Robert Reich: 5 Reasons Why Trump’s and Cruz’s Tax Plans are Huge Giveaways to the Rich

Yves here. A lot of people have been fooled by Trump’s anti-free-trade talk into thinking that he is an economic populist. While Trump has said he will take some steps to increase jobs, he is even more clearly interested in measures that will preserve and even improve the lofty standing of top earners like him.

Also bear in mind: the magnitude of Trump’s proposed tax cuts, in combination with the mainstream fixation on reducing Federal deficits, will reduce growth. In other words, even if Trump were to live up to his word on pressuring multinationals to bring jobs back to the US, it would be offset, and likely more than offset, by the economic shrinkage resulting from lower Federal spending.

By Robert Reich. Originally published at his website

he tax cuts for the rich proposed by the two leading Republican candidates for the presidency – Donald Trump and Ted Cruz – are larger, as a proportion of the government budget and the total economy, than any tax cuts ever before proposed in history.

Trump and Cruz pretend to be opposed to the Republican establishment, but when it comes to taxes they’re seeking exactly what that Republican establishment wants.

Here are 5 things you need to know about their tax plans:

1. Trump’s proposed cut would reduce the top tax rate from 39.6 percent to 25 percent – creating a giant windfall for the wealthy (at a time when the wealthy have a larger portion of the nation’s wealth than any time since 1918). According to the Center for Tax Policy, the richest one tenth of one percent of taxpayers (those with incomes over $3.7 million) would get an average tax cut of more than $1.3 million each every year. Middle-income households would get an average tax cut of $2,700.

2. The Cruz plan would abandon our century-old progressive income tax (whose rates increase as taxpayers’ incomes increase)  and instead tax the amount people spend in a year and exclude income from investments. This sort of system would burden lower-income workers who spend almost everything they earn and have few if any investments.

3. Cruz also proposes a 10 percent flat tax. A flat tax lowers tax rates on the rich and increases taxes for lower-income workers.

4. The Republican plans also repeal estate and gift taxes– now paid almost entirely by the very wealthy who make big gifts to their heirs and leave them big estates.

5. These plans would cut federal revenues by as much as $12 trillion over the decade – but neither Trump nor Cruz has said what they’ll do to fill this hole. They both want to increase the military. Which leaves them only two choices: Either explode the national debt, or cut Social Security, Medicare, and assistance to the poor.

Bottom line: If either of these men is elected president, we could see the largest redistribution in American history from the poor and middle-class of America to the rich. This is class warfare with a vengeance.

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  1. Tom

    The problem is that people are ignorant. We can’t only blame media and the elite. Normal people could try to understand thing a little deeper as well. Otherwise they shouldn’t complain after electing people like Trump and Clinton.

    1. Revolting Peasant

      Those are the only choices. People are not ignorant we just do not have a representative option. One is not aloud to suceed thanks to the media and the elite.

      1. Vatch

        No, those aren’t the only choices. Senator Bernie Sanders is a viable choice, and he is clearly opposed to the agenda of the oligarchs. I don’t know why so many Democratic primary voters have been choosing Hillary Clinton, who is a stooge of the billionaire oligarchs, but I strongly suspect that Tom’s hypothesis about voter ignorance is a big part of the problem.

        1. Revolting Peasant

          When we finally have a candidate like Mr. Sanders despite popular sentiment he will not be on a ballot as one of the 2 parties. It is not because we are ignorant to him.

          1. Vatch

            Voter ignorance is a huge problem. Millions of voters aren’t aware of how beholden Hillary Clinton is to the plutocrats who own the country. Instead, they think that she is a left wing progressive.

            1. Revolting Peasant

              Lol! I would like to believe that after “hope” & “change” no one would be that ignorant but perhaps your right. I still tend to move to the hopeless feeling of determining the worse of two evils, very evils, is the ongoing crushing brutality that keeps the apathy of the public high.

            2. washunate

              And yet, that’s one of the ironies of this framework. Reich presents tax cuts as part of the Republican establishment rather than framing them as a bipartisan effort.

              I find it rich to blame average citizens for being ignorant when our intellectual class has such a tribal tone to their language.

              1. Vatch

                Nobody can know everything, and some of what we “know” is inevitable wrong, but people can make an effort to be informed. Those who are willfully ignorant deserve blame.

                “The evil that is in the world always comes of ignorance, and good intentions may do as much harm as malevolence, if they lack understanding.”

                — Albert Camus in The Plague

                I think Camus overstates his case; not all evil is the result of ignorance, just a lot of it.

