DAY 36 - In this Feb. 24, 2017, file photo, President Donald Trump arrives to speak at the Conservative Political Action Conference (CPAC) in Oxon Hill, Md. (AP Photo/Evan Vucci, file)
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So there was no tax plan after all.

As my FT colleagues suggest, Wednesday’s pre-hyped tax announcement from the Trump administration “was more a mechanism for signalling the direction the administration wants to take, rather than a detailed set of proposals”. That’s putting it politely. The whole “plan”, which Donald Trump unexpectedly promised with only a few days’ notice, was a list of talking points sparsely set out on a single sheet of paper.

Astonishingly, this vaguest of policy aspirations contains a lot less detail than candidate Trump’s tax proposal from the campaign trail. What little concrete information it contains hews very closely to that earlier plan. So the sole function of this week’s announcement, rushed out ahead of the president’s 100-day mark, is presumably to be able to say that Trump is in the process of fulfilling a campaign promise.

As for content, the concrete items presented on Wednesday’s one-pager that are identical with the campaign proposals include: going from seven to three tax personal income tax brackets; raising the tax-free amount individuals can earn; eliminating inheritance tax and the “alternative minimum tax” (which prevents high-earners from using too many loopholes); and a radically lower tax on business profits of 15 per cent, extended to cover non-incorporated business people.

That covers just about everything that was announced on Wednesday. The only thing that was new was the proposed elimination of surtax on capital gains, which currently helps fund Obamacare. The rest was a poor digest of a campaign leaflet.

It is also illuminating to note what was not reprised from the campaign proposal. On the campaign trail, Trump promised to quadruple the personal deduction (the amount you can earn before paying income tax); now he merely says he will double it. The three simplified tax rates offered by candidate Trump were also lower — at 10, 20 and 25 per cent — than the 10, 25 and 35 now on the table. But that may not matter, for the administration (unlike the campaign plan) has declined to specify where the new tax brackets would lie, which renders any rate proposals meaningless.

The biggest difference, however, is that (as we predicted on Monday) the “plan” has no revenue-raising measures. As a candidate, Trump (unrealistically) promised to pay for the tax cuts by closing loopholes. The new plan does not, and in fact commits to maintaining the deductions for mortgage interest and charitable donations.

So if anything like it is implemented, it will add massively to the deficit — my FT colleagues quote one estimate that the corporate tax cuts alone will cost $2.2tn over 10 years. The government is relying, 1981-style, on tax cuts spurring sufficient growth to pay for themselves. As in 1981-style, this is highly unlikely to happen. Jared Bernstein usefully rounds up some of the reasons why “dynamic scoring” — assuming tax cuts will create growth that will close the deficit they create — is highly suspect.

So the upshot is that all the criticisms that applied to candidate Trump’s proposals apply as strongly if not more so to what seem to be the administration’s intentions. We should not devote too much energy to those intentions until a more serious proposal emerges. (Alexia Campbell at has a succinct rundown that contains all that most people need to know about the main financial, legal and legislative problems with the one-page “plan”.)

But it is worth reflecting on the background economic worldview from which those intentions spring. The neglect of deficits may be the least troubling part; those who think there is a lot of hidden slack left in the US economy should welcome a demand stimulus even if there is no reason to think the tax cuts will improve long-term supply-side growth. But as we wrote about Trump’s earlier tax proposals, these tax cuts give you about the least bang for the buck you can imagine.

But worst of all are the distributive priorities revealed by such “plans”. The New York Times’s Neil Irwin enumerates the losers and the winners. Among the latter, the most important are . . . Donald Trump and his children.

Other readables

  • In an interview with the New Yorker, Anne Case suggests that her striking finding (with Angus Deaton) of an epidemic of “deaths of despair” may be caused by a fall in the rewards for experience, and the disappointment of income and social status expectations that has followed.
  • Bloomberg reporters map the latest developments in the politics of how to deal with Europe’s weak banks, in particular the squabble over “precautionary recapitalisation”. In a must-read (for those who follow this) Twitter thread, Nicolas Véron provides learned exegesis.

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