One Flat Tax

Evolution of Tax Reform into Billionaire Tax Relief

What Trump campaigned on:

  1. Deductions and credits were limited to $150,000, so taxes on the wealthy went up, to pay for working and middle-class tax reductions in a revenue-neutral way.

What Trump proposed in April - the first two points are the heart of it:

  1. Corporate tax rate 15% - there are actually some good reasons for lowering the corporate tax rate, but not that much.
  2. Flow-through tax rate 15% - so business owners like Trump only pay 15% instead of the maximum personal tax bracket 39.6%.
  3. Eliminate alternative minimum tax - so business owners like Trump don't have to worry about the maximum AMT personal tax rate of 28%.
  4. Eliminate estate tax - so wealthy individuals like Trump can leave all their accumulated fortunes to their heirs.
  5. Window dressing - small cuts to deceive the masses into thinking it's all about them, despite that almost all W-2 wage earners get nothing from the four points listed above.

What the Republicans proposed in September

  1. Corporate tax rate 20% - instead of Trump's 15%
  2. Flow-through tax rate 25% - instead of Trump's 15%
  3. Eliminate alternative minimum tax -
  4. Eliminate estate tax -
  5. Window dressing - slightly different from Trump's window dressing, but still almost all W-2 wage earners get nothing from the four points listed above.

What Trump signed in December:
You all just got a lot richer if you were already rich enough for Mar-a-Lago!
  1. Corporate tax rate 21% - instead of 20% - That's probably the biggest factor in our plan
  2. Flow-through tax rate reduced - the details are impenetrable but the motivation is obvious. Here's a simplified explanation. Steve Butler explains the amazingly complicated ways for small businesses to change their 401k plans to make the most of the new pass-through provisions. One can tell that pass-through taxation is the most important aspect of the new tax law from the inordinate amount of insufficiently-considered last-minute hacking to get enough senators aboard.
  3. Reduce estate tax - the zero brackets are doubled
    Points 1)-4) were modified from the September plan in order to get through the Senate under reconciliation (50 votes) instead of regular order (60 votes); the previously adopted budget resolution had only called for $1.5 trillion deficit increase. So some tax cuts had to be reduced.
  4. Window dressing - slightly different from previous window dressing, but still almost all W-2 wage earners get nothing from the points listed above
    To meet the deficit target in the budget resolution and thus pass muster under reconciliation, the personal income tax cuts expire after ten years. In contrast, points 1)-4) are permanent cuts.
  5. Repeals individual mandate of Obamacare - as young healthy people drop out, tax subsidies will decline, but insurance rates will increase, so tax subsidies will increase. People who don't qualify for subsidies will just get premium increases.
  6. Opens Arctic National Wildlife Refuge to oil drilling - that's certainly germane to tax reform!

Why did the Republicans pass a deficit-busting billionaire relief bill at a market top? Why did the Republicans pass a major complication of tax law in December for which the IRS needs to have employer guidance in place in January, after cutting the IRS budget and headcount for years?

Because it was their first opportunity to do so since 1986, and they don't expect to get another opportunity for another 30 years!

The $1000 per employee bonuses announced by a number of corporations seeking to ingratiate themselves with Trump don't mean much. Even before taxes, a one-time payment of $1000 won't pay rent for the twelve days of Christmas in most of the economically vibrant areas of the country. Raising the entry-level hourly wage to $15 is much more meaningful to employees, but most corporate beneficiaries of the 21% tax rate were planning to use the money instead for stock buybacks, to raise the stock price. Then they matched their plans with action. History suggests that corporations will continue to spend much more of their tax reduction on stock buybacks than on investment in capital equipment or labor. Just as Democrats predicted.

The Republicans had planned to base their 2018 campaigns on the tax bill. Now, even Trump seems to have lost interest. It's just so boring! Of course that's why ordinary citizens never understand much about it, and that enables legislative shenanigans.

The Trump Philosophy:

At least he's consistent! He consistently sells the sizzle to the base, and the steak to the donors. But maybe consistency is not the only political virtue worth considering...

