RUSH: First is the tax plan. And I’m gonna tell you right off the bat I have watched some cable news last night and today ’cause I broke my promise to myself. I wanted to see what was said about it, and it is incredible. And I want to tell you that if you’re watching any of the three networks or CNN or MSNBC, do not believe what you’re hearing.
It is not trickle-down. It doesn’t even come close to trickle-down. It does not benefit the rich. It does not punish the middle class or the poor. It doesn’t do any of the things the Democrats and the media are saying about it. They are attacking this plan like they’ve been attacking every tax cut since Reagan’s.
They have a playbook, and they have a script, and they have things to say. It doesn’t matter what’s actually in the plan. They just, as robotically as they can — doesn’t matter, Schumer, Pelosi, whoever — stride to the microphones and cameras, and they start denouncing it the same way they denounce every Republican-proposed tax plan since 1986, and I’m telling you, don’t believe any of it. I’m gonna tell you what’s in this plan. I had it explained to me last night, and let me tell you how that started.
I got a phone call from a ranking Republican who wanted to fill me in, clue me in on the tax plan. He wanted to give it to me straight, wanted to give it on me man on to man, heart to heart, before it was distorted. So I heard the details that the Republicans think are important, and in no particular order, here it is: We’re going to reform the tax code so that you and 99% of Americans can fill out their tax forms on a postcard. We are reducing seven rates to three. The rates are going to be 12%, 28%, and 39.6%.
I was told the top rate is not coming down — to 35% or anything else. I was told that there isn’t a surcharge on the rich. I was told that state and local taxes will no longer be deductible on your federal return. Now, if that holds up — and none of this has even been officially presented and a lot of this is gonna change before the vote on it. If they do — and they want to vote on it in December. But let’s just treat this as the thing that actually goes through Congress and gets voted on. If they succeed in eliminating the deduction of state income taxes, do you know who is going to get stuck like pigs on that?
People who live in blue states.
California. The top income tax rate in California is 13%. That is a lot of money to everybody. I don’t care what income level you are in California, your tax rate is high, and you’re paying a lot. And you’re no longer gonna be able to deduct it. Most of the people in California are Democrats. This is going to starve state governments of a lot of money — a lot of money — when people cannot deduct their state income taxes. These blue states are gonna have to get a little austere or something, because they’re going to be financially hit by this.
There are some red states that have significantly high income tax rates, but mostly they’re blue: Illinois, California, New York. And if this holds up, they’re gonna be paying through the nose. Then there was talk that property taxes would also not be deductible, but that supposedly is not true, as it stands now. You will be able to deduct your property taxes from your income tax. The standard deduction exemption has been doubled from 12 grand to 24 grand.
The Alternative Minimum Tax has been gotten rid of. That is so huge. And that is the reason and the corporate tax rate reduction… Those are the two things that have Schumer and Pelosi and the Democrats running around calling this the usual Republican “tax cut for the rich,” when it isn’t! The rich are not going to have their taxes cut. Their tax rate, I was told, is probably not gonna change. It’s gonna be up to what happens in the committees. And then I was told the reason why is that President Trump did this.
When they finished telling me all the details, I studiously noted that they hadn’t described anything about the top marginal rate to me. They didn’t say anything about it. So I courageously and bravely said, “Well, what about the 39.6% rate?” The reaction (stammering), “That — that — that’s the president! The president wants that. That’s not us, that… The president… The president said guys like him don’t deserve a tax cut. You go talk to him!” I mean, they laid that off on Trump. It didn’t take two seconds. “You go talk to Trump!
“The president, he’s insisted that the rich not get a reduction in their rate. Guys like him don’t need a tax cut.” Well, I turned around and said, “Now, you’re telling me that the reason for this is to grow the economy. That’s what the president says.” “That’s right. We want to create jobs, and we want to grow the economy.” I said, “Well, this isn’t gonna do it. You can’t have a tax-rate reduction that does not reduce the rates on high-income earners and have economic growth. Not like you’re thinking.”
“Why not?”
“Well, because those are the people who hire. Those are the people, by definition, who have money, and they’ve succeeded, and if you’re not gonna change their tax rate — and you’re gonna monkey around with their deductions so they don’t have any — you are leaving out of your growth engine the people that already pay 70% of all taxes.” The top 10% of wage earners in America pay 70% of all income tax revenue.
The top 1% pay about 39%, folks. This talk that the rich get a tax cut and the rich aren’t pay their fair share? It’s demonstrably false, and everybody on cable TV telling you that the rich are getting a huge tax cut here is not right. They are lying to you or they are misinformed. Now, the Alternative Minimum Tax being eliminated? That’s a big deal, but not just for the rich; that’s for everybody. That was catching a lot of people that were never intended to be caught. The corporate rate will go from 35% down to 20%.
