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The big winners from Trump’s business tax cut

Will the Trump administration’s proposed cut in small-business taxes create a windfall for the rich?

The new tax proposal released by the White House today—“the biggest tax cut and the largest tax reform in the history of our country,” Treasury Secretary Steven Mnuchin declared—promises to cut the corporate tax rate to 15 percent, and also cut to 15 percent another business rate called the “pass-through” rate. This is how most of America’s small-business owners pay their taxes. By reducing it, Trump promises to put more money in pockets of America’s small business owners, allowing them to expand their operations and hire more workers.

But if it passes, that new lower tax rate is likely to benefit mom-and-pop businesses far less than it helps the ultra-rich. That’s because it’s actually the rich who earn most small business income. In 2016, according to estimates from the nonpartisan Tax Policy Center, the top 1 percent of small businesses earned 50.8 percent of all small business income—and the slice at the very top, the top 0.1 percent of small businesses, earned a whopping 22.8 percent of the money. (The bottom 20 percent, in comparison, received just 4.1 percent of such income.)

The secret about small businesses in the United States is that the really profitable ones aren’t your mom-and-pop shops, the kind of local carpenter or family restaurant that politicians love to visit and talk about. Most of the money in the small-business tax category is earned by a tiny subset of extremely profitable businesses—many in finance—whose owners are in the top of the income distribution, and would be the largest beneficiaries of Trump’s tax plan.

When tax experts talk about small business taxes, they have something specific in mind: entities whose income is “passed through” from the business to the individual owner and taxed according to the individual side of the tax code. So-called “pass-through” businesses generally fall into one of three categories—S-corporations, sole proprietorships and partnerships. They aren’t always that small : S-corporations can have up to 100 shareholders, while partnerships can have an unlimited number of partners and hundreds or thousands of employees.

The pass-through structure has proven increasingly popular in the United States because of the country’s high statutory corporate tax rate of 35 percent. Companies structured this way can “pass through” their earnings and have partners pay at their personal rates, which are often lower than they’d pay under the corporate tax system. And the tax rate on corporate owners can stack up: A company first pays its normal corporate taxes and then its owners—shareholders—pay investment taxes on their dividends and capital gains. As individual tax rates have fallen, the ability to pass income through to the individual side of the tax code, avoiding the corporate side entirely, has proven more and more enticing .

Thus pass-throughs have come to represent a growing share of the American private sector. According to a recent paper by Treasury Department economist Michael Cooper and seven co-authors that used administrative tax data, the


Senators hauled to White House for rare classified briefing


Sens. Orrin Hatch and Rob Portman walk from an all-Senators briefing on North Korea in the White House complex on April 26. | AP Photo

Senators were alarmed by a Trump administration presentation Wednesday at the White House complex about the dangers of North Korea, though lawmakers in both parties said it was unclear what the president’s next action against the combative nation will be.

Secretary of State Rex Tillerson and Defense Secretary James Mattis, who led the session, did not divulge whether the United States is considering military options against North Korea after recent weapons tests and military activities were conducted by the regime of Kim Jong Un. And senators said officials did not discuss putting North Korea back on the list of nations that sponsor terrorism, as some lawmakers want.

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“There’s so many options that we need to be taking that are a long ways away from a strike,” said Sen. Cory Gardner (R-Colo.), who is urging the administration to sanction Chinese officials that do business with North Korea. “I have supported putting North Korea back as a state sponsor of terror … no indication yet from the administration.”

President Donald Trump spoke for a few minutes at the classified briefing, according to senators and aides. His comments, said an attendee, were “long at the 30,000 foot, short on the specifics.” Though the session was classified, everything said was already public, the person said.

“It’s a very serious situation. As I knew before I went there,” said Sen. John McCain (R-Ariz.), who chairs the Senate Armed Services Committee. “I knew all about it. I didn’t hear anything new because I have been heavily briefed.”

Added Senate Foreign Relations Committee Chairman Bob Corker (R-Tenn.): “It’s good to get everyone together. I’m not sure I would have had it ... I knew what was discussed.”

The administration briefed House members afterward at the Capitol. No explicit explanation was given for why all 100 senators were hauled to the White House, though Trump's appearance was likely part of the reason. Senate Majority Leader Mitch McConnell (R-Ky.) accepted an invitation from Trump to move the briefing from the Senate, where such briefings are typically held, to the White House, according to spokesmen for McConnell and the administration.

