Trump Announces "Wizard of Oz" Tax Reform Plan

"Pay no attention to that man behind the curtain," thunders the Wizard of Oz in the classic 1939 movie, hoping to keep Dorothy Gale and her friends from discovering that he's deceiving them with flashy parlor tricks. That's a pretty good way to think of Donald Trump's newly-announced tax reform plan. After weeks of behind-the-scenes discussions, the administration appears to have learned nothing from the Obamacare fiasco, and has come up with a proposal that is exceedingly unpalatable, so much so that they are clearly hoping most people will be fooled by the various parlor tricks cooked into the plan, and that nobody will pay much attention to the man under the orange curtain.

The proposal, of course, is full of goodies for the rich. As expected, it would cut the top marginal rate 39.6% to 35%. Since it requires an income of over $470,000 a year to qualify for that bracket, this benefits only the wealthy. Similarly, Trump wants to eliminate the estate tax entirely. Since the first $5.5 million in value is already exempt, this is again a concession only for the very wealthy (only 0.2% of American estates pay this tax). The president would eliminate the alternative minimum tax, which exists to keep very wealthy people like him from reducing their tax burden too aggressively. He would also reduce the tax burden for "small businesses" to 25%. This latter proposal will be marketed aggressively using phrases like "middle America" and "job creators." However, the proposal actually defines "small businesses" as "pass-through entities," which includes partnerships, limited liability companies, and S corporations. Certainly, there are some small businesses that are constructed in this way. However, these devices are also used by the ultra-wealthy to avoid paying personal income tax. Readers will never guess, for example, which prominent American billionaire owns over 500 pass-through entities all by himself. Let's just say he's under the orange curtain.

Of course, it wouldn't just be wealthy individuals who would receive an early Christmas present. The corporate tax rate would be slashed from 35% to 20%. Also, those corporations that have money and property stashed overseas—Apple, Google, and Microsoft are among the most prominent—would be allowed to bring those assets into the United States at a sweetheart rate of around 10%. Because if there's anything a company like Apple needs, what with its $321 billion in assets, it's a tax break.

Meanwhile, many not-so-wealthy Americans would take a beating, often while being told that the Trump tax plan is actually better for them. For example, the plan proposes doubling the standard deduction. This is used by people who do not itemize their tax returns, and makes a certain portion of their income tax-free. So, doubling it means more tax-free income, right? Not so fast. Trump wants to change the rate structure for single-parent households, which would result in some of the nation's most vulnerable parents paying more (while raising some of the most vulnerable kids). He also wants to get rid of the personal deduction of $4,000 for each household dependent. Currently, a two-person household (say, a married couple) gets about $12,000 in standard deductions, and $8,000 in personal deductions, for a total of $20,000 in (effectively) tax-free income. Under Trump's plan, the $12,000 would double to $24,000 and the $8,000 would go away, for a net gain of $4,000. A three-person household (say, a married couple with one child) currently gets the same $12,000 in standard deductions plus $12,000 in personal deductions, for a total of $24,000. Their deduction would also jump to $24,000, their personal deductions would also drop to $0, for a total of $24,000. So, for them, it's a wash. And beyond that, it's a net loss. Two kids? Minus $4,000 in deductions. Five kids? Minus $16,000 in deductions. 19 kids and counting? Minus $72,000 in deductions.

And it's not just the not-so-wealthy that would get the short end of the stick. Trump also wants to put the kibosh on the state and local tax deduction. This would hurt people with moderate to high incomes in states with high income taxes. Which states particularly fit this bill? Well, here are those that are in the Top 15 in both state income tax rate and per capita income: New York (#1 in taxes, #15 in income); Maryland (#3, #1); Minnesota (#4, #12); California (#5, #9); Massachusetts (#6, #6); Connecticut (#7, #5); Hawaii (#14, #2); and Virginia (#15, #8). We're having our research team look into how those states voted in 2016; we suspect there might be some sort of pattern here.

There are a few other nuances, but this is the meat of the plan. So what we really have here, once the smoke and mirrors are cleared away, is a scheme that gives money primarily to very wealthy people, and does so by taking it out of the pockets of single parents, larger families, and residents of blue states. And even then, the scales won't balance. Trump is promising 6% annual growth for the rest of his term, which might indeed make his plan revenue-neutral if it happened, but that is about as likely as a herd of unicorns appearing at his next rally. According to the World Bank, the U.S. has achieved that level of growth precisely once in the past 50 years (1973), and has never pulled it off for three years in a row. Consequently, it is almost certain that the Trump plan will blow a giant hole in the budget. This will mean borrowing more money, and then will eventually culminate in a crisis of some sort, most likely to manifest itself when a Democrat is in the White House, left holding the bag.

