U.S. Markets closed

Gary Cohn: 'The estate tax is really about small business'

Nicole Sinclair
Markets Correspondent

The Trump administration has pushed its tax framework with a big emphasis on middle class Americans. But polls show that fewer than 20% of people actually believe that message.

Director of the National Economic Council (NEC) Gary Cohn told Yahoo Finance the uncertainty from people is because the details haven’t been ironed out yet, but he said the framework is “totally about middle class Americans.”

Cohn also defended the proposal to repeal the estate tax as an effort to help small business.

“The estate tax really hits farmers, and we don’t want to hit farmers. It hits small and medium-sized family-owned businesses,” Cohn said. “We want to make multigenerational businesses. We want those small and medium-sized businesses and those farmers to go out and hire people, grow the economy, and expand, and not be worried about death being a taxable event. We want them to really grow the economy.”

However, the Tax Policy Center estimates that only about 80 farms and closely-held businesses are expected to pay the estate tax this year. Furthermore, they estimate only about 5,000 families are expected to pay the estate tax, and the first $5.49 million for individuals and $11 million for couples are not taxed.

Even Treasury Secretary Steven Mnuchin conceded at the Institution for International Finance Conference last week that cutting the estate tax disproportionately helps rich people.

“We’re all entitled to our opinions, but wealthy people have enormous amount of opportunity to tax-plan today, and they can do enormous amount of things with their wealth and their assets and trusts, and the tax system has allowed people to legally plan for death and avoid estate tax,” Cohn told Yahoo Finance. “Where we see the vast majority of people getting caught up in the estate tax are really farms, are small businesses that grow into big businesses.”

Director of the National Economic Council Gary Cohn tells Nicole Sinclair the Trump administration’s tax outline is about the middle class and that the estate tax repeal proposal is about closely-held businesses

The administration’s “Unified Framework” includes elements that many economists have described as focused on the wealthiest Americans. These include cutting the top individual tax rate, a repeal of the estate tax and the alternative minimum tax, a creation of a loophole that would allow wealthy people to act as small businesses, and a cut in corporate taxes.

And the non-partisan Tax Policy Center estimates that about 80% of the total benefit would go to taxpayers in the top 1%, whose after-tax income would increase 8.7% while many middle-income taxpayers would actually pay more.

Cohn did seem to leave the room open to some flexibility as the tax bill gets written.

“We’ve now given it to the tax writers in the House and in the Senate to come up with the final tax bill. We are flexible on many of these areas, to make sure we deliver a middle income tax cut, and make sure we make America competitive on the tax front,” Cohn said. “We are happy to see where they come out. We’re not gonna prejudge where they come out on any one particular area.”

Nicole Sinclair is markets correspondent at Yahoo Finance

For more from Yahoo Finance’s interview with Gary Cohn, please see:
Gary Cohn: We won’t put conditions on repatriated cash, and we’re fine with stock buybacks
Gary Cohn: ‘We have to have a permanent change in the tax system’
Gary Cohn: Here’s how I expect corporate tax cuts to spur growth

Other articles:
Companies say they would use repatriated earnings to buy back stock
The lack of chaos has been brutal for Wall Street trading desks
One-third of retirees end up getting full-time jobs
Credit Suisse’s new strategist unveils bullish 2018 market call