  2. griffen

    There is a small army of Cpa ready to march against a flat tax. What would all those accountants and tax attorneys be good for, once the tax laws make them less useful ?

    1. Steve Gunderson

      Cruz’s plan to get rid of the IRS would eliminate even more CPA and tax attorney jobs.

    2. jrs

      Yea because it’s progressive marginal tax rates that make taxes so complex. Have you ever actually done your own taxes? Because I think it’s impossible to have done so and honestly think progressive taxation is what makes the tax code difficult. Marginal tax rates are just the tax table the IRS provides. It’s deductions and the like that make the tax code complex. And by the way I do favor eliminating the AMT, that is a real true complexity. But progressive marginal taxation is not.

  3. washunate

    I know Reich has a long time connection with the Clintons and so is conflicted by familiarity and loyalty. But why on Earth are we talking about potential tax plans of GOP candidates 8 months before an election?

    How about talking about what the current occupant of the White House has done to raise taxes on the rich? Or what the next establishment candidate wants to do on that front? Or how leftist approaches like MMT provide intellectual cover for de-emphasizing the role of taxation in public policy?

    Taxing the rich is one of the major fissures within liberalness. Talking about the Republicans reinforces the false red team vs. blue team meme that the real difference is between the two parties.

    1. Kulantan

      People are going around saying that Trump is a real alternative to the current establishment stranglehold and is going to smash the red team vs blue team dynamic. Its worth having a critical look at that assumption and the five minutes used here to do so is not a waste of anybody’s time.

      1. RUKidding

        I agree that it’s worthwhile to review these proposed ideas of Trump & Cruz. We hear so much bs about Trump’s incendiary remarks but we don’t get to the real “meat” of what he’s proposing – that is, when he actually does make at least a somewhat substantive proposal.

        The Trump supporters I know – and they’re not dumb boobs or white supremacists – are really ignorant about what Trump is proposing. They believe that he’s going to “smash the parties” and make everything better for average citizens. But they’re short on the details of how that’ll happen.

        When I speak about how Trump is proposing to lower the marginal tax rates – YET AGAIN – on the super wealthy, they are surprised. People don’t know.

        So YET AGAIN we’re presented with trickle down that has only worked in favor of the wealthy and just keeps screwing over the rest of us.

        Thanks for the info.

      2. washunate

        I don’t disagree with anything you say in so far as the details.

        But at some point, a point necessarily vague and nebulous but nonetheless important, we are missing the forest for the trees. If we want Sanders to have even a remote chance of winning the Democratic nomination, political focus has to be on Clinton specifically and the Dem establishment more generally. Every time we mention a Republican we bolster the case (right or wrong) for picking the safe choice (again, regardless of whether that is actually right or wrong) as embodied by the Clinton camp. Reich is in a particularly noteworthy position on this front precisely because he is so close personally and historically with the Clintons.

        If it’s substantive policy analysis rather than political commentary, then this peculariar American focus on distant elections stands out even more. Actual policy has been happening on the tax front, and it is a policy where bipartisan neoliberal elements have methodically pushed tax cuts as a legitimate tool in the public policy toolbox.

      1. washunate

        Hence the conflict.

        I have the deepest respect and admiration for Hillary Clinton, and if she wins the Democratic primary I’ll work my heart out to help her become president.

        I don’t hold that against Reich specifically. But it makes for a poor strategic position overall. Literally in the very announcement describing his support for Sanders he is saying he’ll also support the candidate opposing Sanders.

        1. Vatch

          Here’s the full statement:

          I endorse Bernie Sanders for President of the United States. He’s leading a movement to reclaim America for the many, not the few. And such a political mobilization – a “political revolution,” as he puts it — is the only means by which we can get the nation back from the moneyed interests that now control so much of our economy and democracy.

          This extraordinary concentration of income, wealth, and political power at the very top imperils all else – our economy, our democracy, the revival of the American middle class, the prospects for the poor and for people of color, the necessity of slowing and reversing climate change, and a sensible foreign policy not influenced by the “military-industrial complex,” as President Dwight Eisenhower once called it. It is the fundamental prerequisite: We have little hope of achieving positive change on any front unless the American people are once again in control.

          I have the deepest respect and admiration for Hillary Clinton, and if she wins the Democratic primary I’ll work my heart out to help her become president. But I believe Bernie Sanders is the agent of change this nation so desperately needs.

