The Empire Strikes Back—With More Billionaire Tax Breaks (with Samantha Jacoby)

Episode Summary

Executive Summary: This episode examines the true cost and political consequences of the 2017 Trump tax cuts with tax expert Samantha Jacoby. The discussion shows the law overwhelmingly favored corporations and wealthy households, added trillions to deficits, and failed to deliver promised wage or growth gains. It also frames the 2025 expirations as a major chance to reverse regressive provisions, raise revenue, and fund priorities like the child tax credit and IRS enforcement.

Main Topics: Trump tax cuts and their expiration (Priority: 5/5): The hosts explain that many 2017 tax cuts for households expire in 2025, creating a major policy fight over whether to extend, reform, or let them lapse; corporate cuts were made permanent. Benefits concentrated among the wealthy (Priority: 5/5): Jacoby details how the law’s largest permanent and temporary benefits flowed to high-income households and business owners, including rate cuts, the pass-through deduction, estate tax changes, and AMT relief. Cost to revenue and deficits (Priority: 5/5): The conversation emphasizes that the law reduced federal revenue by trillions over time and materially increased deficits, undermining claims that it was fiscally neutral or self-financing. Failure of trickle-down economics (Priority: 5/5): The episode argues that promised wage, investment, job, and GDP gains did not materialize, reinforcing the hosts’ broader critique of supply-side tax theory. IRS enforcement and lost revenue (Priority: 4/5): They discuss how underfunding the IRS reduced audits of wealthy individuals and corporations, and how better enforcement could raise significant revenue without changing tax rates. Opportunities for reform in 2025 (Priority: 5/5): The interview closes by outlining a progressive tax agenda: end high-income cuts, revisit corporate rates, strengthen international anti-profit-shifting rules, and expand the child tax credit. Tax policy as a reflection of values (Priority: 4/5): Jacoby frames the tax code as a moral and political choice, arguing that the U.S. can and should use revenue policy to reduce child poverty and support public investment.

Key Arguments: The 2017 Trump tax cuts primarily benefited corporations and high-income households, while lower- and middle-income gains were modest and often offset by other provisions. The law did not pay for itself; even witnesses across ideological lines have acknowledged it failed to generate enough growth to offset revenue losses. Claims that corporate tax cuts would raise worker wages were not borne out by evidence; studies found no wage increase for many workers after the rate cut. The pass-through deduction is especially regressive because it delivers the biggest benefits to high earners, costing billions annually and flowing largely to millionaires. A corporate tax rate of 21% is too low; raising it modestly could restore significant revenue while still leaving the rate below the pre-2017 level. IRS budget cuts weakened enforcement and reduced audits of wealthy taxpayers and large corporations, meaning stronger funding could recover revenue without raising rates. 2025 is a critical opportunity to let unpopular, high-income-oriented provisions expire and use the revenue for child tax credits, climate, housing, childcare, and other public needs.

Data Points: 2017 tax law cost over 10 years: $1.9 trillion - CBO estimate for the combined permanent corporate cuts and temporary individual cuts. Cost of extending expiring provisions (2026-2035): $3.5 trillion - Revenue loss if the temporary provisions are extended for another decade. Annual revenue loss from original law: About $200 billion per year - Derived from the $1.9 trillion 10-year estimate. Annual revenue loss from extending expiring provisions: About $300 billion per year - Additional revenue loss on top of the permanent cuts if expiring provisions are renewed. Top individual tax rate change: 39.6% to 37% - Cut under the 2017 law for high earners. Tax cut for a married couple with $2 million income: $36,000 - Example of the benefit from the top-rate reduction alone. Pass-through deduction cost: $50 billion a year - Annual cost of the 20% deduction for owners of pass-through businesses. Pass-through deduction share to millionaires: More than half - Jacoby says over half the benefit goes to millionaires. Estate tax change: $4.4 million tax cut per couple - Benefit for taxable estates from the increased exemption. Corporate tax rate: 21% - Current post-2017 corporate rate described as too low. Potential corporate rate alternative: 28% - Jacoby suggests a middle-ground rate that could raise substantial revenue. Revenue from raising corporate rate to 28%: Around $1.3 trillion over 10 years - Estimated revenue gain from a higher corporate rate. IRS budget cut: 20% in inflation-adjusted terms - Reduction from 2010 to 2020. Audits of millionaires: Down 70% - Change in audit rates during the IRS funding decline. Audits of large corporations: Down 50% - Change in audit rates during the IRS funding decline. IRS funding from Inflation Reduction Act: $80 billion over 10 years - Investment intended to rebuild enforcement capacity. IRS funding cut in debt-limit deal: $20 billion - Portion of the IRA funding later rescinded. Minimum tax on foreign income: 10.5% - Described as a baseline that could be strengthened to reduce profit shifting. Child tax credit impact: Largest reduction in child poverty in history - Refers to the temporary 2021 expansion of the credit.

Pivotal Quotes: "Tax cuts plainly don't pay for themselves." — Samantha Jacoby: Direct rebuttal to trickle-down claims about growth and fiscal self-sufficiency. "The middle class is the source of growth, not its consequence." — Intro narration: Sets the show’s middle-out economics framework before the interview. "We're the richest country in the world. We shouldn't have the level of child poverty that we do. And we know how to fix it." — Samantha Jacoby: Her closing explanation of why tax policy matters morally and economically.

Implications: The episode argues 2025 could be a major tax-policy reset: end regressive cuts, strengthen enforcement, and redirect revenue toward families and public investment. If Congress extends the current law, inequality and deficits will grow further.