So, could this plan really become law? The general consensus has been that changing the tax code is even harder than changing the healthcare system, and so success on the tax front is unlikely. Perhaps we should be rethinking that conclusion. If the financial and political might of America's corporations is added to the financial and political might of America's richest individuals (like, say, the Kochs), that's a pretty formidable combination. Then we keep in mind that somewhere between 45 and 49 GOP senators were ready to vote for a health-care bill this week that many of them hated, just because they needed so badly to deliver on one of their campaign promises. Many of those individuals are going to be thrilled by this plan, and even the ones who aren't might hold their noses and vote for it so the GOP doesn't go a whole year without any major legislative accomplishments. There will certainly be vocal opponents of Trump's plan, particularly as the details are hashed out. But can the blue states, plus advocates for working families, plus a few other lobbying groups really match the pressure that's being applied from the other side? It probably depends on voters in a few purplish states, who might take notice of what's going on, and make their Republican representatives and senators fear for their political lives at town halls, via phone calls, and so forth. On the other hand, the voting public may be weary of fighting back after almost a full year of scandals and squabbling, or may be fooled by Donald Trump's parlor tricks, and may not push back at all. We shall soon see. (Z)

Trump to Issue Executive Order on Health Care

Deeply irritated by the failure of the various Obamacare repeal efforts, and clearly wanting to cut that annoyance at the other end of Pennsylvania Avenue out of the loop and just do things himself, Donald Trump announced on Wednesday that he would soon be issuing an executive order on health care:

I'll probably be signing a very major executive order where people can go out, cross state lines, do lots of things and buy their own health care, and that will be probably signed next week. It's being finished now. It's going to cover a lot of territory and a lot of people. Millions of people.

Given that this promise/threat is rather vague, there are only two things that can really be said right now. The first is that it is highly questionable as to whether or not Trump can really do the things he wants to do via executive order. He would effectively be legislating without Congress, which would make him, well, a dictator. He might be fine with that, but the courts are likely to see things a bit differently.

The second is that, if Trump does somehow make this plan stick (and many Republicans, most obviously Sens. Ted Cruz, R-TX, and Rand Paul, R-KY, love the idea), it is likely to turn into a disaster. It is already the case that insurers can cross state lines to sell policies; they just have to make sure that each policy comports with the law of the state in which it is sold. What the President is really talking about is a situation where a policy that is legal in any state in which an insurer does business would be salable in any other state. In other words, Blue Cross could sell Alabama policies in, say, Indiana or Ohio. The probable result is that young and/or healthy people would flock to the cheapest policies from the least regulated states with the least amount of coverage, while sick and/or elderly people would have to purchase more expensive policies from more heavily-regulated states. If all the healthy people have Alabama policies, and all the sick people have, say, New York policies, then we're looking at a death-spiral situation where the cost of the New York policies would skyrocket. So, if Trump really does try to pull this off, expect a lot of people and organizations to have something to say about the matter. (Z)

Private E-mail Accounts All over the White House

Early this week, news broke that First son-in-law Jared Kushner was using a private e-mail account for some of his government business. Now, the New York Times is reporting that he's not the only one. At least a half-dozen high-ranking staffers, past and present, did the same, including Steve Bannon, Stephen Miller, Reince Priebus, Gary Cohn, and Ivanka Trump.

This behavior is not necessarily illegal, as long as the individuals in question forwarded any messages to their government-run accounts. And while one could argue that Hillary Clinton's use of private e-mail was worse than this, since she apparently used her private account much more extensively, one could also argue that Team Trump was worse, since they—unlike Clinton—made their choices while aware of specific, hostile actors who are out there trying to crack e-mail accounts (the Russians, Wikileaks, etc.).

But the main issue at the moment—until such time as specific, unlawful behavior comes to light—is not the legality of what Team Trump did, nor the security risks they took. It is the incredible hypocrisy that is on display here. An enormous portion of Trump's campaign was built on the inherent wickedness of Clinton's private e-mail use, "[H]ow can someone with such bad judgment be our next president?" he asked at one rally, and "We must not let her take her criminal scheme into the Oval Office," he declared at another. Of course, who knows if anyone heard him, what with all the chants of "Lock Her Up"?

In most ways, this is similar to Obama's golf playing. It is entirely apropos for a president, holder of perhaps the most stressful job in the world, to have leisure activities that help him unwind. So, nobody should begrudge Obama or Trump their golf games if that is what they want to do. But for Trump to blast Obama over and over for golfing, and then to play two or three times as frequently upon becoming president, is a reprehensible double standard. And the thing is, the Obama line was used only occasionally, while the "lock her up" stuff was constant. So, the Times' revelations may linger, in amongst all the other festering Trump scandals. (Z)

Price May Have Just Become the Trump Administration's Most Endangered Person

When it comes to figuring out who might bolt the Trump White House next, the obvious candidates are people like Chief of Staff John Kelly, Secretary of State Rex Tillerson, and NSA Herbert McMaster, all of whom reportedly accepted their jobs out of a sense of duty, and all of whom apparently have a prickly relationship with Donald Trump. However, HHS Secretary Tom Price may have taken the lead in this particular race, thanks to his habit of chartering expensive jets whenever he travels.

