by David Haggith, The Great Recession Blog:
As soon as President Trump put his Goldman boys, Gary Cohn and Steven Mnuchin, in charge of his tax plan, I knew Trump’s tax plan would never fulfill his and his henchmen’s promises of helping the middle class and of not giving additional tax breaks to the rich. The Trump Tax plan, as it now exists, proves those conjoined promises to be the greatest lie Trump ever told.
After two decades with Goldman Sachs, Munchkin (as he shall hereinafter be known for he lives on the Goldman-bricked road) bought his own bank, IndyMac. He renamed it OneWest and turned it into a mega repo machine in 2009, whirring out hyuuge amounts of crash cash during the Great Recession. His revamped bank set a speed record for putting homeowners out on the street, foreclosing one home every thirty seconds. A vice president of OneWest even admitted in court she shortened her signature so that she could spend less than thirty seconds processing each foreclosure. As a result of this rush to foreclose, the court found the bank had frequently mishandled documents because it did not even read many of them before foreclosing.
Munchkin’s grim reaper of a bank closed its greedy grip on a whopping 35,000 homes during the Great Recession. The bank was even so unscrupulous as to instruct homeowners to stop making payments, ostensibly because it was going to modify the loans, but in reality in order to purify its argument for repossession. (For more on the Munchkin’s greed, read “U.S. Treasury Becomes a Laughing Stock.”)
Cohn, meanwhile, was president and COO of Goldman Sachs during the years when the Goldman squid monstrously raped its own clients by encouraging them to make investments that it bet its own money against. Cohn claimed in his own testimony that never happened, and his defense consisted of arguing that his company lost money during the Great Recession, so this couldn’t be true … as if a complex company with many areas of business couldn’t lose money overall during a crisis while making money in one area of business where it bet against its own advice to its clients. (See WSJ: “Gary Cohn Testimony: Goldman Didn’t Bet Against Clients.”
The senate subcommittee Cohn was speaking to on the matter disagreed in its own conclusion:
“Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis. They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients.” (The Independent: “Goldman ‘bet against securities it sold to clients’”)
The SEC ultimately fined Goldman half a billion dollars for its dishonesty, and Goldman conceded to its dishonesty. (See “Goldman Sachs and The ABACUS Deal.”)
By placing these financial weasels in full charge of creating his tax plan, Trump proved to my satisfaction that he never intended to serve the middle class. Some people, however, did not accept my claims putting the worst swamp creatures in charge of his signature campaign pledge did not prove Trump would prove to be a Trojan horse for the establishment. Now that we have seen both Senate and House versions of the plan, however, the proof is in the pudding (the sloppy mess that envelops Trump’s tax plan).
The Trump tax plan, in either of its current conceptions, will be the worst thing that ever happened to America, even though it will certainly boost stocks, and I’ll tell you why below. Still, many will refuse to see the truth and will be addled in their evaluations down the road by the fact that the plan did kick the stock market into even higher gear.
Trump tax plan is a loophole haven for the richest of the rich
One of the biggest promises of tax reform was that it would, in Trump parlance, hyuugely simplify the tax code by eliminating loopholes. This loophole elimination would make sure that any reduction in the upper tax bracket for the rich did not create additional tax savings for the top one percent so that, this time around, tax revision would benefit the middle class.
Contrary to the Goldman boys’ promises, both the senate and house versions of the Trump tax plan create the most massive tax cuts the rich have ever received because they leave most of the loopholes in place. Even President Reagan’s tax designer, David Stockman, calls the Trump tax plan “a wish list of … Wall Street.” Why wouldn’t it be when it was designed by Wall Street moguls whose snaky mouths revealed a forked tongue at their corner whenever they smiled and promised their plans would not include tax cuts for the rich?
This tax plan, in either incarnation, is the Christmas Wish Book for Wall Street, and it is built on total economic denial about the rampant deficits it will create as far as the eye can see.
The biggest loophole of all, the one loved by hedge-fund managers, lawyers and stock brokers, is left firmly in place. The House bill preserves for its wealthiest cronies on Wall Street the carried-interest tax loophole for private-equity managers, venture capitalists, hedge-fund managers and certain real estate investors … like Trump. Trump and Cohn specifically stated they were committed to ending this special provision that helps hedge-fund managers, but this grand loophole they bedeviled during the campaign is still there. (So, watch carefully to see how loudly they argue for its removal now that we can all see it remains firmly in place.)
The plan, as it stands in the Senate, allows “pass-through” businesses …. to deduct 22 percent of their income before paying taxes, up to a certain limit. In the House, it allows those pass-throughs to pay taxes at a special low rate. The pool of pass-through businesses includes any number of cookie shops and bodegas and corner stores, but also law firms, hedge funds, consulting firms, real-estate development companies, investment partnerships, and lobbying businesses. An estimated 70 percent of the benefits for such pass-through firms go to the top 1 percent of income earners—meaning this benefit is more about helping rich families than it is about helping small local businesses.
Moreover, such changes to the way pass-through businesses are taxed complicate the code and create a preferential category for rich individuals to try to work their income into…. The new provisions have “the potential to become the single greatest inducement to tax arbitrage ever enacted by a single Congress,” the tax expert Daniel Shaviro of New York University Law School has written, also saying that they “might end up being the single worst structural change in the history of the U.S. federal income tax.” (The Atlantic)
“After I saw that tax bill, I lost hope with the drain the swamp concept,” Gundlac
h said. “The swamp keeps getting bigger.” (NewsMax)
Swamp wins all in this plan. In either of its currently approved forms, the Trump tax plan trumps the middle class for decades to come!
Capital gains tax cuts preserved in Trump tax plan
If President Trump’s tax plan was intended to help the middle class, the first thing it would do is finally end the one tax provision that has created the biggest income disparity in history between the top ten percent of tax payers and all the rest of us. It would eliminate the special capital-gains tax break that has built real-estate bubbles and stock bubbles but done nothing to create jobs for the middle class in spite of endless promises that it will — promises that are now believed by blue-collar Republicans at the level of religious dogma.
While the new plans offer no additional capital-gains tax reduction for the rich, they keep this now sacred loophole locked in place. Republicans and Democrats wouldn’t dare talk about further reductions in this area because that would risk putting this special rate that has served the one percent so well at risk by putting it back into the discussion. Best to be happy with the massive gains the rich have already secured in this area and focus on opening entirely new areas of gains for the rich rather than to bring this up for discussion again.
I’m bringing it up precisely because they don’t.
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