Gordon L. Weil
In 2017, the Trump tax bill cut both personal and business income
taxes. The reduction came at a high cost
to the U.S. Treasury, boosting the national debt.
To reduce the effect, the tax cuts for individuals were slated
to expire this year. If Trump were elected
to a second term, individual rates would increase after he left office. He would “rent” political support and left it
to the 2024 campaign to see if candidates would “buy” and make the lower taxes permanent. That would have a cost, but not on his watch.
By this year, people had become accustomed to the new tax
rates. Political reality required
extending the individual rates to parallel the business rates. Republicans asserted the extension would be painless
in terms of the federal debt. Though
Trump says readopting the individual rates is part of the nation’s largest tax
cut, he also denies it’s a tax cut when it comes to the debt.
The 2017 tax changes were made permanent in the One, Big,
Beautiful, Bill. The Republicans found a
way to make it seem that the change came at no cost. They claim that the original reduction
increased debt, but the mere extension beyond its scheduled end added nothing
more.
If that lie were true, then why was the individual tax cut set
for a limited period in 2017? Then, the
concern was limiting growth in the national debt. Now, that growth will be built
in, but the GOP will say that reviving a tax cut that was due to expire to relieve
the debt, won’t add to it.
This process revealed two major elements of Trump tax
policy. Set changes in the tax laws with
delays that will cushion their costly effects until after the next election. It’s an application of Lincoln’s saying: “You
can fool all of the people some of the time, and some of the people all the
time.”
The second element is that the American government now
assumes the responsibility for establishing the laws of economics. When you can tell the people that the
national debt will grow larger, but that’s not an increase, the government has
reached the point where it can create a new reality.
This obviously works for the solid GOP government. The OBBB contains
many provisions that have timers attached.
Benefits come quickly and could appeal to voters next year, though the
timers would end the changes later. Wanna bet?
Here are some key timers:
● Big boost in exemption for state and local taxes – for five
years
● No taxes on tips – until 2028
● Tax break on auto loans – 2025-2028
● Increased tax deduction for seniors – until 2028
● Trump child saving subsidy – 2025-2028
● Phase-out of wind and solar subsidies – delayed a year
● Border spending – increase by ten times, but over five-year
period.
It’s easy to see that some of these timers are meant to
fulfill Trump’s campaign promises but are not now expected to outlast him by
much. This includes taxes on tips and
auto loans. As for his promise not to
tax Social Security, while its leaders claim that it’s included, it did not
happen. The increased seniors exemption,
a partial substitute, is also subject to a timer.
Without congressional approval and with the Supreme Court’s
seal of approval, Trump is changing longstanding understandings of how the
government works. As previously noted,
this resets the constitutional clock and creates a new original for which there
will be a new originalism.
When it comes to the economy, only one institution stands in
the way. The Federal Reserve, established
in 1914, is expressly meant to serve independently.
Its seven members are appointed for 14-year terms, long
enough to withstand the political pressures of even a person serving as
president over a 12-year period, like Trump.
Policy is set by a 12-member body that includes representatives chosen
by regional Federal Reserve banks.
The government’s economic policy takes two forms. The political branches set fiscal policy – government
spending, taxation and debt. The Fed
sets monetary policy – controlling inflation and limiting unemployment. Fiscal management is subject to review by the
voters; monetary policy is left to the independent Fed non-political, economic
experts.
Seeking to gain control of the Fed, Trump would oust Fed Chair
Jerome Powell, but can’t. Trump will appoint
a successor next year, but Powell can remain on the Fed Board. And, even with a new chief, Trump could not
count on other Fed leaders falling in line.
While it is turning control over independent agencies over
to Trump, the Supreme Court stresses the Fed’s independence from the executive.
Lincoln concluded, “you cannot fool all of the people all of
the time.” Trump may be content to “fool enough of the
people, enough of the time.”