Last week, it was revealed that Price had hitched a ride on chartered jets more than two dozen times, even when commercial flights were widely available. This choice often multiplied his travel costs fifty-fold. On Wednesday, Politico added some more detail, reporting that on some of these flights, he also made "personal business" pit stops, for things like lunch with his son, or visits to his vacation properties. While this is not illegal, per se, it is regarded as very unethical for a cabinet officer to mix personal and official business while the government is footing the tab.

When all of this news reached Trump, he was not pleased. "I'm going to look at it. I am not happy about it, and I let him know it," Trump told reporters. Given the difficulties that Trump has had this week, coupled with his penchant for temper tantrums, this is probably not a good time to be in the President's dog house. One story from Fox News about how the failed Obamacare repeal is mostly Price's fault, and he could be joining Reince Priebus, Sean Spicer, Michael Flynn, et al. in the unemployment line. (Z)

Trump Is Rewriting History While it Happens

It's often been said that "the news is the first rough draft of history," but Donald Trump is now taking that to extremes. He's already been in the habit of erasing tweets to correct for misspellings, factual errors, and the like. This is kosher, as long as he keeps copies of the deleted tweets (whether ot not he's actually doing so is an excellent question; ProPublica and other organizations are trying to get to the bottom of the matter).

In any event, Trump entered new territory on Wednesday when he went back and erased three of the tweets where he expressed support for Loser...er, Luther Strange. There are still six or seven left; either Trump doesn't know how to scroll back that far, or he's too lazy to do so, or he's hoping others are too lazy to do so. In any event, it's certainly a little concerning that he would so visibly attempt to rewrite the recent past. Actually, it's more than a tad bit Stalinesque, given the Soviet dictator's taste for "adjusting" the historical record to suit his tastes. As the popular proverb from Uncle Joe's time goes, "It is easier to predict the future in Russia than it is to predict the past." We may soon have to get that one out of mothballs. (Z)

Democrats Pick Up Two Republican Seats in State Legislatures

With so much big news Tuesday (ACA repeal failure v4.0, Bob Corker's retirement, and Roy Moore's win), the smaller news got lost in the weeds, but it is still important. In a Florida special election in state senate district 40 in Miami, Democrat Annette Taddeo beat Republican Jose Diaz 51% to 47%, with an independent taking the rest. The special election was called when former state senator Frank Artiles (R) was forced out after he made racist remarks that became public. In 2016, Artiles won by 10 points, so Tuesday election represents a 14-point move in the direction of the Democrats.

There was some good news for Florida Republicans Tuesday, though. When Diaz chose to run for the state senate, he vacated his house district 116 seat, triggering a special election there. Republican Daniel Perez won that race easily, which was to be expected given how red the district is. Diaz won it by 24 points in 2016 and by 22 points in 2014.

Special elections weren't limited to Florida, though. In New Hampshire, Democrat Kari Lerner flipped state house district Rockingham 4, which has a 2-to-1 Republican registration advantage. She beat Republican James Headd 50% to 48% for an open seat. The New Hampshire house has 400 seats split over 204 districts, with some districts having multiple seats. Rockingham 4 has five seats and in 2016 elected five Republicans. Together, the Republican candidates pulled in 69% of the vote in the district, so Lerner's victory represents a 40-point movement toward the Democrats.

Since Donald Trump was elected president, Democrats have flipped eight Republican seats in state legislatures, many of them in deep red districts. No Republican has won a Democratic seat. In 19 special elections this year, the incumbent party held the (often heavily gerrymandered) seat. (V)

Bannon Is Already Picking His 2018 Team

Fresh off a gigantic win in Alabama, Breitbart executive chairman Steve Bannon is declaring a full-blown war on the Republican Party for 2018. He already has a substantial number of candidates lined up whom he will support with articles on Breitbart News as well as with Robert Mercer's money. His favorite candidates include:

• Danny Tarkanian, who is challenging Sen. Dean Heller in Nevada
• Kelli Ward, who is challenging Sen. Jeff Flake in Arizona
• Chris McDaniel, who is challenging Sen. Roger Wicker in Mississippi

In addition, Bannon is likely to support certain Republicans who are the clear favorites to be the nominees in the general election. These include

• Josh Mandel, who is running against Sen. Sherrod Brown (D-OH)
• Matt Rosendale, who is running against Sen. Jon Tester (D-MT)

The Tennessee Senate race is still muddy because it's been only a day since Sen. Bob Corker (R-TN) announced his retirement. If Rep. Marsha Blackburn (R-TN) runs, Bannon may support her, but if she doesn't, he may support state senator Mark Green. In most of these races, he will be opposing the Republican establishment's candidate. Furthermore, if Bannon's candidate wins in the primary, it may open the way for a Democratic victory in the general election. Bannon knows that, of course, and doesn't care since he is trying to send the Republicans a message: If you don't support my candidate, you will lose the seat. (V)

Will the Democrats Contest Alabama?

