RUSH: Axios: “The Republicans on the House Ways and Means Committee — engaged in a high-pressure, high-stakes tax policy rewrite — are currently exploring not cutting the income tax rate for people who earn $1 million or more per year.”
This is not what Donald Trump indicated all during the campaign. All during the campaign, President Trump made it clear that he was going to cut taxes across the board for everyone. I have to be honest. There were times where he went out of his way to say that people like him “didn’t need a tax cut.” And I got nervous when I heard that because when I hear people in government start talking about who “needs” and who doesn’t “need” money and a percentage of what they earn, my antennae go up.
The Democrats are famous for this as a basis of their tax policy. “Well, they got more money than they need. They don’t need a tax.” Remember Dick Gephardt? Little Dick Gephardt. He was a congressman from Missouri, and he actually tried to say one day during a period of time that we’re going through this usual promise of cutting taxes that very rarely happens… Gephardt, he was famous. He always had these “friends” that he quoted that nobody had ever met. It was one of his rhetorical devices, the I-have-a-friend rhetorical device.
“I have a friend who told me…” “I have a friend who said to me…” And one of Gephardt’s little friends, he said, “I have a friend — a rich man. He told me, ‘If you really want to make me rich, you’ll raise my taxes!'” He literally said that. He said he had a friend begging him to increase his taxes as the way to really get rich, and we have a version of that here in this story with an upcoming sound bite from President Trump.
Here are the stats. “Right now, the marginal tax rate for anyone who makes $418,000 or more per year is 39.6%.” “So 418K and above, 39.6%. Now, the Republican tax reform proposal lowers that to 35%. “The Republicans’ opening gambit — secretly negotiated for months, and endorsed by Trump — would have cut the highest tax rate to 35%. But now, House Republicans’ thinking has changed. Under their current thinking, people who earn between $418,000 and $999,999 will be in a lower tax bracket. But those earning $1 million or more will not.”
So the way it will work out is that if you earn $418,000 up to $1 less than a million, you will get the tax break. You’ will get the reduced rate: 35%. A million dollars or more you will not get a rate cut. As of now, the rate stays the same: 39.6%. But if they’re thinking this way, it’s not a very big step to raising that rate. “Let’s just makes it an even 40%,” somebody might say, or, “Come on, they don’t need it. Let’s make it 42%. After all, we’re talking about people who earn more than a million.” And, of course, once you the premise — once the Republicans establish the premise of raising taxes — the Democrats are gonna run the House again someday.
I mean, the law of averages, it’s gonna happen. So if the Republicans do this, they are essentially etching in stone yet another tax increase by the Democrats when they get control. Meanwhile, all kinds of deductions are gonna vanish again here. This is not what the president intended — or said that he intended — and, look, it’s really hard to defend the rich, and that’s not what I’m doing. I’m not defending the rich here at all, although I don’t mind doing it. If somebody asked me to, I’d be happy to. I’m not nervous or frightened of that at all.
RUSH: Here’s President Trump this morning. Maria Bartiromo: “Look, these rich people already pay 40 to 50 of all the income taxes now. Why are you so afraid to cut their taxes?”
THE PRESIDENT: It’s about me representing rich people, being representative of rich people. It’s very interesting to me, Bob Kraft, who was down… Was very nice. He owns the Patriots. He gave me a Super Bowl ring a month ago, and he said to me, “You have to do us all a favor. Give the tax decrease to the middle class. We don’t need it. We don’t need it! We don’t want it. Give it to the middle class.” And I’ve had many people, very wealthy people tell me the same thing. I’ve had very few say, “I want more. I want more.” They really want to see… You know, the middle class has really not done very well over the last long period of time.
RUSH: Now, I want to play for you this Dick Gephardt sound bite that we made a bit out of when we get back from the break at the bottom of the hour. You’ll see how similar it is to what you just heard.
RUSH: Now, what President Trump said in that sound bite was he doesn’t want to defend the rich. He doesn’t want to be representing the rich. He doesn’t want to be seen defending or representing the rich. He doesn’t want the appearance of cutting taxes on the rich. He’s afraid that he’ll be demagogued and criticized and held to account as not caring about the little guy if he makes a big push on cutting taxes for the rich.
