Taxes and the swamp

Shannon Bohrer

(6/2018) During the presidential campaign Donald Trump promised he would reduce our taxes. He said: "Tax reform will protect low-income and middle-income households, not the wealthy and well connected." Candidate Trump also said that he would "drain the swamp" by banning lobbyist and the Washington insiders. He spoke on both topics at his election rallies during his campaigning. Both promises were repeated, they energized the crowds and later became part of his Presidential agenda.

Of course from the very beginning of his administration he was accused of filing up the swamp with insiders, millionaires and swamp rats. Now, just because someone is a millionaire does not mean they should be excluded from a government position. Maybe the millionaires can help us all to be millionaires, or maybe not.

In President Trump’s defense, not all of his cabinet members are millionaires. The Environmental Protection Agency Administrator, Scott Pruitt, is not rich; he just acts like he is – with your money. His secret phone booth (a cone of silence) cost over $43,000 and his first class flights cost over $105,000. Maybe he will be a millionaire before he leaves office and he is just practicing.

Another non-millionaire cabinet member is Interior Secretary Ryan Zinke. Secretary Zinke was questioned about spending $139,000 dollars for a set of doors to his office. In all fairness the new doors were replacing some old doors, so part of the $139,000 was to remove the old doors. Secretary Zinke was also criticized for his travel expenses. He paid $12,375 for a flight from Las Vegas to Montana. I guess that was first class. It was also reported that he spent over $53,000 on three helicopter trips. Another way to look at this is that the Vegas flight was a real bargain, compared to the Helicopter flights. Maybe he is just practicing like Scott Pruitt is?

Of course there are millionaires that are also using the swamp. Housing Secretary Dr. Ben Carson is only worth 22 million, so maybe he also needs more practice. His department contracted to spend $165,000 for lounge furniture for the department headquarters. That did not include the $31,000 for a dining room set for his office. He later cancelled the dining room set, but only after saying that "$5,000 will not even buy a decent chair." I am not sure what he meant by that. The only way I would even think about buying a $5,000 chair would be if the stuffing in the chair included $4,900 in cash.

Now, Treasury Secretary Mnuchin is a real millionaire; he knows how to spend like one. It was reported that his flying expenses were close to one million dollars for trips on military planes. One flight did seem strange; it was a flight to Florida at a cost of $45,136. He was attending a Conference on Prosperity and Security. I guess when you are worth an estimated 500 million - to maintain your own prosperity you don’t care how much tax payer dollars you need to spend. To spend a million dollars for flights in just one year means he was spending around $20,000 each week. I would think that would be hard to do.

While the swamp has not been drained as promised, at least we have the new tax breaks for the middle class. President Trump said that the new law "is going to cost me a fortune." Then again, maybe he should have read the law before saying that. While the average tax payer will see an additional $1,600 this year, the top 20 % will realize an average of $7,640. So if you are in the top 20 % you are going to do well. However, not as well as the average top 1%, who will receive an average of $51,140. Now that is a tax break. But the real savings occur at the top 0.1%, with an average return is $193,380. To put that into perspective, that equals 120 years of tax breaks for the average person.

While the top income earners and corporate taxes are greatly reduced, the new tax laws should benefit the middle class by spurring the economy, at least that is what has been said. Treasury Secretary Mnuchin said the tax laws would also pay for themselves by increasing the Gross Domestic Product growth rate. The key to his optimism was the growth rate. However, when 38 major economists were surveyed, only one of them agreed with Secretary Mnuchin. You would think that they could have found a few more that agree with the administration. One of those surveyed was Richard Thaler, a Nobel Prize winner. Talking about the new tax law, he commented "aside from the redistribution of wealth, hard to see this changing much."

I believe Mr. Thaler is not very informed. Why would the new tax laws redistribute the wealth, when that was already done? Since the recession officially ended in 2009, 52% of all income growth accrued to the top 1% and there has been a 52% increase in the top CEO salaries and benefits. Income for the other 99% (that’s us) has gone up 8% since 2009. Of course that begs the question of why the wealthy need any tax breaks at all.

Gary Cohen was head of the National Economic Council when the tax law was passed, but left the government shortly after. His replacement was Larry Kudlow, a well know economist who has not always been correct about our economy. After President Clinton raised the top income tax rates in 1993, Mr. Kudlow predicted our economy would be depressed and the recovery would falters. Instead we experienced and economic boom. Conversely when President Bush instituted tax cuts in 2007, Mr. Kudlow predicted economic growth and government surpluses would exist. That did not happen; instead we experienced large budget deficient s and entered a recession. Mr. Kudlow also said the housing bubble fears were unfounded, saying "there is no recession coming," Then when President Obama instituted a stimulus package Mr. Kudlow predicted it would cripple our struggling economy, which did not happen.

Of course, Mr. Kudlow was correct once, when he said "Middle-income wage earners have essentially had no pay increases since 2000," so we know he is not always wrong. I don’t think that draining the swamp and tax reform has been good for us, just my opinion.