Why don’t Republicans want you to be a millionaire?

Why don’t Republicans want you to be a millionaire?


There is one great Washington lie about the economy that encompasses all the others, and that is that the federal budget is complicated. And there is a great Washington truism I first heard from John McCain, which is that character is what happens when no one’s looking.

As congressional Republicans prepare to unveil a crafted-in-secret $2.6 trillion tax cut representing a giant transfer of wealth from the middle class to America’s wealthiest households, it’s stupefying that a major political party will expose how completely (and inexpensively) it has sold itself to its donor class.

The events of the last few days make clearer than ever that the bill’s a heist: It will take money from the middle class, especially the upper middle class, and deliver it to the very folks who paid to put the GOP in office.

I’m referring, as you may have guessed, to the party’s back-and-forth on reducing by 90% the amount taxpayers can contribute to 401(k) retirement plans, deferring taxes until they take the money out in retirement. Conservative tax intellectuals (and even some liberals) go on about how progressive this supposedly is. Presumably populist President Donald Trump tweeted a promise not to mess with retirement incentives but shortly backed down.

They must be joking.

The numbers make plain that the tax break regular people use most often in retirement planning is what Republicans will propose we forego to repeal the inheritance tax, the alternative minimum tax, and meet other goals of those who consider politics a means to shovel after-tax income from us the 1%. Hardly progressive.

The fraud of “corporate tax reform” has always been that lower corporate rates will be paid for by closing corporate loopholes. The GOP bill will propose paying for rate cuts by taking tax breaks mostly from individuals, with most costs added to the national debt. But the other half of the fraud is that the bill is about much more than corporate taxes — it’s about reducing personal taxes that fall almost exclusively at the very top..

And making you pay for that, too.

Here are some numbers from the nonpartisan Tax Policy Center:

• Cost of cutting corporate-tax rates to 20% from 35%: $2 trillion over 10 years.

• Amount recouped from corporate-tax loopholes: $232 billion over 10 years.

• Cost of eliminating the inheritance tax, paid by 12,411 filers in 2016,(normally only on estates larger than $11 million for couples): $239 billion by 2027

• Cost of the 401(k) deferral, used by 54 million people holding $5.1 trillion in assets: $583 billion over five years (this estimate is from the congressional Joint Committee on Taxation, and includes all defined-contribution plans).

• Amount recouped by repealing the deduction for state and local taxes, claimed on about 18 million returns: $1.3 trillion over 10 years.

This is exactly what you should have known we’d get in 2016, when we learned more than half of the GOP presidential primary campaign was financed by 130 families.

That’s not even all.

There’s the $770 billion in revenue lost by taxing business owners’ personal income at a lower corporate rate rather than much-higher personal rates. And the $440 billion lost over 10 years by eliminating the alternative minimum tax.

But the one that captures the imagination is House Ways & Means Committee chairman Kevin Brady’s insistence that the government’s top incentives for retirement savings be limited to deferring taxes on $2,400 a year, about $46 a week, in 401(k) contributions.

I take this personally, since 401(k)s and IRA rollovers comprise most of my retirement money. Leaving aside real estate equity, I became a millionaire this year, at 56, after about 25 years of saving 7%, then 10% and 12%, of my income every year.

Even at 30 or 31 years old, making $50,000 a year, I would have been over Brady’s proposed cap.

There’s no question — none — that the tax break drove my contributions. Otherwise, I’d have given 35%-plus of what I didn’t save to the government, a realization that eased my early-career cash-flow worries considerably. Some studies claim people will save without the break, but I would’ve started later and saved less early on, when it matters most.

The difference is dramatic. I ran numbers on a retirement calculator from AARP, the lobbying group for senior citizens: A young married couple that begins saving now at Brady’s proposed limits will have about half what my family stands to have at retirement — even that diluted by another quarter-century of inflation.

It’s a tax hike that could, literally, cost a patient young investor who follows the incentives government lays out (i.e. contributing only $2,400 a year, with a spouse doing the same) more than a million dollars.

(Whining)…Daddy, why don’t Republicans want me to be a millionaire?

Mr. Brady, take note: People like me don’t bust our butts, exemplifying thrift and industry, to let the Steinbrenner kids inherit the New York Yankees tax-free while Paris Hilton does whatever Paris Hilton does.

Mr. Trump, I won’t cut my son’s retirement in half to spare you the alternative minimum tax, representing three-fourths of your taxes in 2005, the only year for which your tax data is available. Even with it, you paid a perfectly reasonable 25% of your income. Without it, proportionately, you’d have paid less than your maid’s Social Security tax alone.

That’s what the GOP’s proposing. Those are the choices they’re about to admit making, hoping to vote before Americans begin really watching.

That’s what their character is. And that’s how simple their oh-so-complex, purportedly historic tax “reform” is.



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