He wouldn’t have to make a big pitch on cutting taxes for the rich. All you have to do is across-the-board tax cuts for economic growth. That’s why we’re doing this. I mean, they’re not saying they’re cutting taxes for fairness. They’re saying they’re cutting taxes for economic growth. Well, in the process here, we are still demonizing and using envy on a certain segment of our population, and they happen to be the people that do most of the hiring.
Now, it’s very tough — and I understand the president’s position on this. It’s very tough to be seen as defending the rich within the confines of the way the argument is being or the policy’s being proposed, and it is this: Washington is going to magnanimously cut people’s taxes, and this is happening from the standpoint of Washington determines how much people get. Washington determines how much people have.
Washington is going to favor the middle class more than anybody else, because it’s just safer. There are more people in the middle class than there are in the upper-income brackets. So even if everybody in the upper-income brackets aligns to vote against you, they can be vastly outnumbered and outweighed by people in the middle. That whole premise bothers me. The premise that we have a certain amount of money as people in government and we’re going to give some of it back — and they come up with a dollar amount.
You don’t think they arrive at these rates arbitrarily, do you? That’s not how they do it. They figure out what their budget is (although it doesn’t matter because they run a deficit every year) and they determine how much money that they are going to let people keep. And then they say, “It wouldn’t be fair… If we’re going to cut taxes…” Let’s just use a number that may not be accurate but it’s easier to explain this if I use a number. Let’s say we’re gonna cut taxes $1 billion. That’s it. We’re gonna cut taxes a billion dollars.
That’s a phony premise. It’s a false way to do this in the first place, but it’s the way they always do it, and it maintains the belief that all money is Washington’s, that all money originates in Washington, and what you end up with is because of the good graces of your elected representatives. So we’re gonna cut taxes $1 billion. Okay. Well, who’s going to get the money? Well, if the rich are going to get a portion of it, then it’s easy to demagogue and it’s easy to object.
“The rich don’t need any more money. They’ve got plenty! All that money ought to go to the middle class.” It’s much easier to say, “Yeah. You know what? You’re right! That money should go to the middle class, because we have determined the rich don’t need it.” They’re already paying… The people we’re talking about here are already paying… The top 1% are paying 40% of all income taxes. The bottom 50% are paying nothing, and yet they want to talk to us about fairness.
So we’re gonna cut taxes a billion dollars — and in that billion, the way we’re gonna do it, is we’re gonna reduce rates because we can’t reduce the rates are on the rich because the rich will get some of that billion dollars and nobody will benefit from that politically. So we are going to make sure the rich don’t get any or maybe even make ’em pay more because then we’ll really be loved by the middle class, who have been conditioned by Democrat envy politics for decades to feel good when other people get skewered.
That’s the whole premise for cutting taxes.
That whole premise is wrong.
It begins with a phony premise that all money is Washington’s. The second premise is that Washington gets to decide who gets what based on Washington’s definition of who needs what, and also based on Washington’s definition of how they can most benefit by way of votes, by quote-unquote “giving” this money back. When in truth, what’s really happening here is that the end result of the tax rate reduction is that people are “allowed” (there’s that word again) to keep more of what they earn, because the money is theirs.
The money is theirs to begin with, and everybody who earns money should have the same right to the money they earn. You shouldn’t have any right to somebody else’s earnings, and nobody should have the right to some of yours. But that’s the way we structure policy now. In cutting taxes, we’re gonna say that some people have a claim on the earnings of others, and other people do not have a claim on the earnings of others — and then, even worse, some people don’t even have a claim on their own earnings!
The pure and clean way to do this is to do what you said during the campaign: Announce an across-the-board tax rate reduction to stimulate the economy, to allow people to keep more of what they earn because that’s the just and moral thing to do. It’s their money. And then you get out of the way for all the new money rolling into Washington, because doing all of that is going to create new jobs, because new businesses will form, existing businesses will expand and need new employees, which means additional taxpayers paying taxes.
So tax revenue will rise even though everybody gets a rate reduction. There’s a happy medium where you lower the rates a certain amount, it stimulates the economy, and the total revenue coming in exceeds even the projections from the nonpartisan CBO. But doing it this way is made-to-order to demonize the wealthiest, demonize the people who are already paying way more than their share. Now, I know this is a losing argument. It’s a losing argument by virtue of the numbers, and I say all this not to defend the rich — and the rich will never defend themselves.
