In the U.S., only 0.2% of estates were expected to pay the tax in 2017. (Sept. 29, 2017)
Last Wednesday, the Trump Administration released the framework for its tax plan. Most of the specifics never made it into the framework, so we can't know for sure what the final numbers look like. But based on what we do know, the proposed changes bring little relief to most of us and huge tax breaks for the ultra-wealthy top 1 percent and large corporations. Here are the framework's main points:
Trump wants across-the-board cuts in corporate tax rates from its nominal 35 percent rate to 20 percent. That means businesses, which now keep 65 cents of each dollar profit, not including the already generous tax credits they enjoy, would keep 80 cents on the dollar. If you believe that corporations will use that windfall to pay workers more or increase hiring, guess again. That money will wind up in shareholders' tax-sheltered accounts.
Then, there are pass-through profits. Trump wants to cut them from 39.6 percent to 25 percent. He justifies this by saying that small businesses would benefit. He doesn't tell us that more than 85 percent of small business owners already pay less than 25 percent. The real beneficiaries of this cut will be doctors, lawyers, hedge-fund managers, and other high-income, self-employed individuals. If you get a paycheck or a pension, this cut won't spare you a dime.
Neither will removing the alternative minimum tax help you. That tax was designed to keep millionaires from sheltering all their money and avoiding taxes altogether. The AMT needs to be fixed, not discarded. Trump swore up and down he would not benefit from his plan, but we know from his leaked 2005 tax forms he would have dodged $31 million without the AMT.
If you happen to have a multimillion dollar estate, your heirs might appreciate repeal of estate taxes. Trump says this tax will help preserve family farms. Want to know how many small farms actually benefited from the estate tax? The most recent USDA figures tell us that out of 2.7 million deaths in 2016, precisely 161 of them were small farms subject to estate taxes, and only after exempting the first $5.4 million of the estate's value. I'd be genuinely surprised to learn that any Carroll County farm paid this tax last year.
If you think Trump's tax cut for companies "repatriating" jobs from overseas will help you, I've got a bridge to sell. George W. Bush tried this early on in his presidency. Want to guess where the tax rebates went? You'd win if you guessed it went into dividends for stockholders. You'd have won more if you owned lots of Apple or Microsoft stock. The rest of us didn't get a dime — or a new job, either.
No one can tell if Trump's plan will help you until tax brackets are finalized. That being said, there will be winners, the top 1 percent, and losers. Reducing individual taxes will be offset by eliminating deductions you actually could use, like state and local income taxes. The nonpartisan Tax Policy Center estimates that about 12 percent of us would actually see our taxes go up by about $1,800 this year. They estimate that by 2027 "nearly 30 percent of those with incomes between $50,000 and $150,000" would pay more.
Trump lied to us when said he wouldn't benefit from his tax plan. The top 0.1 percent would receive more than 10 percent in tax breaks. The bottom 95 percent — which is where most of us can be found — get about 1 percent in tax relief. It's as if the president is channeling Robin Hood's doppelganger, Robbin' Hood, who stole from everyone and kept everything for himself (apologies to Mel Brooks).
Kidding aside, there's little reason to think this plan will improve America's economy. The Trump plan is strikingly similar to the experiment in supply-side economics that Kansas Gov. Sam Brownbeck put in place in 2012. Kansas tried mammoth tax cuts for corporations on the theory that businesses would grow without being encumbered by high taxes. Brownbeck said: "We'll see how it works. We'll have a real live experiment." We know how the experiment worked. It failed. After five years of steep economic decline, a nearly bankrupt state treasury and massive spending cuts, Kansas' Republican legislature gave up on this ruinous policy. We saw what outsized tax cuts do, and it ain't pretty. We also saw that cuts like JFK's stimulated economic growth by putting more money in consumers' pockets, coupled with modest corporate tax reductions.
Someone once said, "you don't have to eat the whole egg to know it's rotten." We were fed Trump's stinker of a plan before. One taste was enough.