Question: What is a provident and productive way to raise government revenue by taxation?

Answer: One flat tax on discretionary income.

Taxation and public expenditure summary:

What should have been done instead of the 2017 tax law?

With regard to four specific points:

What are some good general principles for taxation?

That's my list. Here's Jacob Lew's list.

Expanding on my general principles above, here are a few specific principles of a better system:

Details: There are many details that could be handled in many ways, which would undoubtedly be worked out in the legislative process. Although the devil is in the details, none of them is as critical to this proposal as the key principles above. Here are some suggestions corresponding to those principles:

Responsible government: the devil in these ideas is not in the details, but in the hope that Congress and the President would be responsible enough to follow the independent recommendations for raising or lowering tax rates to meet the goals of balancing the current budget and paying down a portion of the accumulated deficit. Every politician would like to increase benefits and lower taxes and too many promise to do so. Can a culture be established of acting responsibly for the benefit of future generations? The recommendations for tax increase or decrease could be ignored for a while during rare times of intense economic stress when deficit spending could stimulate the economy. But will the voters require their representatives to make a habit of deficit spending? Robert Samuelson lays out the essentials of Federal budget and deficit.

Later Ideas

Reduce wealth inequality with wealth and estate taxes!

If the current flat tax rate on income were 40% Federal and 10% state, why not have

Because income taxes are credited against them, these additional flat taxes will affect very few taxpayers. They do insure that whatever scams sneak into the tax code at midnight eventually get paid for, and help reduce income and wealth inequality. Note that a wealth tax might require a constitutional amendment; scholars differ on that.

Long-term tax-deferred retirement accounts!

The Keep America Great accounts mentioned above are intended to subsidize previously tax-favored activities like state and local bonds for public purposes, home ownership, and education expenses. There are very few limitations but long-term returns will not be as great as stock market investments.

So another kind of long-term tax-deferred retirement account could be based on investing for a fixed number of decades - 10, 20, 30, 40, or 50 years. No-load mutual funds could offer these as investments in target-date funds. You put the money in, and you take it out at the end of the fixed term. You can take it all out at once, in which case the original investment is returned tax free and all the accumulated income and capital gain is taxed at the flat rate. Or you can take it out as monthly payments which are tax free until your original investment is returned and taxed at the flat rate after that. If you die before the fixed term is up, the entire amount goes to your estate, taxed at the flat rate except for the initial investment.

What if you want the money before the fixed term is up? That's not a good idea - the intent is to fund retirement or college or other definite expenses decades in the future. But because life happens - you can withdraw any amount you like early - but it's all taxed at the flat rate. You only get your initial investment back tax free if you leave it in for the full term or until death.

What's wrong with the current system?

Problems with the current system of taxation:

What's the rationale for one flat tax?

The experience of a lifetime is that whenever legislators speak of "tax simplification" they really mean "tax complication." The tax code is always longer after they simplify it.

Sure, they might reduce the number of brackets, but for almost all salaried individual taxpayers, that's not any simpler because their taxes could be computed automatically from their W-2's and 1099's, refunds issued or balance due billed. Why doesn't Congress just authorize the IRS to do that? Congress already tried, but capitulated to the tax preparation industry. In most countries, filing income tax forms takes about half an hour.

The real "simplification" that increases the internal revenue code affects a tiny fraction of rather important taxpayers. There are no loopholes in the Internal Revenue Code, just vital job-creation provisions. If the vital job-creation aspect of some obscure clause isn't immediately apparent, just try to repeal it and then you'll find out who's behind it and who's carrying their water in Congress. The best explanation for this is that when corporations make political contributions, they view this as an investment for which they expect a return. Obscure tax law provisions are the easiest way to repay contributors without being obvious to casual observers.