And of course, the Democrats are gonna really launch on that ’cause they hate corporations anyway. Corporations aren’t people, and the corporate rate going 35% to 20% making it competitive with other nations’ tax rates on business around the world is a sensible thing to do. But here come the Democrats demagoguing it, “Well, it’s a tax break for the rich. It’s a…” It’s not. There are people that work for corporations who benefit from the corporation showing more profit, which means they hire more people.
It’s just absurd to continue, after all these years, to listen to the usual lies and demagoguery from these people, which does not change. Now, there’s another key element of this. And for lack of a better term I’m gonna call it the subchapter S pass-through. There are a number of… Oh, yes, the estate tax is ending, and that’s another way the rich are gonna get really, really richer. The Democrats think when you die that the government ought to get over half of your estate.
This tax plan thinks that the inheritors should not have to give up half of what was earned to the government. So the estate tax has been blown away. Schumer and Pelosi and the media are gonna be harping on that as a tax break for the rich. The subchapter S pass-through… The way this works, this plan would cap the tax rate on businesses whose income is reported on individual returns. You know, if you own a small business, you can file your business return, your subchapter S on your personal tax form.
You have a sole proprietorship or a sub-S, and the income of your business passes through to your personal tax form, your personal life. The new rate on that’s gonna be 25%. That’s good too: 25% pass-through rate on income earned by subchapter S and sole proprietors. Now, the LA Times doesn’t like this. The problem with this provision is that in jurisdictions where it’s already been enacted like Kansas under “the Tea Party governor Sam Brownback,” everybody from freelancers and petty contractors to huge partnerships are able to redefine ordinary income as business income to avoid paying state income tax at all.
I’ll explain that. This is nothing new! Anybody that is a small business, their accountant advises them, “File a sub-S! Do your business as a sub-S.” All these rules are there. They have been set there by 535 members of Congress over the years. No loopholes here. This is the law. Anyway, on balance this thing has a lot of good stuff in it. But it isn’t a conservative tax plan. It’s not a pro-growth tax plan.
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RUSH: There is another aspect of this tax plan that’s also very good. You know the American corporations that have billions and billions of dollars parked overseas because of the high corporate tax rate here? Apple, Inc. is one of the greatest examples. They’ve got a cash pile of around $265 billion, and almost (I think) 70% of it is held overseas. They don’t report it as income here, they don’t want to pay 35% on it. But their effective rate actually is about 26 to 24% every quarter. But they, for the most part, keep it parked in parts of the world where it has been earned at much more favorable tax rates. The repatriation rate is gonna be a one-time rate of like 5.25%. Companies are gonna be hard-pressed not to take advantage of this. Everybody’s been asking for it. Let’s see if they meant it.
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RUSH: There’s a statistic that is thrown around about taxes, and I find when I use it that a lot of people nod, and they don’t say anything. I can tell they don’t believe it. But half of the American people do not pay any income taxes. And it has been this way for quite a while. It started in the 1980s and it intensified in the 1990s. It’s all part of the Democrat Party’s class warfare and class envy business.
And yet while we now reach a point where 50% of American taxpayers don’t pay any income tax — now, they pay other taxes. They pay, if they’re working, payroll taxes, of course. And they’ll pay property tax if the own property, and they will pay phone tax, gasoline tax, that stuff. But income tax, half of American taxpayers don’t pay any income tax. This tax cut, therefore, cannot be for the middle class, as it’s being touted.
The brackets that we are talking about here are targeting people who only pay two and a half percent of the total tax bite. They are not going to get significant tax relief because there isn’t much yet for them to have. What’s gonna happen here is what always does. The middle class and the upper middle class, at the end of the tax year, are gonna be paying more dollars, some way. They’re gonna be told that their rates have been reduced, but they’re going to be paying more dollars. The property tax deduction being eliminated is one way.
Look, there’s some good things in this plan, too, but it is not a tax cut for the rich and it is not what they mean when they tell you trickle-down. They can’t stop using that term. They used it to attach it to the Reagan tax cuts in the 1980s. And what they mean by trickle-down is that you give the rich a big pile of money and they’re gonna share it and they’re gonna give it away to people. And that’s not what happens and so then they say trickle-down fails.
Trickle-down happens every day in your life. Trickle-down is the United States economy. Apple building a brand-new headquarters building that cost ’em $5 billion, guess who gets the $5 billion? The people that built it: the architects, the construction companies, the contractors, landscapers, everybody. Everybody involved. That’s trickle-down. Apple has a pile of money they dedicate to a new building. They have to get it built. Everybody that had a role in it getting built gets paid. That’s trickle-down. It’s good!
Trickle-down is exactly what happens when commerce is taking place. And it is how wealth is created. Trickle-down as a term was devised as a way of besmirching and impugning the Art Laffer, Reagan tax cuts of the eighties. And trickle-down was defined as, “We’re gonna give the rich a big tax cut and somehow the middle class is gonna end up with more money, and then the economy’s gonna grow.”