          He says he’s going to support the eventual Democratic nominee — lots of Democrats will be doing that. I (and a few million other Sanders supporters) will only do that if Sanders is the nominee. Meanwhile, Reich is a Sanders supporter, too.

  4. Carolinian

    So if Trump is planning a huge tax cut for the rich then surely all those billionaires like the Koch brothers should be supporting him. Instead they mostly oppose him or support other candidates including Hillary. Perhaps they recognize that his tax “plan”–like so much of what he says– is just rhetoric designed to get him the Republican nomination.

    However if Trump should win and some of his crazier ideas like the wall or giant tax cuts come to pass then the true blame would be on America’s invisible left. If only we had an opposition party that could effectively fight such things…..

    1. rusti

      So if Trump is planning a huge tax cut for the rich then surely all those billionaires like the Koch brothers should be supporting him. Instead they mostly oppose him or support other candidates including Hillary.

      How applicable are income tax rates to people like Trump? That is to say, how significantly does he improve his income by lowering marginal tax rates for “earned income”? I am not asking rhetorically, I have no idea. On the other hand, I can see how this stuff from last summer would upset a lot of people like Mittens or Chelsea’s husband:

      In interviews over the last several days, Trump made blistering comments about inhabitants of a corner of the financial industry who have grown accustomed to criticism. “I know a lot of bad people in this country that are making a hell of a lot of money and not paying taxes,” Trump said in an interview with Time, in apparent reference to hedge fund and private equity fund managers. “The tax law is totally screwed up.”

      “They’re paying nothing and it’s ridiculous,” he added on CBS a few days later. “The hedge fund guys didn’t build this country. These are guys that shift paper around and they get lucky.” He went on: “They’re energetic, they’re very smart. But a lot of them, it’s like they’re paper pushers. They make a fortune, they pay no tax…The hedge funds guys are getting away with murder.”

      Don’t know if that has been a prominent part of his campaign since then…

      1. Yves Smith Post author

        That’s been discussed elsewhere. He proposed changed to the carried interest loophole that preserve the break for real estate related vehicles, meaning him and his deals. So he most assuredly does not plan to walk his talk.

        Or according to him, he does. Those hedgies are just paper pushers! People like him who use the same type of legal structures to build buildings…now those are manly men!

        1. jrs

          It is possible a Trump presidency might be an incredibly corrupt one. It’s hard to say, but who would really be surprised.

    2. James Levy

      So, when he says something you like, he’s telling the truth and we should seriously consider voting for him, but when he says something you don’t like, he’s lying and we can ignore it…..

      1. Carolinian

        When did I ever say you should vote for him? What I have a problem with are people who think all of Trump’s supporters are boobs or, to use your word, “marks.”

        The Real News has put up an interesting series of talks on America and Israel and you get to see blog figures like Phil Weiss and Justin Raimondo doing their thing. Raimondo talks about Trump and says that he’s not planning to vote for him but he is “rooting for him”–meaning: when Trump says things that are true and that are never said by anyone else then we should applaud. I agree. I also think that in the end it is the ordinary Americans who will save us. The elites’ fear of the great unwashed has become quite explicit lately. America’s real class conflict is between the lowers and the middles. The rich are enjoying the “divide and conquer.”

  5. Asdis

    If I were going to vote for Trump, part of his appeal would be his proposed personal income tax program. If you are among the large number of americans who fall within the lower end of his proposal, you wouldn’t owe taxes at all for a 2 income household at $50,000…

  6. Erwin Gordon

    Yes, Trump and Cruz are dangerous and Hilary Clinton is the wise choice because the she and the establishment have done a standup job or preventing wealth extraction from the middle class and poor to the rich!?! Pray tell, given that the middle class and poor have already been stripped of the overwhelming majority of their wealth, I’m unclear as to how there could be a larger redistribution of wealth than has already taken place unless you put people in cages and forced them of slave labour? In any case the article was worth of laugh. LOL!!! Brilliant!!!

    1. Vatch

      Reich endorsed Bernie Sanders for President. I provided a link in my reply to Washunate, but that reply is currently in the moderation queue.

    2. James Levy

      So, Trump’s plan is terrible but it doesn’t matter because Hillary Clinton is EEEEEEEVVVILLLL. So he’s not dangerous for holding these opinions but Hillary, whom you imply holds the same opinions, is, because–she holds these same opinions. You do the Obamabots proud.