Most individual taxpayers don't have any clue about passive loss limitations, at-risk limitations, accelerated vs straight-line depreciation (how can real estate depreciate, particularly housing? I've never seen that over any extended period of time), intangible drilling costs, oil and gas depletion, R&D tax credits, investment tax credits, 1031 exchanges, net operating loss carryback and carryforward, SEPs, Keoughs, bargain element of incentive stock options, private activity municipal bonds, alternative minimum tax... but this complexity is the bread and butter of tax law hacking. And the best part is, the legislators don't actually have to understand it, because lobbyists write the legislation for them and accountants write their tax returns for them! There oughtta be a law... But that's how the sausage gets made. Not a sight for queasy stomachs. . It's just vested interests that need to keep it mysterious. You can read about tax literacy and all of that jazz here.

In Silicon Valley we are also very familiar with the difference between architecture and implementation. But most legislators have never read The Mythical Man-Month and wouldn't grasp its significance if they did. A simpler way of stating its thesis is "too many cooks spoil the broth". Whether architecting a cathedral or a computer operating system or database or complex technical legislation, the overall plan has to be the province of a few architects, or preferably one. The implementation - the actual building of the cathedral or software or legislation - necessarily involves many hands, but the implementation deviates from the plan of the architect only at great risk to its overall integrity and ability to meet its design goals.

When it comes to tax law, no politician can restrain himself from implementing whatever his clients consider important, regardless of the overall plan of the architect - if there is any. That's how tax law gets more and more complicated every time it gets "simplified." Each "simplification" is essential simple career-security for the politician. And your simplification and my simplification interact in ways that we never considered. The end result is micro-optimization and the overall architected goals are never achieved.

It seems to me that, in lieu of all other Federal, state, and local personal taxes, the ideal tax is a flat tax on discretionary income, with a fixed fraction of total receipts returned to the states (in proportion to their voter turnout). The total personal tax burden, as a fraction of discretionary income, is quite regressive and getting more so since at least Reagan's time.

"A flat tax on discretionary income" is too abstract to qualify as architecture. Deciding what constitutes discretionary income as a set of principles constitutes architecture; drafting legislation accordingly counts as implementation.

Like base closure and deficit reduction, the only way to genuine tax reform seems to be for professional politicians to specify overall goals and then defer to experts who understand the economics to define an architecture, and then return the ball to the politicians to implement the architecture in legislation rather than undermine it. I don't expect that to happen in my lifetime.

Only a very small percentage of taxpayers leave an estate of five million dollars or more - ten million for married couples. They are the only ones who need to be concerned about the Federal unified estate and gift tax. But the Republicans like to talk about repealing the "death tax" as if that would be a great boon to the working man. In fact repeal is just a gift to the wealthy donors to political campaigns. The real point of the estate tax is to continually re-level the playing field for new generations who were not born into wealthy families - it's a move toward equality and away from liberty, part of the eternal tension between these conflicting ideals. There is an issue around private family-held businesses - but that could be addressed well enough simply by doubling the zero-bracket amount.

Depreciation on real estate?
Bypassing progressive income tax by unrecaptured section 1250 gain

That's a catchy title! But what it means is, that if you can afford to invest in commercial real estate, you can keep your maximum tax rate at 25% instead of 39.6%.

If you buy a car or a computer for your business, you are not usually allowed to deduct it all in one year. Instead you deduct a part of the cost over several years, thereby reducing your income taxable at the usual rates up to 39.6%. This makes sense; your car or computer started losing value the day you took it home.

If you at some point sell the car or computer for more than its depreciated value, the excess depreciation is recaptured and taxed at ordinary income rates. You've managed to defer some of your taxes for several years, but you eventually pay at the same rate.

Real estate is different. That's why it's such a popular investment, if you can afford it. You are allowed to depreciate real estate buildings (but not land), even though real estate doesn't depreciate in urban California and many other parts of the country - it continues to go up in value even if abandoned to wrack and ruin. After all, some social media gazillionaire might want to buy your real estate (and some of your neighbors) just for the lots, so the lots can be combined to make room to build a palace.

Better yet, when you do sell, the imaginary depreciation that you deducted against ordinary income at rates up to 39.6% - is recaptured at capital gains rates of up to 25%. So you not only get to defer taxes, you get taxed at a lower rate.

