Six months ago, President Trump revealed his ambitious plan – a tax plan – to fulfil his presidential campaign promise on tax reform. His proposal will see the “biggest tax cut” in U.S. history – slashing corporate tax rate to 15% from 35%. That would make the U.S. a cheaper country than Singapore (17%) and Hong Kong (16.5%) – the #3 and #4 world’s top financial centres – to do business.
Unfortunately, there was a huge problem with Trump’s plan. The 1-page sexy plan drafted with less than 200-words lacked substance. The proposal was like a brochure distributed by a snake oil salesman trying to scam people. Perhaps that was precisely what President Trump tried to do – selling an empty dream, a so-called fabulous tax reform, to ignorant Americans.
The funny thing is after 6 months today, when Donald Trump reveals – again – his tax reform last week, even Trump’s Economic Adviser Gary Cohn isn’t able to explain it with confidence. Mr. Cohn, who serves as the director of the National Economic Council, claimed that an American family could save US$1,000 under the Republicans’ proposed tax reform plan.
His boss must be proud when Mr. Cohn told the Americans – “If we allow a family to keep another thousand dollars of their income, what does that mean? They can renovate their kitchen, they can buy a new car, they can take their family on vacation, they can increase their lifestyle. That’s what our tax plan has to do.
Coming from the mouth of the second-most-powerful person at Goldman Sachs, Gary Cohn was supposed to be a Wall Street elite who could instil confidence to the financial community. We’re talking about a man who was going to be named chairman of the Federal Reserve when Janet Yellen’s term expired in February. But this guy flopped spectacularly instead.
Not only Mr. Genius Gary Cohn thought Americans could buy a new car or get a new kitchen for only US$1,000, he dares not reveals that Trump’s tax reform is expected to primarily benefit corporations as well as the wealthiest Americans. The estate tax repeal would save Trump family US$564 million, Wilbur Ross US$545 million, Betsy DeVos’ father-in-law Richard US$900 million.
Forget tax reform. Former U.S. President Ronald Reagan’s Budget Director David Stockman predicts that President Donald Trump’s grand tax-reform campaign promise will never come to fruition. While Trump brags about his tax reform, Mr. Stockman instead said – “There will not be a tax cut, there will not be a reform, there will not be a bill.”
Stockman explained that slashing payroll taxes would be more helpful to average U.S. citizens than cutting income taxes that have been benefiting the rich for years. He said – “I think we need to have a big tax cut, it should be in payroll taxes for 160 million people, most of them out in fly over America who are paying far more in payroll taxes than income.”
Rubbing salt into the wound, Mr. Stockman even warned that the current bullish stock market is heading for 40% to 60% plunge. He said – “If you have to work for a living, get out of the casino because it’s a dangerous place. There is a correction every 7 to 8 years, and they tend to be anywhere from 40% to 70%.”
“This market at 24 times GAAP earnings, 21 times operating earnings, 100 months into a business expansion with the kind of troubles you have in Washington, central banks are going to the sidelines. This is a bubble created by the Fed. There’s very little reward, and there’s a heck of a lot of risk.” – said Stockman.
He argued that President Donald Trump’s business-friendly tax reform bill won’t prevent a damaging sell-off. He also said White House economic advisor Gary Cohn and Treasury Secretary Steve Mnuchin “totally failed to provide any detail, any leadership, any plan. Both of them ought to be fired because they let down the president in a major, major way.”
Of course, Gary Cohn who is loaded with US$266 million of stock and awards amassed during his years at Goldman Sachs, and Steve Mnuchin who held shares in CIT Group Inc. worth more than US$100 million, are set to benefit directly from Donald Trump’s new tax reform. That alone speaks volumes why Mr. Cohn didn’t care to check his fact about middle-class Americans getting a car for US$1,000.