I’ll never forget I saw Andy Grove. He was the CEO intel, and it was in the early nineties. It was Bill Clinton’s first term, and at the time, Bill Clinton was proposing (and it eventually was signed into law) a tax policy that would not allow corporations to deduct as a business expense anything over a million dollars they paid executives. It was targeted at CEOs. So let’s say the XYZ Company has a CEO that they pay $10 million.
Under Clinton’s plan, they could only deduct the first million as a business expense, and they’d have to eat the other nine million. They asked Andy Grove, “What do you think of this? This is the height of unfairness,” and Andy Grove said, “I’m not gonna go there, George!” It was George Will who asked. “I’m not gonna go there. I’m not gonna get into discussions of silly social policy,” because there’s no way Andy Grove wanted to be seen as upset that he wasn’t getting his fair share.
The rich will never defending themselves in these circumstances — and, look, I understand how tough it is. You know, back when I had this show in Sacramento, I could complain about a lot more and relate to a lot more people. I can’t complain about anything now. I can’t complain. If I started complaining about things that bother me, the reaction will be, “Really? Grow up!” Or “grow a pair” or “Grow up! Do something. Are you really complaining?” But we all have complaints, except I can’t share mine anymore.
Well, more properly stated, I don’t. I’m not a complainer anyway. I’m not a whiner anyway, although there are a couple things right now I would really love to unload on but I can’t. And the rich cannot unload when they are being targeted and when they are the result of an envy campaign and so forth. They have to stand silent, or go out and applaud and say, “Tax me more! Tax me more!” How do you think Bezos, how do you think Bill Gates and Warren Buffett get away with nobody demanding they give their money away?
Because they’re out there and they routinely claim they don’t think they’re paying enough taxes. They routinely claim that they think tax policy is unfair, that their secretaries pay a higher tax rate than they do; it’s not fair. (applause) The hordes and the barbarians at the gate applaud them. So when it comes time to go steal money from the rich, they’ll leave Gates and Buffett alone because Gates and Buffett already agree. But you don’t see ’em giving away their money.
The Kennedys did this. The Kennedys were famous for keeping people away from their money, because the Kennedys made it look like the only thing they cared about was abortion and the downtrodden, and that’s the trick. That’s the game. So you heard here’s Trump, and he’s saying, “Yeah, I talked to Bob Kraft, owns the Patriots. He gave me a Super Bowl ring a month ago. He said, ‘You gotta do us all a favor. Give the tax decrease to the middle class. We don’t need it.'”
So right there, confirmation. There’s a pool of money that is by the good graces of Washington going to be sent back to the people who actually own it. Bob Kraft is saying, “Of that money, give it all to the middle class. We don’t need any of it.” Excuse me, but it’s not Bob Kraft’s responsibility to determine whether or not I or anybody else get a tax cut. But he’s being used as an excuse. Here’s the bit that we put together after Gephardt tried something very similar to this back in the 1990s.
BEGIN PARODY TRANSCRIPT
ANNOUNCER: A lot of kids have imaginary friends.
LITTLE BOY: Mommy, Cowboy Bob and I are gonna go outside and play soccer.
MOTHER: That’s nice, Honey.
ANNOUNCER: Dick Gephardt has a friend, too.
GEPHARDT: “I have a very wealthy friend who came to my office the other day. He told me that he had made $2 billion over the last 10 years!”
ANNOUNCER: Dick still has the imagination of a child.
GEPHARDT: But he said, “Let me tell what I’d rather have. I’d rather you keep my tax cut!”
ANNOUNCER: When a child pretends, people say it’s cute…
LITTLE BOY: Cowboy Bob and I are thirsty. Can we have some Red Eye? (giggling)
ANNOUNCER: But when Dick Gephardt does it, it’s just another lie.
GEPHARDT: He said, “In the end, if you practice Democratic economics and invest in the people in this country, I’ll really make money over the next 10 years! Don’t give me the money in tax cuts!”
ANNOUNCER: A message in the public interest from the EIB Network.
END PARODY TRANSCRIPT
RUSH: I’ve told you about my friends. Ha! I have a friend, I told you, the only reason he voted Trump was tax cuts. He believed everything Trump said on tax cuts, and he’s at a point in his life where he’s maxed out earning what he can earn. The only way, in his mind, he can have appreciably more disposable income is via a tax cut. He believed Trump, and this story came out over the weekend about the — and it’s not new. I mean, I predicted this some time ago, that the rich would not actually get one of these, and might actually have a surcharge.