(Prior to 1986, this worked even for passive investors in limited partnerships. Now it's mostly available to active real estate investors. It also used to be possible to take accelerated depreciation on real estate, though perhaps subject to AMT.)

If all income were taxed at the same rate - as proposes - then commercial real estate might not be quite as attractive an investment. You'd still get to defer taxation - but when you sold, it would be at the flat tax rate in effect then, which might be higher or lower than that on the income you deferred, but most likely will not be much different. Commercial real estate might decline a little in value without that tax break. That sounds like a bad thing for investors.

But what if you are a would-be owner-occupied homeowner tired of competing with investors outbidding you for single-family residential property that they want for rentals? If some of those investors get discouraged and single-family residential property becomes less expensive, that sounds like a good thing for prospective homeowners. But there will still be plenty of other would-be homeowners competing, so don't expect too much of a drop in real estate prices.

How does depreciation work in a one-flat-tax scheme? It could work somewhat at present, with depreciation taken over the life of the asset and recaptured at about the same rate on disposal of the asset. But does it make sense to grant even the tax deferral benefit when there is no actual cash expense?

Perhaps it's better, and certainly simpler, for all assets, to allow deductions of the actual amount spent in the years spent, and tax the actual amount gained, if any, in the year of disposal. You get a tax deferral benefit according to the actual cash spent, but no conversion from ordinary income rates to capital gain rates, because they are the same.

Taxation of Primary Residences

There are a lot of tax law provisions to encourage home ownership in various ways. The one-flat-tax scheme eliminates two: the deduction for mortgage interest and property taxes on real estate not used for business. That's partly compensated since the zero bracket amount is intended to cover basic housing costs, Keep America Great Accounts provide ample low-cost funds for primary residences, and property taxes to fund general government are repealed and replaced by the Federal collection allocated for state income tax.

That still leaves special-purpose property taxes and capital gains on sale of primary residences as sources of concern, particularly to senior citizens on fixed incomes who fear being taxed out of their homes, on the one hand, and having to pay capital gains on the sale if they want to relocate to a smaller house or a lower-cost-of-living locale.

So many states have mechanisms to defer property taxes to some extent, and Federal and most state tax laws allow deferral of capital gains on sale of a primary residence to some extent.

Why not keep it simple: allow deferral of property taxes and capital gains on primary residence until death. The first is a matter of state law though the Federal government could facilitate matters by paying deferred property taxes for primary residences to the states and collecting at death. Under one-flat-tax, capital gains is strictly a Federal matter, that could be deferred until death.

The deferred property tax and capital gain are a debt to the Federal government which becomes due at death of the owner(s) or a year after sale if no replacement primary residence is purchased - if a replacement primary residence is purchased, the debt rolls over to the replacement primary residence.

Primary residences only, excluding any part of the property used for commercial purposes, and only one primary residence at a time. Divorce settlements would have to specify how the debt is divided.

At death, after the deferred property tax and capital gain tax are paid, the basis of the property steps up to its current market value and the primary residence is excluded from estate tax.

Altogether that seems to be an adequate incentive for home ownership. Dollar limits could be placed on any of these benefits, but simpler is usually better.

Stock options

Speaking of non-statutory incentive stock options and alternative minimum tax, there is a situation that Silicon Valley would like addressed: exercising a non-statutory incentive stock option in a private firm creates an immediate tax preference on the bargain element, with no way to sell the stock. Many very small fish who were granted options in a Silicon Valley startup learned too late that their road to riches was detoured into bankruptcy when the value of their stock plummeted before they could legally sell it in order to pay their AMT. This would be easily fixed by deferring the tax preference on the bargain element until the stock could be legally sold. That fix shouldn't affect any larger AMT discussions. There are many nuances for those who care.

