Hope springs eternal. Steven Mnuchin, Donald Trump's campaign finance chairman and now his nominee to serve as secretary of the treasury, made headlines Wednesday by claiming that there would be no "absolute" tax cut for the wealthy.
This is a promising sign that a Trump presidency will not, after all, turn on a bait and switch, in which an angry populist movement votes an outsider into the presidency only to be greeted with the same-old, same-old trickle-down tax policies that Republican insiders have touted for decades. As is typically the case with politicians and their words, it is too early to tell what truth emerges. But the people of the movement can hope at least that Trump is listening to them.
First, a word of explanation. What does Mnuchin mean when he says there will be no "absolute" tax cuts for the rich?
He means that cuts to the tax rates will be offset by increases to the tax base or what is being taxed. Trump previously, and Mnuchin now, hint that such expansions will come from limiting itemized deductions, which only the top 30% of taxpayers claim, anyway (the other 70% claim the standard deduction, which Trump has promised to raise). Itemized deductions that could be limited or eliminated include the mortgage interest, charitable contribution, and state and local income tax deductions. There could also be limits on retirement plans or the non-taxation of employer-provided health care. All these matters are "personal" deductions, so they should not directly affect business decisions.
Will the math work? It is too early to tell, but there is plenty of reason to be skeptical, to think the rich will still come out ahead when all the devilish details get made into law.
There are already limits on many of these deductions, as is, and both the mortgage interest and charitable contribution deductions are deeply entrenched, such that their removal or limitation will face fierce opposition. There is also the estate tax, which Trump has vowed to repeal, and which "absolutely" falls solely on the very rich. Only individuals who die with more than $5.5 million, and married couples with more than $11 million of net wealth, face this so-called death tax, so its repeal would be a boondoggle for the billionaire class.
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There is also the deeper matter that the income tax has largely morphed into a wage tax, because the rich living off their capital can easily pay little or no tax. Neither Trump nor Mnuchin have shown a willingness to change this aspect of tax. As a result, what we are likely to get is a simpler, flattened wage tax.
But, for today, we can have hope -- hope that a Trump presidency will actually listen to and help the working class with their heavy economic burdens, by giving them tax relief, now, and directly, instead of telling them to shut up and be patient as they wait for the benefits of massive tax cuts for the rich to trickle down to them. Been there, done that.
It's absolutely time for something -- almost anything -- else. Let's hope we get it.