“Since the Great Recession, which is now 8 years old, we’ve been growing at 1.5 to 2 percent in spite of stupidity and political gridlock, because the American business sector is powerful and strong. What I’m saying is it would be much stronger growth had we made intelligent decisions and were there not gridlock…. It’s almost an embarrassment being an American citizen traveling around the world and listening to the stupid s— we have to deal with in this country.” – Jamie Dimon, CEO, JPMorgan Chase (Hat tip Politico)
Behind the scenes at the White House, we are told that Steve Bannon has been arguing for higher taxes on the wealthy and advising President Trump to advance them, in a move more politically strategic and symbolic than substantive in percentage terms. Several other sources have confirmed that such discussions are underway. See Josh Green’s article at Bloomberg for more:
So, why is this strategy gaining a hearing and what does it mean?
The early Trump line and Republican euphoria after the election was encapsulated in the tax-cut proposal released by House Ways and Means Committee Chairman, Kevin Brady. We wrote about that proposal at the time: cumber.com/flynn-russia-trump-markets/. The timeline was this year and a possible attachment to a continuing budget resolution. So much for timelines and political gridlock now raises questions about next year.
All that euphoria has faded into history; and many observers, including us, now see little chance of any tax cuts this year. There still seems to be a consensus or majority view to repeal the alternative minimum tax (AMT). And a repeal of the carried-interest provision has a lot of support. Many would also like to see a large repatriation incentive tied to the funding of a national infrastructure program.
Those elements seem to be heavily supported by both political parties and by the majority of independents who think about policy issues and are inclined to swing in elections.
So maybe the Bannon argument can gain traction? Is that what will move things beyond the gridlock?
Simply put, Democrats cannot blame Republicans for giving breaks to the rich if the top rate goes up. A 40% number is higher than a 30-something number. Also, the healthcare legislative debacle seems to assure that the 3.8% Obamacare tax will remain. And the changes in taxation have already inserted an income threshold (means testing) for Social Security recipients.