The taxing difference

Trump’s and Biden’s tax policies need more coverage because they’re opposites. Biden’s is progressive. Trump’s is regressive.

Friends,

One of my goals in sending you this daily letter is to equip you with arguments and facts you need. This is especially true leading up to the 2024 presidential election. It’s also pertinent to Thursday’s debate.

I know that tax policy isn’t the most exciting thing I could be talking about with you today. The mainstream media are focusing on immigration and access to abortions. But tax policy is among the most important and revealing differences between another term of Trump or another of Biden.

Start with Trump.

During his wild term in the White House, Trump had one major legislative accomplishment, if you want to call it an accomplishment: The Tax Cuts and Jobs Act he signed into law in December 2017.

It has an enormous cost: Although Republican leaders claimed it would generate growth and lead to “$1 trillion in additional revenue,” the Congressional Budget Office estimated that it would cost $1.9 trillion before the tax cuts expired in 2025. The CBO’s estimate has proven to be right on the mark. The Trump tax cut has exploded the national debt.

With no benefits: The Trump tax cut did not generate the wave of new investment Trump promised.

It just widened inequality: The Trump tax cut has given an undeserved windfall to its major beneficiaries: the very rich and big corporations.

Corporations didn’t use it to reward workers or increase productivity. Instead, corporations merely increased their stock buybacks, which will exceed $1 trillion by 2025. 272 of America's largest corporations spent 7 times more on stock buybacks and dividends than they paid in taxes after the Trump tax cut.

The rise in buybacks is another way Trump’s 2017 corporate rate cut translated into higher wealth for the already wealthy rather than a boost in worker pay.

In stock buybacks, corporations distribute profits to shareholders by offering to buy back shares, which automatically raises the stock’s price. This increases wealth for all stockholders, especially those with the most shares, who are wealthier to begin with. 

A recent study by economists from the Joint Committee on Taxation and the Federal Reserve Board found that workers below the 90th percentile of their firm’s income scale (a group whose incomes were below roughly $114,000 in 2016) saw no change in earnings from the Trump tax cut. Earnings rose only for those at the top, with the largest gains for those at the very top. 

If reelected, what will Trump do? The 2017 Trump tax cut ends in 2025. This gives policymakers an opportunity to move toward a tax system that raises revenue through progressive tax policies — ending the Trump tax cut and increasing the corporate tax rate.

But Trump is telling his largest funders that if he is reelected, he’ll extend his tax cut. That was his message at his April fundraiser that supposedly made $50 million for his campaign.

The cost of extending the Trump tax cut will be mammoth: The Congressional Budget Office has a new estimate of the cost of keeping Trump’s tax cut in place over the next decade: $4.6 trillion, which is more than double the original cost. It would cause the federal deficit and debt to soar.

It would be trickle-down economics on steroids.

GOP lawmakers and some of Trump’s economic advisers are considering even more corporate tax breaks, arguing that they would improve the U.S.’s global competitiveness.

Why do you suppose so many CEOs, big corporations, and the wealthy are coming around to Trump? Why is the Business Roundtable investing big bucks in Trump? Because he’ll cut their taxes (and roll back regulations), making them even richer. But the rest of us will pay — with more of our tax dollars devoted to paying interest on the larger debt, and fewer devoted to keeping Social Security and Medicare solvent or to any other public need.

And now, Joe Biden’s tax plan. It’s the exact opposite of Trump’s.

Biden says he will not extend the Trump tax cuts.

Biden has proposed to increase taxes on incomes in excess of $400,000 a year, while cutting taxes for lower-income Americans.

Biden wants billionaires to pay at least 25 percent of their incomes in taxes. He wants to raise the corporate income tax to 28 percent.

Biden would end corporate tax breaks for multimillion-dollar executive compensation.

And he’d quadruple the tax that corporations pay when they buy back their own shares of stock.

This would increase revenue. The conservative American Enterprise Institute’s analysis of Biden’s plan found that, rather than costing another $4.6 trillion, as Trump’s plan would, Biden’s changes would result in $3.8 trillion in increased revenue.

It would also make the tax system fairer and progressive.

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There are obviously many reasons to reelect Biden in the fall. And tax policy sometimes causes eyes to glaze over. But it’s hugely important.

The $8.4 trillion difference in revenue between Trump’s plan to extend his tax cuts for the rich and big corporations and Biden’s plan to increase taxes on the rich and big corporations needs to be shouted from the rooftops.

It’s the difference between a government that’s capable of responding to what Americans need, and one designed to make the rich far richer.