Corporate income tax

So why have three presidents and countless Congresses been unable to fix [the corporate income tax]? The reason is simple: To restructure the tax code while still raising the same amount of revenue, all those companies paying less than the average effective rate would have to pay more so those paying uncompetitive rates could pay less. And the low-tax companies have made it their business to prevent that from happening.
-- Steven Pearlstein on a cash-flow tax

Income tax on corporations (and some trusts) is a knottier problem than personal income tax. To the extent that corporate earnings are distributed to taxable individuals, there's no need to tax them twice. But what about retained earnings and earnings distributed to non-taxable entities, later-taxable entities (retirement accounts), and foreigners? What about global corporations with operations and funds in many countries? Some of the far-reaching complications of any change are laid out by Neil Irwin and Lawrence Summers. Tinkering with complex systems almost never works as intended. The simplest idea, consistent with the personal income tax, would be a flat tax on discretionary income, with tax credits for the flat tax paid, that flow through to taxable shareholders. The varieties of corporate income and expense and ownership structure would make the details of this simple idea quite complex.

It's not even clear whether corporate income tax is actually borne by shareholders, employees, or customers. And T.R. Reid argues that the corporate income tax should just be abolished and the tax captured from the resulting increase in compensation to shareholders and executives. That would mean that dividends paid to non-taxable entities didn't get taxed at all. In the context of a flat tax on personal discretionary income, a better approach would tax dividends at the flat rate at the corporate level, and then be tax free to recipients.

And what about retained earnings that are neither used for business purposes, nor paid out as taxable compensation to employees, nor paid out as taxable dividends to investors? I don't know if that's really feasible for publicly-held corporations subject to hostile takeovers, but it might be a concern for privately-held corporations.

Republican Tax Bill Signed into Law!
You all just got a lot richer

if you were already rich enough for Mar-a-Lago

What Happens When You Fast-Track a Tax Bill?

The centerpiece of Trump's original tax proposal was a reduction of tax on business income to 15% instead of the personal income tax rates. That's because, he, his family, and his billionaire cronies all get their income from businesses organized as pass-through entities - under previous law, the business income passed through to be taxed at personal income rates. Getting W-2 wages as a statutory employee is for schmucks, including highly-paid athletes and actors.

But 15% was a bridge too far even for Republicans, but in an around-the-clock attempt to beat the bell - Trump wanted to sign in 2017 before Congress went home - Republican senators kept hacking on the pass-through provisions to make sure they provided tax relief to the deserving, such as themselves, and not to the undeserving, while keeping the overall deficit impact to $1.5 trillion. What if every schmuck started trying to be treated as a business rather than a statutory employee?

As every technologist knows from bitter experience, around-the-clock hacking under intense time pressure leads to mistakes, errors of omission and commission. But the clock ran down, and they turned in what they had, and Trump signed it. They hadn't resolved all the issues about their changes, but they figured the IRS could figure it out.

Of course, in public, the president and the Republican leaders talked about anything and everything except the heart of the matter, which was the pass-through taxation, about which they felt the less said the better - after all, it doesn't have anything to do with the average W-2 schmuck. The best reading on how Congress left matters is here; You can't understand the tax bill until you read this. It's unreadable for most people. That's what you need to understand.

In the SF Bay area, you might hear an ad for tax planning services for businesses to help them make the most of the "reform." But don't blame the lawyers and accountants who make a living trying to interpret byzantine tax law - blame the lawyers and accountants who "serve" in Congress by voting for it!

So who figures out what it really means? That's not even clear.

What's clear is that it's going to take a long time to figure it all out. All of which could have been avoided if Congress had taken a long time to get it right in the first place, even in the narrow definition of "right" as what they meant to do. But it never works that way, because every member of Congress has a different intent, and so tax bills always leave the hard parts for the IRS to unscramble, and that way Congress can blame the IRS for the impenetrable tax code.

Besides that kind of confusion, there are also objective drafting errors to resolve:

Oddly enough, the Democrats who had no say in the original bill are no more interested in making it work better, than Republicans were interested in making Obamacare work better.

And in an interesting footnote, the tax law makes certain W-2 schmucks into capital assets, subject somehow to capital gains taxes.

