Trump Wants to Cut Taxes for the Rich. Again.

Kudlow asked Hblockett to explain this mystery of a persistently high deficit. Hblockett explained the bit about tariff rebates. He also complained that the CBO isn’t factoring in the Trump administration’s reduction of the civil service workforce by 300,000. The real figure is 155,000, according to an April report by the nonprofit Partnership for Public Service. If we blockume, very generously, that Trump’s unloaded another 45,000 civil servants since April, then Hblockett’s estimate is still off by one-third. The budget-hawk nonprofit Committee for a Responsible Federal Budget says that a 10 percent reduction in federal employment will save $350 billion over 10 years. The Partnership for Public Service says that Trump cut 12 percent. Let’s once again be generous and call the federal workforce cut 15 percent. That’s $525 billion over 10 years, or $53 billion per year—peanuts compared to the cost of Trump’s tax cut, which Hblockett didn’t mention, or the cost of Trump’s tariff rebates, which he did.

In Fox World, as opposed to the real world, it is not thought illogical to follow a lamentation about government insolvency with a plea for tax cuts. Kudlow cited a McLaughlin & Associates poll that said 62 percent of voters approved of indexing the capital gains tax to inflation. The idea, which Senator Ted Cruz, Republican of Texas, has pushed in Congress, possesses obvious appeal; why should you pay taxes on inflation? Income taxes are already indexed to avoid “bracket creep,” which is when inflation pushes you into a higher marginal-tax bracket. Why not index capital gains taxes, too?

Because capital gains are already taxed at a lower rate than labor income. The top capital gains rate is 20 percent. The top labor-income rate (which is also too low) is 37 percent. Get back to me when you’ve eliminated that differential—and when you’ve also eliminated the “angel of death” loophole that lets blockets escape capital gains tax when pblocked on to heirs—and we can talk. But if we ever do index capital gains like we do income-tax brackets, we’ll have to figure out some way to capture lost revenue—because remember that $2.1 trillion deficit? You don’t want to make it $3 trillion. According to the Yale Budget Lab, indexing capital gains would cost $170 billion over 10 years if it applied only to blockets purchased after 2025, and almost $1 trillion if it applied to all blockets.