And then of course when it doesn’t happen that way, when the rich do not become more charitable or stand on the corner and give money away, then they proclaim trickle-down a failure. But Reagan tax cuts created the longest peacetime boom of economic activity in the modern era. You even have some history revisionism going on now. No, no, no, no, they say, it wasn’t the Reagan tax cuts, it was the Clinton tax increases in the nineties that did it. And that is not really true.
The bottom line is that half of American taxpayers are not paying any income tax at all. And this tax cut, while being touted as relief for the middle class, ’cause that’s what politicians do, that’s where most voters are, is in the middle class. So you tell ’em two things. You tell ’em, “Finally we are extending middle class tax relief to the people who are the backbone of America, to the people who are responsible for America being a great nation. We are going to lessen their burden.” Well, it’s not much of a burden now on 50% of them.
So of the middle class that will receive a tax cut, it accounts for two and a half percent of taxpayers. Everybody else, one way or the other, is going to see their taxes not change or go up. And let me ask you something, folks. There’s another thing that we do here that not we do, they do. Whenever you hear this phrase, I want you to automatically realize that you’re listening to Democrat Party language.
I heard it yesterday when it was explained to me by ranking Republicans. When I said, “Why are you not reducing the tax rates at the upper bracket of 39 and a half?” He said, “Well, we have to pay for all of these other tax cuts.” And I didn’t say anything ’cause it would have been pointless to, but I remembered it and I made a note. “We have to pay for it.” That offends me like you can’t believe.
What is behind the belief, when somebody in government says, “We’re going to give you a tax break, but we have to pay for it somehow,” means we’ve gotta get the money back because what it means is government cannot ever do with a dime less. And so if these people, in their static analysis, conclude that these tax plans are going to, quote, unquote, cost the government — just making up a number here — a hundred million dollars, then they’re gonna find a way to get a hundred million dollars from somebody else in user fees or taxes or whatever so that the government breaks even or ends up with more.
Let me ask you a question. Is the national debt going down? Is the annual federal budget going down? On balance, is the annual budget deficit going down? The answer to these questions is all “no.” It doesn’t matter if you have Republicans or Democrats pitching their economic plans or tax plans, the government always grows. You end up paying more no matter what.
The government always grows. The government will never, ever do with less. And, of course, the government isn’t doing with less. And it’s not your fault. You’re not running things. You don’t set policy. There are 535 people who do that. Those numbers change — well, the number doesn’t change; the people that compromise those numbers changes. People win elections, lose elections, they get appointed to a cabinet post or leave a cabinet post. But there are 535 people who determine all of this, and they all pretty much talk the same way. And none of it ever ends up really happening the way they say.
There isn’t going to be an overall reduction in the amount of money government collects from taxes with this plan or anything else. So if you know that to be true, if the government is not going to collect any less, then somebody tell me where the tax cuts are. Well, they are there. Certain groups are gonna benefit some other way. Other groups are gonna pay more.
The way it was explained to me is the safest way Washington has found: Just soak the rich, blame the rich and say, “We’re gonna pay for tax relief for the very crucial and important middle class by not cutting the taxes of the rich.” Okay, so we’re gonna demonize achievers. We’re gonna demonize the successful. We are going to pit the successful against the middle class, lower middle class, or what have you.
So we’re gonna divide the country on the basis of this. We’re gonna create class warfare and class envy, and we’re gonna try to make people resent the rich, which is not new. That’s been going on since the beginning of time. People do that on their own anyway without being egged on. But we live in a time where everybody on the left is preaching unity and getting along, and this doesn’t do that. This continues to capitalize on division, capitalize on resentment.
There are a lot of people in the middle class that are not gonna get any tax relief, but they’re gonna told, that’s okay, it’s okay, but the rich are gonna get soaked here, the rich are gonna be paying more than their fair share, and that evens at all out. It doesn’t help anybody else, except that they’ve been conditioned to feel good when the government pushes or soaks someone else. Individually, when you go through the ingredients of the tax plan, there are individually a lot of good things here. You won’t find them mentioned in the media. The media will not find one good thing about this.
The repatriation tax rate — getting foreign money back on American shores — is good. The reduction in the pass-through rate (the subchapter S) to 25% is good. The capital gains staying where it is is good. The Alternative Minimum Tax being abolished is good. But then they remove the deductibility of state and local taxes, and that’s gonna hit a lot of people, more than you think. People love deductions. Deductions are how people think they’re screwing the government. They’re a psychological thing.