But not to worry, tax cuts for the rich make everybody wealthy! Andrew Mellon said so.

But Ryan is looking forward to cutting entitlements next year, though McConnell is not convinced that's a good idea in an election year.

Republican "Tax Reform"

The House passed its version of the Republican plan, 227-205, and the Senate passed its, 51-49. No Democrat voted for either. Now it goes to conference.

It might have been a better idea for the House to swallow its pride and just pass the Senate bill exactly as it passed the Senate and send it on to the President to sign the same day. "Speed kills" is not the way Republicans were thinking about it - "delay kills" is more like it.

So a conference committee risks producing a compromise between the House and Senate versions, which might lose two votes in the Senate and become impassable, or if they delay past the Alabama election on Dec 12 there will be another lost vote, or the anxiety from the Russian investigation might distract Trump and lead him to say something unhelpful, or the longer the bill sits unpassed, the more peculiar provisions will come to light and to the attention of the public and special interests, so that a senator or two might become convinced that his future looks brighter without passing this particular bill. Light is not good for this bill; it was produced in the dark very quickly and has a very short shelf life.

Here are some of the differences to be resolved in conference Washington Post and New York Times.

The Senate bill makes the corporate tax cut permanent, but the individual tax cuts expire after ten years. Their explanation is that corporate executives need certainty for planning, and anyway Congress is sure to extend the individual tax cuts before they expire. But I think it's much more certain that a Republican Congress would extend corporate tax cuts before personal ones, so why not make the personal ones permanent and the corporate one expiring after ten years? The Senate bill also repeals part of Obamacare funding, perhaps in the belief that their tax reform bill will be so popular that they can add the Obamacare cut without all the negative reaction that greeted their previous repeal attempts. And it also has a number of special provisions that are just being uncovered, such as remarkable breaks for real estate investors and tax deductions for political donations that are funneled through churches or "churches" and many more opportunities for the well-to-do to hack the system.

It's hard to believe that the Republicans think voters will thank them for their billionaire tax relief bill, no matter how they slice and dice the House and Senate versions to come up with a conference version. If the Republicans are right, then it's a reminder that people get the government they deserve. It brings to mind a recent Simpsons episode set in feudal times where Homer talks about how much he appreciates the opportunity to be a poor feudal serf for his rich feudal lord.

But ordinary Republican W-2 earner voters don't seem to be buying the Republican leadership lines; they accept it's just another scheme to make the rich richer and the poor poorer. Lots of them still support Trump anyway, presumably for other reasons.

Actually it's not clear that even the major Republican donors that bought and paid for the Republican tax plan will be happy; Trump in April and the congressional leadership in September promised that the estate tax, alternative minimum tax, and pass-through taxation would be completely and immediately repealed - and instead there are a bunch of complicated partial measures phasing in and out. Tax simplification always seems to make the tax code longer somehow, but this is worse than usual.

That's because the Republicans have been desperately trying to get to 50 votes so they can get their bill through the Senate under reconciliation with no Democratic support.

Instead of aiming for 50 votes for a bill that will embarrass everybody that supported it for the rest of their careers, why didn't they aim for 60 votes for something they could be proud of? It wouldn't be that hard to find 30 Republican and 30 Democratic votes for revenue-neutral permanent tax relief for working and middle class families. That's what Republicans and Democrats are SUPPOSED to be doing. That's what Republicans and Democrats SAY they are doing. Government for the People, you know? But instead it got Trumped by Government for the Billionaires. Well why not - billionaires are people too, just like you and me - except they have more money. Lots more money.

What if the Republican tax bill conference effort runs off the tracks and produces something that can't pass both houses? What if you could help that to happen in order for something better to happen? What if YOU told your Republican legislators to start over, take your time, and get to sixty votes. Maybe it will be good enough that the Democrats won't immediately repeal it as soon as they get control of Congress during the next bear market.