He was fit to be tied, and he said, “Aren’t you?” I said, “I’ve gotta be honest with you: From the first moment that I began earning a lot of money, I have always thought Washington was gonna come take it from me.” I’ve always thought it. I don’t know how many years it would take, but the point is I’ve never expected a tax cut. I never expected one, because of the very politics that we just heard. There isn’t a politician under the sun since Ronald Reagan who wants to be seen as defending the rich or speaking up for them.
Because that’s the way it’s always cast. There are ways around it. You know, a tax cut for the economy, a tax cut for the country should include everybody who pays taxes if you’re talking about fairness alone. But because the issue’s been so demagogued, none of this actually surprises me, that the Republicans are not gonna cut the top personal rate. Never expected it to. I’ve always…
In fact (snorts), to be honest with you, I’ve been kind of amazed the rate hasn’t gone up in the last 10, 12 years. Bush did cut some of the top marginal rate, and look at the price he paid for it politically. But it wasn’t necessary. He could have defended himself, and he could have fought back on it, but you know how that drill went. I don’t want to spend the whole program on this, folks, and I’m not going to, but it’s just…
It’s a bugaboo of mine because there’s a way to do this that includes everybody that can benefit everybody. And the way they structure it, “There’s certain people we want to benefit, and there’s certain people we don’t — and the people we don’t want to benefit, we want you to know we’re not benefiting ’em because we know you resent ’em! And we’re gonna help you resent ’em even more and we’re gonna help you get even with ’em by not cutting their taxes.” That’s the simplest route to go.
Here is Bill in St. Paul, Minnesota. Welcome, sir. Glad you called.
CALLER: Hi, Rush. Thank you. Thank you for taking my call. Yeah, I’ll just be brief. I’m very disappointed in the Republicans as well as President Trump. I think there’s a consistency of principle here. On the one hand, they want to make significant reductions in the corporate tax and they justify that through job creation, economic expansion — and those same principles would apply to tax cuts to the wealthy. I mean, it’s just very obvious to me. I’ve got a degree in economics. But like I said, I feel the Republicans actually are sort of compromising their own principles as they push towards a corporate tax cut, when they then turn around and say, “Well, you know, the wealthy tax cuts are just tax cuts for the rich, and they don’t have a similar impact, positive impact on the economy.”
RUSH: Well, I’ll tell you what they’re gonna say to that, although that’s a great point. It’s a… (silence) I’m sorry. The cough button’s in an entirely different place here than it was in LA. I keep turning my mike off. After only one day, I formed a habit out there. Sorry about that. Here’s the thing. It’s an excellent point. If you listen to everybody talk about why we need to lower the corporate rate from 35 to 20, they say, “We need that money brought home here! We need that money overseas brought home. We need that money infused into our domestic economy.”
As though they’re just excited as they can be to cut the corporate rate from 35 to 20. Also, keep in mind that there are exceptions, but for all intents and purposes, corporations don’t pay taxes. They find a way to recoup whatever they pay in taxes in either increased prices or paying fewer dividends to stockholders or any number of ways. When you run the numbers at the end of every year, corporations actually don’t pay… Well, they pay taxes, but they’re not the ones that do it. They get the money from others. But look at the principle.
“We need to lower that rate to incentivize these corporations to hire more and to invest more.” But when it comes to wealthy individual taxpayers, somehow that whole line of thinking vanishes and is replaced by, “We need to punish them. They don’t need tax relief. Corporations apparently do, but individuals don’t.” Now, what they will tell you out there, Bill, is that the changes they are making in the pass-through on the sub-S (which is where a lot of small business owners file) is gonna be a great benefit. But that’s not exactly who we’re talking about here.
RUSH: “Hey, Rush. Isn’t there a tax on unearned income and a tax on earned income?” That’s true. Earned income is earned income, and you pay your marginal rate. Unearned income, an example of that… “Unearned” is really a poor word. It’s just meant to describe income that’s not salary and wages. Cap gains is considered unearned income, meaning you invest in a stock or something, and if it grows and you sell it, then you pay tax on how much you’ve gained, and the capital gains rate’s relatively low.
