It doesn't take a CPA or a budget hawk to get the basic gist of the tax plan lawmakers are muscling through to Trump's desk. The plan is to take the money and run. Why worry about the country's future when you can profit from our system now? In the long run, other people will pay for your plundering.
What's going on here? The House and Senate are working towards consensus on a bill that will increase the deficit by $1.5 trillion over the course of 10 years . Treasury Secretary Steven Mnuchin and Chief Economic Advisor Gary Cohn are asserting a strategy something along the lines of, "Let's throw this thing at the wall and see what sticks," claiming the economy will somehow make up for $1.5 trillion worth of loss. They don't have any research or figures to back up their claim.
The average person doesn't feel affected by the deficit. But the deficit is a tool lawmakers use to promote their agendas, which directly affects policy, which affects the taxpayer. Rutgers University notes that, when it come to the budget and public administration , "Administration hinges on the execution of policy prerogatives through pragmatic action that takes the bigger picture into account, and a government's budget is what makes policy implementation possible by grounding initiatives in hard dollars-and-cents data." The budget hinges on the deficit. A high deficit means a skimpy budget. In other words, a big deficit makes it hard for administrators to implement any positive policies, such as much-needed infrastructure repair.
Under this scheme, Trump and corporations are two of the biggest winners. Landowners with nonresidential property (which Trump has plenty of) will be able to depreciate it at 25 years instead of 39. Basically, under the Senate plan that means Trump will be able to save about $5.2 million per year on Trump Tower taxes alone, instead of the current $3.5 million. And that's just from depreciation and that's just from Trump tower. All told, Trump has $1.3 billion worth of commercial real estate. Besides the depreciation break, Trump will also be able to continue deducting mortgage interest on all of his rental properties, while the majority of businesses with a mortgage on property will not be able to deduct interest.
While the tax bill will make life great for landlords like Trump who rake in money from rent, the same can't be said for homeowners and real estate agents. According to Marylhurst University , "Unlike a traditional 9-5 job, working in real estate doesn't have a guaranteed, steady income. Your income is tied directly to your commission and what kind of listings you can attain." The tax bill will greatly limit the listings an agent can attain. People won't see a tax break on selling their homes until they've owned them for 5 years, instead of 2 as the code specifies now. Real estate agents will see less homes on the market to sell, and the bill incentivizes people to become landlords. Fewer homes on the market means higher prices on sales. Renters will continue renting in a market that's already seeing a lot of barriers to entry because of debt. Here again, this is great for landlords like Trump.
And all tax breaks for everyone except corporations will expire in 2025. Corporate taxes will fall from 39 percent to 20 percent and stay there, while everyone else's will go back to where they were before this madness began.
By the time 2025 hits, Trump, other billionaire real estate tycoons, and corporations will have had plenty of time to fatten their purses. At that juncture there will be a new president who will face a fiscal cliff. 2025's president will most likely inherit an additional $1.5 trillion in debt, and they will either have to extend the tax cuts to satisfy a public that has gotten used to them or let them expire to help mend the deficit, while we watch corporations continue paying less. The president who lets them expire will be unpopular for that decision because the GOP will be able to say, "Look, they're raising your taxes."
As for corporations using the tax cut to boost employment and productivity, they're more likely to use the extra money to invest in new machines. Automation could displace 800 million workers worldwide by 2030 because machines are more efficient than humans.
Will tax cuts create $1.5 trillion in growth to offset the impending deficit? There's no way of telling. But what this new tax bill will create is a winning game for Trump--and a huge question mark for the economic future of this country.
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