How did the Republicans want to reform taxes? - with lots of reference links

Campaign plan: In contrast to the House and Senate bills, Stephen Moore wrote the same day about the original Trump campaign tax plan, which in many ways is closer in intent to the flat tax plan above than to what's currently in Congress. It's politically savvy by retaining all the current tax structure for lower and middle incomes - so most voters feel as if they are not losing anything - but limiting deductions and credits to $150,000, which would put the bite on the wealthy and make the nominal progressive tax brackets mean something - as long as estate tax, long-term capital gains, offshore tax havens, tax-free municipal bonds ... etc were addressed as well. Moore observes that "eliminating loopholes is a far more effective and less economically destructive way to raise money from the wealthy than raising tax rates." Politically easier, too. But instead of that...

We don't pay taxes. Only the little people pay taxes.
-- Leona Helmsley

I think not having the estate tax recognizes the people that are investing, as opposed to those that are just spending every darn penny they have, whether it's on booze or women or movies
-- Rep. Chuck Grassley, R-IA

"No man can serve two masters,"
so when dialing for dollars, this is what one wants to hear:
"Well done, good and faithful servant;
enter thou into the joy of thy donor.

My donors are basically saying, "Get this done or don't ever call me again."
-- Rep. Chris Collins, R-NY

The party fractures,
most incumbents in 2018 will get a severe primary challenge,
a lot of them will probably lose,
the base will fracture,
the financial contributions will stop
-- Sen. Lindsey Graham, R-SC, on consequences of failure to pass billionaire tax relief

The Republican tax plan announced in September is a nine-page summary. Here are the salient points where most of the tax reductions lie:

Notably, none of these key points makes life easier for the average unemployed, retired, working class, or middle class family. They are all designed to lift the crushing tax burden on America's hard-pressed billionaires, especially wealthy real estate investors. Senator Thune explained "Why the GOP-Trump Tax Plan Works" without a word about estate tax and alternative minimum tax, and barely a mention of pass-through elimination. Even though Gary Cohn said "Only morons pay the estate tax", repeal is still part of the Republican plan, so I guess some of their important donors are morons. In contrast, FDR said "The transmission from generation to generation of vast fortunes by will, inheritance or gift is not consistent with the ideals and sentiments of the American people."

Astonishingly, the corporate entity with the largest benefit from the corporate tax reduction is Wells Fargo!

The Republican plan of September has now coalesced into two bills, one in the Senate and one in the House, each hundreds of pages that differ in many details. To get enacted, both houses must pass the same bill and President Trump must sign it. As of November 13, it seems doubtful that any Democrat will vote for either version, and there are some Republicans in both houses that will not vote for any "reform" that increases the deficit by 1.5 trillion dollars, and others that will not vote for any bill that limits their favored deductions. So getting to 50 Republican votes in the Senate for a bill that has a chance of passing in the House will be even more difficult than Obamacare repeal. Meanwhile the billionaire Republican donors like the Kochs remind the Republicans they funded in 2016 that they have bought and paid for billionaire tax relief, and if this Congress can't provide it, they will fund new primary contestants in 2018 that can.

Trump is first, last, and always a salesman, so he always talks about the hopes, dreams, and fears of the prospective buyers rather than the objective facts about the product he is selling. If he understands their hopes, dreams, and fears, he doesn't even need to know any objective facts. So he will SAY that he's reducing taxes for working people, and he might, slightly, and he will SAY that his salient points are job creators, and there is some truth in that if your goal in life is to clean house or garden for a billionaire, but it's mostly the same old trickle-down voodoo economics that never worked before. Republicans had to search high and low to find somebody who would claim that tax cuts would pay for themselves. Instead, how about some trickle-up economics - reduce taxes and increase discretionary income of the less than wealthy, who will certainly spend it quickly on goods and services and that spending will trickle up in economic activity, even benefiting billionaires eventually. The billionaires are much better situated to wait for trickle up than the masses to wait for trickle down. This is not a new idea:

There are two ideas of government. There are those who believe that, if you will only legislate to make the well-to-do prosperous, their prosperity will leak through on those below. The Democratic idea, however, has been that if you legislate to make the masses prosperous, their prosperity will find its way up through every class which rests upon them.
You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold. -- William Jennings Bryan, 1896

Bimetallism is no longer a potent political issue; if you're curious about the details:

Now it's "tax reform" and "entitlement reform." Republicans can expect to hear a lot about those crosses of gold in 2018. Even Trump supporter wage earners don't expect anything good from "tax reform:" Washington Post and New York Times. But there are lots of unpublicized tax breaks for business.