The national Democratic Party has an important decision to make: Will it help Doug Jones battle Roy Moore for Jeff Sessions' old Senate seat? At first glance, contesting a statewide election in Alabama seems pointless. On the other hand, Republican nominee Roy Moore is so far out of the mainstream that there is a small chance Jones could knock him off.

One thing the blue team has going for them is that they have miles of footage of Republicans, including Donald Trump, saying nasty things about Moore. Another thing is that Moore has a very severe—probably incurable—case of foot-in-mouth disease. These include:

• "Reds and yellows" (referring to Native Americans and Asians)
• "Maybe Putin is right with his opposition to gay marriage."
• "I was informed that there are U.S. communities under Sharia law."
• "What is a Dreamer? Quit beating around and tell me what it is."
• "9/11 may have happened because we've distanced ourselves from God."
• "My personal belief is that Obama wasn't born in America."
• "[Muslim] Rep. Keith Ellison should be prohibited from taking the congressional oath."

These probably aren't quite enough to do the job, but sooner or later some reporter is going to ask him if rape is God's will and he might say the wrong thing.

The Democrats are certainly going to help Jones in areas that don't cost them any money, such as giving him access to voter databases. But the big question is whether they will come up with actual cash or save it to defend vulnerable Democratic senators such as Claire McCaskill (MO), Heidi Heitkamp (ND), and Joe Donnelly (IN). Since the election isn't until December, they can wait a bit, but they can't wait too long to define the unknown Jones or Moore will do it for them. (V)

Democratic Recruiting Is a Mixed Bag

The enthusiasm on the Democratic side for congressional races is enormous, but it is not uniform across the map. For example, eight Democrats are already running against Rep. John Faso (R-NY) in NY-19, which is in the Hudson Valley, mostly south of Albany. Another district in which eight Democrats have already announced is VA-10, currently represented in the House by Rep. Barbara Comstock (R-VA). Her district includes all of Clarke, Frederick, and Loudoun Counties, plus parts of Fairfax and Prince William Counties. It is a highly educated district and could easily flip, hence all the interest from Democrats.

However, there are also holes in the map. For example, Rep. Frank LoBiondo (R-NJ) in NJ-02 doesn't have a credible Democratic opponent yet. NY-24 looks like a dream pick-up opportunity for the Democrats. Hillary Clinton won it by 4 points and Barack Obama won it twice by double digits. But so far, no serious Democrat has stepped up to take on Rep. John Katko (R-NY). Likewise, FL-18 is devoid of a strong Democrat despite its being a district that Trump carried by less than 2 points and the incumbent, Rep. Mario Diaz-Balart (R-FL), having a 100% voting record in support of Donald Trump. Part of the reason is clear, though. FL-27, just south of FL-18, is going to be an open seat because Rep. Ileana Ros-Lehtinen (R-FL) is retiring, so local Democrats see that as an easier race than going after an eight-term congressman.

The Democrats' problem is that candidates who might run for Congress, such as state senators and representatives, often look at a district and say it is too tough, so they decide to stay put. What they don't realize is that if 2018 is a wave election—and it might be given what has happened in the special elections already this year—a plausible but unknown state senator could be swept in on the tide. But that can happen only if the potential candidate becomes an actual candidate. It is an old saying, but it is still true: "You can't beat somebody with nobody." (V)

House Republicans Are Planning to Appropriate $10 Billion for a Border Wall

The chairman of the House Homeland Security Committee, Rep. Mike McCaul (R-TX), is working on a bill that would appropriate $10 billion to start building a wall on the Mexican border, as well as related projects like aerial surveillance of the border. Sen. John Cornyn (R-TX) has introduced a companion measure in the Senate. Since this is a stand-alone measure, it will require 60 votes to break a Democratic filibuster in the Senate—assuming the measure can first clear the House, which is not 100% certain. McCaul is nevertheless serious about his bill and will mark it up on Oct. 4.

The only way the bill might pass is as part of a deal in December, when the government will hit the debt limit. To prevent a government shutdown, Congress will have to do something, and this means the Republicans will have to negotiate with the Democrats. One of the things the Republicans might insist on is having McCaul's bill included in whatever deal is made. (V)

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---The Votemaster and Zenger