gifts to his former colleagues in the name of “growth.”
This is where I remind you a Tax Policy Center analysis of the bare bones outline of a plan these two men introduced in April found that it would be “highly regressive,” mostly benefitting the top 5% of earners while cutting $US7.8 trillion of revenue over the next 10 years.
So much for Trump’s “unrigging America” tagline.
Of course, the first walk back was the biggest when it comes to tax policy. In a CNBC interview last year, Mnuchin said that there would be no tax cuts for the wealthy in Trump’s tax plan. And there was much rejoicing (outside Wall Street — mostly in Washington).
Everyone loved it so much they called it the “Mnuchin Rule,” which should make what happened next highly embarrassing for this administration — but it wasn’t.
By June, Mnuchin was telling Senator Ron Wyden (D-Ore.): “You made it a rule, I didn’t make it a rule… “I have walked it back from the CNBC interview.”
So now Mnuchin says this is up for negotiation, and another member of his gang, House Ways and Means Committee Chairman Kevin Brady (R-Tex.), is saying that a tax cut for the rich may be on the table — for “growth.“
The wealthy will also love Gary Cohn’s statements about the estate tax. He wants to eliminate it, apparently because “only morons pay the estate tax.” That is to say that a smart tax planner will find a way for any wealthy person to avoid the 40% posthumous tax on an estate valued at over $US5.49 million for individuals or $US10.98 million for couples.
To be fair, he’s right. The estate tax is riddled with dodges and loopholes. It impacts few Americans, and has been contributing less and less to government coffers over the years. But is getting rid of it altogether the answer?
Ask your random Wall Streeter and they would likely say, “Yes, yes it is.”
But wait, there’s more — and this one is specifically for Wall Street. During his campaign, Trump slammed carried interest, a controversial loophole that allows fund managers to pay a tax rate as low as 20 per cent of their income. Even Mitt Romney was iffy on keeping carried interest when he ran on 2012, and he — a private equity fund manager — benefitted from the tax. Basically, it gives fund managers a break for taking a risk on money when they really aren’t.
Recently, Mnuchin said the administration’s plan would eliminate carried interested for hedge fund managers, but keep it for everyone else who “creates jobs.”
This is a funny statement for a two reasons. The first being that hedge funds do, in fact, create jobs. Ask the MBA students and associate level Wall Street bankers who are throwing elbows to get them.
It’s also funny because many hedge funds don’t benefit from the rule anyway. Carried interest only applies to assets held for more than a year, and tons of funds don’t do that. Especially not the funds that are dominating Wall Street right now — the algorithmic quant funds. Also again: Private equity would go untouched here.
Are you tired? Because I’m tired
At this point you may be thinking to yourself. What happened to the deficit hawks? The Tea Party national debt patrol? Doesn’t Wall Street hate the idea of an unbalanced budget?
You have a right to be confused. During the Obama years, Wall Street and its (in this matter at least) conservative allies would have had a conniption fit any time anyone would discuss a policy that might add to the national debt.
This of course, was when there was a Democrat in the White House who would have potentially added to the debt (during a time of crisis) to fund government social programs.
I hope you see what I’m getting at. The politics on Wall Street are not “conservative” in the traditional fiscal sense. They are hypocritical in the traditional logic sense.
Goldman Sachs, for example, has always been known to support Democrats and Republicans. When Democrats are in office they cry about the deficit. When Republicans have power they beg for tax cuts. Bloomberg’s Max Abelson captured this self serving political cynicism in a must-read column for those with strong stomachs.
Beyond the top executive suites of the biggest banks, support for cuts can be even more full-throated. Inside the 21 Club, one of Wall Street’s favourite hangouts, a few dozen executives, money managers, and other businesspeople gathered in August at a reception thrown by two groups that despise high tax rates: the Committee to Unleash Prosperity and FreedomWorks, co-founded by the billionaire Koch brothers.
Standing in a brown Brioni pinstripe suit with a martini in his hand, Alfred Angelo, an investor based in New Jersey, gestured to the other guests. “We’re those villainous people,” he said. “Nobody put me on this Earth to pay for everybody’s health plan. I know that sounds like Scrooge or somebody. But this is the real world.”
In Wall Street’s mind, the only reason to add more debt to the government’s balance sheet is to do so in the name of starving it, not in the name of building things for the public good of all Americans — things like schools and infrastructure and community programming. Vox estimated that the plan Mnuchin and Cohn pitched in April would “would give the poor $US40 each and the ultrarich $US940,000.”
Could you possibly think of a better reason to add to our national debt than that?
Of course not, the only reason to take from the communal is to give to oneself. This is the ethos of Trump’s tax plan. The problem with that is, of course, once the communal is gone, what becomes of the community?
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