Trump misleads about the impact on the wealthy, as confirmed by the New York Times fact check and the Washington Post fact check and the Tax Policy Center.

Tax cuts do not pay for themselves by economic stimulation, especially when the economy is already maxed out by any historical standard. Adding stimulus to a boom makes the subsequent bust worse.

Perhaps the Republicans embrace dynamic scoring because they anticipate inducing an imminent severe recession will require drastic economic stimulus. So far most analyses indicate dynamic scoring won't change the conclusion. There isn't any more room for growth; further stimulus will hasten the next recession.

In contrast to the House and Senate bills, Stephen Moore wrote the same day about the original Trump campaign tax plan, which in many ways is closer in intent to the flat tax plan above than to what's currently in Congress. It's politically savvy by retaining all the current tax structure for lower and middle incomes - so most voters feel as if they are not losing anything - but limiting deductions and credits to $150,000, which would put the bite on the wealthy and make the nominal progressive tax brackets mean something - as long as estate tax, long-term capital gains, offshore tax havens, tax-free municipal bonds ... etc were addressed as well. Moore observes that "eliminating loopholes is a far more effective and less economically destructive way to raise money from the wealthy than raising tax rates." Politically easier, too. I recall a relevant quotation from a Swedish theologian: "If even the Devil says six and six are twelve, I will believe him."

But in the year since the election, populist tax cuts for working and middle classes paid for by tax increases on the rich, turned into traditional Republican tax cuts for the rich paid for by tax increases on the working and middle classes and by deficit spending. Billionaire tax relief now and entitlement elimination later is what the Republican donor class bought and paid for.

Paul Ryan confirms that the real goal of the current Republican tax proposal is to set the stage for entitlement reform in 2018 or 2019, when Republicans will suddenly remember that they believe in balanced budgets, and will seek to balance by "reluctantly" cutting Medicaid, Medicare, and Social Security - as they've planned all along - rather than by undoing the billionaire tax cut. Some of the Republicans will even admit it, though they might not dare to act until after the 2018 election. Another strategic Republican goal is to reduce the size and scope of state government so that reduction in Federal entitlements is not offset by the states.

More commentary:

How does the Republican tax plan differ from Trump's one-page list of bullet points from April? The Republican tax plan is essentially identical to Trump's: it would abolish alternative minimum tax and unified estate and gift tax, tax flow-through business entities at a lower rate than the personal tax rate, and dramatically lower the corporate tax rate. The key differences are that the corporate tax rate is proposed to be 20% rather than Trump's 15%, and flow-through business income would be taxed at 25% rather than Trump's 15%. Still a pretty good deal for billionaire real-estate developers.

The Republican proposal pretends that the pass-through repeal is a bug, to be fixed in Congress, but it's definitely a feature that will not be fixed; even if Congress tries, there are plenty of smart lawyers and accountants that will find ways around it for those who can afford their services. The rules for pass-through in the current Senate and House bills are designed to encourage such tax-motivated non-economic income shifting schemes and tax shelters, especially for passive investors, undoing most of the better ideas of the Reagan tax reform era.

As one pundit observed, the Republican proposal is very specific on all the tax cuts that benefit the billionaires but very vague on all the other details affecting everybody else that Congress will have to work out. I'm sure Congress will jump right on that with its usual alacrity.

What's a more accurate way to think about the Republican proposal?

What would the Republicans do if they wanted to be honest?

They could try selling their plan in parts to see how far it gets:

But to summarize what's really going on:

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