Washington, D.C. – U.S. Senator Chuck Schumer today released the following in USA Today on the Trump administration’s tax reform plan. The op-ed can be found here and below.
Anyone who remembers the substance and the process of the 1986 Tax Reform Act should be baffled that President Trump has compared his current tax plan to that famous bipartisan bill signed by former president Ronald Reagan. Trump’s partisan tax cut bill differs from that one in three major ways: It helps the rich at the expense of the middle class, it would explode the deficit, and it hasn’t gone through a thorough, bipartisan process.
Reagan-era tax reform wasn’t designed to completely favor big corporations and the wealthy over the middle class. While the 1986 law lowered the top rate on individuals and businesses, it also expanded the personal exemption and the earned income tax credit. It eliminated corporate tax breaks and actually raised the tax on capital gains.
Trump’s plan, by contrast, would slash taxes for the top tax bracket, repeal the estate tax, and create a huge new loophole by reducing the rate on pass-through entities, allowing wealthy law firms and hedge fund managers to circumvent higher tax rates. The Tax Policy Center estimates that the top 1% will enjoy 80% of the benefits from Trump’s plan — while a third of middle-class taxpayers will be paying more in taxes by 2027.
The goal of the 1986 act was to simplify the tax code by bringing down rates while at the same time closing loopholes in the tax code. It did those two things in precise unison so that while the tax code got fairer and simpler, it would not add a penny to the deficit. Trump’s tax proposal eschews this model, promising lavish tax cuts to corporations and the top 1% while closing hardly any loopholes or correcting any inefficiencies in the tax code. As a result, experts predict Trump’s tax plan will add between $3 trillion and $5 trillion to the deficit.
For many Republican lawmakers in the Obama era, lowering the deficit and debt was their number one focus. Trump’s proposal is an existential challenge to those principles. No true-blooded deficit hawk could vote for such tax plan.
Finally, 1986 tax reform went through an extensive, bipartisan process on the road to passage by a bipartisan majority whereas Trump’s tax plan has been crafted by one party, in secret, and will be rushed through Congress with hardly any debate.
The bill that arrived on Reagan’s desk in October 1986 originated more than two years earlier, when the president directed the Treasury Department to draft a tax reform proposal in his 1984 State of the Union address. Ten months later, the Treasury Department unveiled its recommendations in a 262-page document. Over the course of the next two years, the Republican Reagan worked closely with House Speaker Tip O’Neill, a Democrat, to iron out specific legislation that both sides could support. There were extensive hearings, markups and debate under regular order on the House and Senate floors.
In contrast, this White House kicked off its tax reform effort by releasing a one-page summary before administration officials retreated behind closed doors with fellow Republicans to hash out the details. After five months of back-room negotiations, they released a nine-page framework, and now will seek to ram their bill through the House and Senate on a party-line vote through an arcane legislative process known as reconciliation. The healthy, years-long debate that characterized tax reform in 1986 is a far cry from this process of secrecy, silence and reckless speed.
In 1991, Trump told Congress that Reagan’s 1986 tax reform bill was an “absolute catastrophe.” If Reagan were here today to learn about Trump’s tax plan, I think he would return the sentiment.