Bill Bonner: Trump’s tax plan would bankrupt the empire
From Bill Bonner, Chairman, Bonner & Partners:
GUALFIN, ARGENTINA – Trump! Great guy!
Big, dumb, hopeless. Menacing. Reckless. And completely loveable.
Here’s The New York Times‘ list of “winners” from his tax proposal:
Businesses with high tax rates. The plan would cut the 35% corporate income tax to 15%. While few businesses pay the full 35% rate, those that pay something close to it are in line for a huge tax cut.
High-income earners. The plan would reduce the top rate on individual income tax – now 39.6% for income over around $470,000 for a married couple – to 35%.But that’s only part of the gain for high-income earners. It also would eliminate a 3.8% tax, used to help fund Obamacare that applies to investment income over $250,000 for a couple.
People with creative accountants. The 15% business tax rate could open a huge loophole for people to receive business income through a limited liability company or other pass-through entity instead of as wages…
Multimillionaires who want to pass money to their heirs tax-free. The plan would eliminate the estate tax, which currently applies to individuals with estates of $5.5 million or couples with estates worth $11 million.
Whom do these things describe?
“You and me, bro.”
Yes, President Trump has proposed a tax rework that would save him… and your editor… a lot of money.
For example, we know from the two pages of his 2005 tax returns that were leaked to MSNBC that eliminating the alternative minimum tax would have saved “The Donald” $31 million.
And the 15% business tax rate would cut our taxes in half.
“CEOs Salivate Over Trump’s Tax-Cut Plans,” reports Bloomberg. And here we are. Drooling like a madman.
The plan is as bold as his Trump Airlines. As refreshing as Trump Ice. As nourishing as Trump Steaks. As learned as Trump University. As good a deal as a Trump Mortgage. As exhilarating and entertaining as the four casinos and hotels he has led to bankruptcy…
… and with about the same chance of success. Still, some elements may survive… as we will explain.
Doubling the Debt
According to one estimate, Mr. Trump’s plan would add more than $6 trillion to the U.S. debt over the next 10 years.
And therein hangs a tale.
Because U.S. debt is already expected to grow to $30 trillion by 2027. Add another $6 trillion, and you’re talking real money.
And that is before any of the dopey spending increases the Trump team proposes.
Our friend David Stockman served as President Reagan’s budget chief. He has analyzed these figures in great detail (yet somehow manages to keep his wits about him). And he believes the combined effect of Trump’s tax and spending plans, revealed by day 97 of his administration, would add $20 trillion to the U.S. debt.
President Obama, he points out, doubled U.S. debt from $10 trillion to $20 trillion. Trump seems to be angling to do it again.
And this poses a moral dilemma for your editor. On one hand, the Trump plan would help him personally. Yugely. But on the other, it would hasten the bankruptcy of the empire.
Should we throw our bantam weight behind the president in search of personal gain? Or should we put on our Good Citizen lapel flag and rally round to save the country’s finances?
Hey, we’ve gotten harder questions in a blood test.
In the first place, it doesn’t matter what we think. The U.S. is in the middle to late stages of a degenerate empire. It’s going to go broke – or worse – sooner or later.
Empires don’t back up. They don’t “come to their senses.” They don’t reform themselves.
The government is controlled by a group of unelected insiders, also known as the Deep State.
These people don’t suddenly say, “Oh, I don’t need so much money.” Or, “I think people ought to be able to do what they want.” Or, “I’m not interested in politics anymore. It’s just too grubby.”
Nope. They continue doing what they are doing until they can’t do it anymore.
We never met a tax cut we didn’t like; we especially like the ones that cut our own taxes.
But this is a tax cut we can also support for unselfish, patriotic reasons: It will balloon the national debt… destabilize the financial system… and hasten the end of the Deep State’s empire.
But little of the Trump tax plan will pass Congress. Not a single Democrat will touch it. And many of the Republicans, those with a residual interest in financial integrity, will also back off.
That will leave the tax plan in the same place as the O’care repeal and foreign policy makeover – nowhere.
Subject to Influence
But this is probably a good place to illustrate how the math of the Deep State system works… why public policy, generally, is a scam… and why Trump, Mnuchin, et al. think they can get away with such an obviously self-serving move.
Let’s say you have a business that makes $10 million a year. You are in the 50% tax bracket (state taxes, alternative minimum tax, etc. included).
Along come Steve Mnuchin, Gary Cohn, and… oh, yes… the president… with a plan that will save you $2.5 million a year.
Over 10 years, you’ll save $25 million. If only the plan would pass! So you and your fellow cronies get to work. You decide to “invest” just 2% of your projected gains – $500,000 – to lobby for the measure.
Now, imagine there are a thousand businesses across the country in the same situation – not to mention the investors, financiers, stockbrokers, gamblers, bankers, and hustlers who stand to gain.
You’re soon talking about half a trillion dollars available to help members of Congress understand how this tax plan will make America great again.
Remember, people are neither always good nor always bad. But they are always subject to influence.
Would they like a little help with campaign financing? Would they like to join a prestigious think tank when they leave Congress? How about a job as a highly paid lobbyist?
How quickly people can learn when they are properly incentivized!
The man on the street hardly cares; it has little effect on him. He won’t devote a minute of his time or a dollar of his money to understanding this tax fight.
But if the insiders can pull it off, the winners win big.
Crux note: You won’t read about it on the news. But behind the scenes, the Deep State has been scrambling to avoid an even bigger crisis than the one that hit in 2008. It has nothing to do with stocks… or bonds… or international currency markets. And when it strikes, it could bring down the entire monetary system. To learn more about the coming monetary catastrophe… and the steps you can take to protect yourself, follow this link.