And it is thought that the wealthy do not have earned income, that they have unearned income, living off investments. That’s not altogether true. There… (interruption) No. If you were in the Lotto, you haven’t invested anything other than your little ticket. The Lotto is earned income. Unearned income is a narrower focus — clipping coupons on investments and this kind of thing — and it has a lower tax rate. Cap gains is the best example of that.
But it’s a fallacy to think that the wealthy do not earn income, that they’re not… Now, the reason why people get away with that is that there aren’t a whole lot of salaries of gazillions. But that’s, you know, actors and actresses are paid salaries. Athletes are, and they pay earned income marginal tax rates on that money and they have to pay it in all the different states they work in, if you’re an athlete traveling around all summer — or baseball or football season.
That’s reason enough why you need an accountant. It’s tricky. I mean, there are so few people that we’re talking about. That’s one of the things about this that bugs me. We’re talking about so few people actually paying 40% of all taxes. So few. And they are the ones who it is said don’t need any more, and it’s Washington saying that, and then it’s Washington people saying that their rich friends are telling them that. Well, sorry, I don’t care.
If you have a rich friend who doesn’t want his taxes cut, that’s fine. But he doesn’t get to determine policy for everybody, as far as I’m concerned. But the friends are used as a convenient excuse. Gephardt popularized it, and now Trump is using Robert Kraft, the owner of the Patriots. But again, it’s based on this false premise that there’s a certain amount of money that Washington has determined it’s going to give back, and that’s not at all what taxation is.
It’s what everybody now thinks of it as, especially people in Washington. But that’s not what it is. The premise is that all money is Washington’s and what you have is what they graciously and famously and compassionately decide you deserve. And the more middle class you are, lower middle class, the more you deserve. And the more you make, the less you deserve. And it’s just… It’s worked itself out to be a productive political formula.
RUSH: We head back to the phones to Shelby Township. Where is that, Michigan? And this is Dan. Great to have you, sir. How you doing?
CALLER: Good. How you doing, Rush?
RUSH: Very well. Thank you very much.
CALLER: I’m referring to I saw a video on YouTube of Donald Trump in the late eighties, maybe early nineties. I saw a couple of them where he’s talking about the 1986 tax reduction where they brought the top tax rate down to I think 26%.
RUSH: It was 28%.
CALLER: Okay, 28%. He was saying that it dried up a lot of venture capital in the building industry, and indeed they went through a bad period at that time. He said that it was a disincentive to use capital investment as tax she did that because the taxes had gone so low. He made that point, and I think it’s a good point. I don’t know if it would happen again this time. But I don’t think they should go down to… A million dollars is too low. I think it should be maybe $10 million. Even then I’m kind of against it. I’m not really for it. But he did make that point and I think that could maybe happen again. Millionaires are looking to reduce their taxes no matter what words… You said businesses, well, if they get reduced taxes, they want to put it back into the businesses, expand —
RUSH: Wait a second, now, we’re talking about something here that I need to include in your description of the ’86 tax cut and what Trump was talking about.
RUSH: The real estate industry was creamed by virtue of the… Particularly the rental real estate market was wiped out by the tax rate reduction to 28% for a while, and that’s the market Trump was in.
RUSH: And there were people… Those people… (sigh) The deductions were gone is why, and the deductions and the expenses that they had incurred in investing and borrowing money to build, it wasn’t grandfathered. And some of them got… It wasn’t the rate that did it to them, although, see… (sigh) It was in a way, because if the top marginal rate’s 28%, then that’s the maximum per dollar you can deduct. So if you’re gonna give a dollar to charity, you only get to deduct 28% of it. Same thing now. If you give a dollar to charity, you can only deduct whatever your tax rate is — and if you’re in the top bracket, you don’t even get to deduct that. They’ve taken ’em all away from you.
CALLER: Right. I know. I know about the… They didn’t grandfather in these items that would cause them to really kind of be cut off, you know, in the middle of their investments, and that hurt a lot, too.
RUSH: Well, because they changed the rules on ’em in the middle of the game. (sigh) I mean, this is the age-old argument about whatever happens in an economy, somebody’s gonna be hurt by it. The drop in the oil price, for example, is great for consumers at the gas pump and for whatever other energy expenses they have. But it is a nightmare for the producers. It’s a nightmare for the drillers. It’s a nightmare for the people that dig down deep and try to find the stuff. Now, taking that top marginal rate down to 28%? It limited a number of things, but the economic impact overall was dynamic.