Monday, October 2, 2017

The Mnuchin-Cohn Tax Plan is Going Nowhere

Both David Stockman and, from the other side of the spectrum, Paul Krugman point out that the Mnuchin-Cohn proposal to tax taxes is going nowhere.

Stockman writes:
 [O]nly Goldman billionaires who live off capital gains, dividends and carried interest could think that having Uncle Sam put a "tax on a tax" has a snowball's chance in the hot place of getting through Congress. In fact, there are approximately 80,000 units of state and local government in the US which will be fiercely mobilized against it----to say nothing of every real estate broker, local developer and neighborhood banker in the country.

Stated differently, after nine months of work these two geniuses have come up with $6 trillion of easy to propose tax rate cuts and virtually no plan whatsoever to pay for them.
Krugman writes:
 The bright answer in Trumpcuts is, end the deduction for state and local taxes (SALT). This probably sounded like a good idea: hey, it will punish blue states, which foolishly collect a lot of taxes to do things like feed people and treat their illnesses.

But there are a lot of Republican voters in blue states, and even a significant number of Republican Congressmen. And who are these voters? By and large, affluent but not super-rich households — hence with relatively high marginal tax rates — for whom deductibility of SALT is a big deal. As the details of the plan sink in, these people will scream bloody murder, and their representatives will become a big problem for the leadership.

So what were they thinking? My guess is that they weren’t thinking.
So how will Trump's tax reform go? This is Krugman's take and, who knew, Trump could make Krugman right on a forecast for the first time ever.:
Right now it looks as if tax “reform” — actually it’s just cuts — may go the way of Obamacare repeal. Initial assessments of the plan are brutal, and administration attempts to spin things in a positive direction will suffer from loss of credibility on multiple fronts, from obvious lies about the plan itself, to spreading corruption scandals, to the spectacle of the tweeter-in-chief golfing while Puerto Rico drowns.

Now, it ain’t over until the portly golfer sings.
My only argument with Krugman here is that it ain’t over until the portly golfer tweets, not sings. As we all know, Trump is a tweeter, not a singer.


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