Gary Cohn: The Holy Trinity of Deductions Will Survive

This morning, National Economic Council head Gary Cohn went on the record about his dissatisfaction with the administration’s Nazi fetish and then talked about how they plan to pursue tax reform.

Of particular importance to my audience is this bit about how the Big Three deductions will survive whatever congressional negotiations go on. The Big Three, which really have little to do with Trump’s base but are especially important to the politically powerful Upper Middle Class, have all been casually bandied about in the last few weeks as potential sacrifices, but I never believed they’d truly be threatened.

Mr Cohn indicated that the White House does not have a fixed or detailed plan for tax reform; instead it is asking the committees to negotiate the details. He would not say if the White House wanted a corporate tax rate of 15 per cent — which Mr Trump previously insisted on — simply saying that he wanted the rate “as low as possible so that businesses want to create jobs here”. He said the plan would preserve three of the biggest deductions for individuals: on charitable donations, mortgage interest payments and retirement savings. It would raise the standard deduction cap that applies to most tax filers, but would eradicate many other personal deductions, he said, adding that the White House also wanted to get rid of “death taxes”, Republican terminology for estate taxes, which will face resistance from Democrats.

As part of my summer reading book list, I took down Richard Reeves’s Dream Hoarders, which explains that the majority of the benefits of these three deductions go to households in the top 20% of the income distribution.

Reeves tells a story about how untouchable these things are. There was a moment a few years back where President Obama had proposed an end to the deduction for 529 college savings plan contributions. He was on an airplane with Nancy Pelosi flying back to the US from the Middle East. When she got wind of the plan, in the air, she straightened out Obama on what the uproar would be in-flight. By the time the plane landed, the proposal was dead.

There are some things you don’t mess around with.

You can read the whole interview with Gary Cohn here:

Trump to push for tax reform passage by year’s end, Cohn says (Financial Times)