      1. Erwin Gordon

        LOL! James, I don’t imply that Hilary holds the same opinions than Trump. Her opinions AND HER ACTS are far worse because most of them are either not her own but those of the less than 1% have told her to say or those that only serve to further her political and personal ambitions! Trump might do some harm to the US economy but basically he’s is not beholden to anyone. He might even rabble rouse and say things that are considered racist but here are some facts about Hilary. Her mentor (i.e. Robert Byrd) is a known racist who not only founded a West Virginia branch of the Ku Klux Klan but also tried to prevent the passage of the civil rights act by filibustering. We also have a person who when she discovered that Libya, the richest country in Africa was going to launch a pan African currency in conjunction with other oil producing countries in Africa and was going to oblige countries buying its oil to pay in this new currency which would have given said African countries an unprecedented level of independence. She spearheaded efforts to eliminate Khadafi and stop this from happening. As well she oversaw many of the administration’s attempts at “nation building” and we all know how well that went! Bombing hundreds of thousands of civilians , creating and funding terrorist groups, displacing populations, trading access and favours in exchange for “donations” to the Clinton Foundation, selling out ambassadors when their embassy is being overrun by terrorists by telling Navy Seals to stand down her deep ties to the banks, Monsanto, TPP, TTIP and TISA and that’s just a small taste of what Hilary Clinton would bring to the White House. I welcome if you have any facts about Trump of him actually creating the sort of chaos and havoc that Hilary Clinton has created throughout her political career. Because for me, at worst Trump may damage the US economy but Hilary Clinton is out to strip people across the globe of their liberties, their health and their well being. She will destroy all that most of us hold dear in the world.

    3. jrs

      Uh duh. You don’t have to make the middle class poorer to have a great redistribution of wealth. You just have to make the rich richer. Eliminating the inheritance tax will do it. A tiny percentage of people control almost all the wealth in the country, but it can definitely get worse with an even tinier percentage controlling even more of the wealth. Basically a banana republic.

  7. Ian

    Anyone willing to weigh in on who the greater evil is? As it stands I am leaning towards Hillary being the greater evil, though it is by no means a very solid stance and a very tortured one.

    1. pretzelattack

      i think she will be the more effective evil than trump. trumps loose cannon quality scares party insiders and their handlers, so they will be resisting him more than they would cruz or bush, to try to control him, and he will try to get revenge. i would hope for an administration bogged down in fruitless power struggles, in which democrats must once again pretend to support the new deal, impeding their effectiveness in undermining it.

  8. jrs

    “1. Trump’s proposed cut would reduce the top tax rate from 39.6 percent to 25 percent – creating a giant windfall for the wealthy (at a time when the wealthy have a larger portion of the nation’s wealth than any time since 1918). According to the Center for Tax Policy, the richest one tenth of one percent of taxpayers (those with incomes over $3.7 million) would get an average tax cut of more than $1.3 million each every year. Middle-income households would get an average tax cut of $2,700.”

    yea, but how about we get real? Those people aren’t getting their income from wages. So what matters isn’t the income tax but the taxes on investments and inheritance (and wealth maybe but that’s another discussion as there are no wealth taxes currently in existence in the U.S.). So what are Trump’s proposals for capital gains etc. taxes. Mixed. Lowering capital gains taxes at the lower level (still nothing the masses are going to make from just investments) and raising them slightly at the higher level. And yes Trump wants to eliminate inheritance taxes, a real windfall for the rich.

  9. Barry

    Have you seen Scott Smith candidate for president tax plan? It is extremely progressive. Attractive to both left and right. CPA’s would be the biggest losers. You can listen to his interview with Ellen Brown.

  10. Jim in SC

    Actually, the very, very rich are making their money from their own work, whether one calls it wages or not doesn’t seem relevant. This is what distinguishes the present from the Gilded Age.

    This essay on Piketty, by a certain former Treasury Secretary, makes this point well.

    Few investors, rich or poor, are making any money from investments these days.

    1. jrs

      I suspect in truth most of the very rich are getting their money from corruption. But I can’t personally prove it as a generalization, though I wish someone would.

      We know from our own everyday experience that those without a moral compass reap economic advantages that those hamstrung by morals never do.

      But the really rich are usually beyond our everyday experience, but certainly some examples stand out (including Misses Cattle Futures herself – yea insider trading has to be one of those corruptions that enrich the rich).

    2. washunate


      That’s why progressive income taxation and inheritance taxes have been under such sustained, bipartisan assault and why no one in establishment economics wants to talk about government-induced wage inequality. Inequality today is largely a function of how we distribute the gains of work, not a conflict between workers and investors.

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