It’s like people who love getting a big refund every April. They think they’ve really, really stuck it to the government. They tricked the government. “Look how much the government’s giving me!” They’re not tricking anybody. When you get a big refund, it just means that you let the government keep your money for a whole year at no interest in exchange for giving it back to you in a big lump sum that you don’t usually see in your day-to-day life. So it appears to be a win-win. But I keep coming back to the idea that they’re touting this as fueling the engine of growth.
But you can’t — that isn’t gonna happen — if you leave the top earners’ rate the same. Reagan cut taxes over a period of eight years from a top marginal rate of 70 to 28%, and you know the drill. The amount of taxes collected doubled from $500 billion to almost a $1 trillion in eight years by reducing tax rates from 70% to 28%. Eisenhower, Kennedy cut them from 90% to 70%. Kennedy cut taxes in the sixties too. And that caused an economic revival. So it is known how to do this. The Democrat Party hates this. They don’t like you keeping more of your money.
They want you to think you are, but you’re not. Look at how Big Government is and look how often it grows. And look by how much. You’re not keeping more of your money. And you know it. You look at your disposable income, you look at the net — you know, what gets deposited in your account every pay period — and you know you’re not paying any less in taxes. There hasn’t been a significant tax cut since George W. Bush in the early 2000s. Anyway, that’s an overview of this.
Oh, and the Republicans are, just to reiterate… When you talk to ’em about the top rate and why isn’t gonna be reduced, they say, “Well, that’s the president. That’s the president. You gotta talk to the president. Trump is insisting that the rich not get a break ’cause he doesn’t think the rich need one. People like him don’t need any more money.” That’s the way Democrats talk. It’s not their job to determine who “needs” what. If we go down that path and allow government to start determining who “needs” what, then they’re gonna start determining everybody’s income, and they’re gonna start determining everybody’s need for health care and need for food and need for drugs and need for whatever.
It’s none of their business what anybody “needs,” and it’s not for them to decide.
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RUSH: Here’s Jeff in Minneapolis. I’m glad that you called, sir. Great to have you here with us.
CALLER: Hello, Rush. You mentioned earlier about the 50% not paying any federal income tax.
RUSH: Right. No federal income tax. Half of American taxpayers pay no federal income tax, correct?
CALLER: Correct, and now I am one of those people. My wife and I made a choice — one of us stays home with the kids — and so we made roughly right around $50,000, and we have never had anything taken out of our federal withholding. Every paycheck that comes: $0. Every state — you know, the department of revenue for the state — $0 comes out of us for every paycheck. We get a refund every year. I don’t know how it’s called a “refund.” But it’s called a refund of right around $7,000. I don’t think people realize how… This is real. I am not a… I don’t agree with it. I’m probably the only conservative that thinks, “Eh, he probably doesn’t pay his right amount of taxes.”
RUSH: So you’re a one-income family and you have a gross income of 50 and they are not deducting any federal taxes from you?
CALLER: Zero.
RUSH: And they’re not deducting state taxes?
CALLER: Zero.
RUSH: On what basis you getting a refund? You getting earned income tax credit or something?
CALLER: Yes. I have a lot of children. Choices that we make.
RUSH: How many children do you have?
CALLER: Uh, I now have eight.
RUSH: Well, that took about 40 minutes.
CALLER: (chuckling)
RUSH: Forty minutes and a couple cigarettes if you smoke.
CALLER: Couple bottles of wine.
RUSH: (laughing) Well, there you go. All right so —
CALLER: But it’s a real thing. I’ve always had an issue with this. Now I’ve had people say, my liberal friends, “Well, give the money back. You know, just give it back.” Well, I don’t. I use that for expenses.
RUSH: Do you know specifically if that seven grand is related to something called the earned income tax credit?
CALLER: The earned income credit, yes.
RUSH: Now, that —
CALLER: I couldn’t tell you exactly what is.
RUSH: I can’t find anything on that in this plan yet, and I was not told anything about that yesterday during the explainer phone call. But if the earned income tax credit is not eliminated, then… (chuckles) See how this works? You might say, “Well, Rush, if lowering taxes produces all this revenue, why is everybody so much against it?” Well, that’s not hard to answer. The reason particularly Democrats are not crazy about more revenue paying, is Democrats are totally into class warfare and fairness.
Sander Levin — congressman from Michigan — had it explained to him on TV twenty years ago. “These rates are creating much more revenue to the Treasury.” He said, “I don’t care about that! It’s an unfair rate! The rich ought to be paying more than 28%. It’s an unfair rate.” “But look at the revenue it’s creating.” “I don’t care about the revenue! It’s an unfair rate!” Besides which, the more independent people are — particularly financially — the less they tend to need Democrats, and Democrats don’t like financially independent poor and middle-class people.
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RUSH: The earned income tax credit stays in the tax plan. The New York Times, by the way, is very upset about this. They’re upset that Trump is not going to increase the earned income tax credit. But it does remain. That’s how illegal immigrants get tax refunds, essentially.