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"This is the first time I remember anything like this. In my congressional career there's never been a similar type of a meeting held at the White House that I'm aware of," said Sen. Ben Cardin (D-Md.) ahead of the meeting. "We've had all-member meetings at the White House, but I don't think they've ever been in a classified setting. They might have been in a sensitive setting."

Joseph Dunford, the Chairman of the Joint Chiefs of Staff, and Director of National Intelligence Dan Coats, a former


House Russia investigators optimistic under Conaway's leadership

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Rep. Mike Conaway took charge of the probe earlier this month after House Intelligence Chairman Devin Nunes announced he was temporarily stepping aside. | AP Photo

Rep. Mike Conaway, the House’s new top Russia investigator, is telling lawmakers on the Intelligence Committee that they should expect to be in Washington more than usual as the beleaguered probe gets a reboot, panel members said after a closed-door meeting Wednesday.

Committee Democrats welcomed Conaway’s remarks, describing the Texas Republican as a “straight-shooter” who was committed to a thorough, bipartisan investigation into Russia’s interference in the presidential election, including the possibility of collusion with the Trump campaign.

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“Mike Conaway told us this morning, expect to be in D.C. a little more than you might’ve anticipated,” Rep. Jim Himes (D-Conn.) told reporters, adding that Republicans and Democrats had agreed to a witness list “in the neighborhood of three or four dozen.” He and other committee members declined to say who would be interviewed.

“It’s going to be a time commitment,” Himes added.

Conaway took charge of the probe earlier this month after House Intelligence Chairman Devin Nunes (R-Calif.) announced he was temporarily stepping aside because of a House Ethics Committee investigation into whether he disclosed classified information. The Russia probe suffered a complete breakdown of bipartisanship under Nunes, who critics said seemed more interested in providing political cover for the White House than in conducting an objective assessment of Moscow’s meddling.

Democrats on Wednesday said they believed the investigation was back on track under Conaway, pointing to several signs of progress. The intelligence panel has scheduled a closed hearing for next week with FBI Director James Comey and NSA Director Mike Rogers. It’s working to reschedule a public hearing canceled by Nunes with members of the Obama administration, including former acting Attorney General Sally Yates.

And the panel is now getting access to more documents than it was previously — a development that Rep. Eric Swalwell (D-Calif.) suggested might be a result of Nunes’ departure.

“We have wider access now,” Swalwell said, explaining that federal agencies are more willing to cooperate with congressional committees when they work “in a bipartisan fashion.”

“So far, Mike Conaway has been a straight shooter,” said Rep. Joaquin Castro (D-Texas). “It seems like he really wants to get to the bottom of what happened and whether there are Americans who coordinated with the Russians who interfered in our 2016 elections.”

Conaway declined to answer specific questions from reporters about his leadership of the investigation and would not confirm details about what he told committee members during Wednesday’s closed-door meeting.

Instead, he provided the same terse answer to every question he was asked about the investigation: “We're doing an active investigation. We're going to do it in a bipartisan manner. This is serious stuff. And I'm not going to talk about the details.”

A number of questions remain about how the probe will work under the new leadership structure, including how Conaway will share duties with the


Hillary’s First 100 Days: An Alternate History

Hillary’s First 100 Days: An Alternate History

On April 29, 2017, Hillary Clinton will complete her first 100 days in office as president of the United States. Or, at least that’s what would be happening right now if her campaign team could scrounge up a goofy mad scientist, a DeLorean and a map to Wisconsin (among other places).

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To some liberals, no doubt, the very notion of a second President Clinton’s first 100 days conjures visions of perpetual sunshine, a cancer cure and the invention of no-calorie chocolate. But how much would Washington, under a Democratic president and Republican-controlled Congress, have changed really? Below a good-faith guess at what those first few weeks in office really might have been like:

Day 1:

In a speech carefully prepared over many months, and drained of lines that might stoke controversy, Hillary Clinton calls for bipartisan unity, avoids laying out a detailed policy agenda and salutes an historic victory for women while former President George W. Bush struggles with his rain poncho. No comparisons are made at any point during the day between President Clinton’s and President Obama’s inauguration crowds. A Gallup poll published that morning shows her approval rating at a respectable 52 percent favorable, 39 percent unfavorable.

Day 2:

Bill Clinton’s office announces that he will officially be known as “The First Gentleman.” The Republican-controlled Senate swiftly confirms the vast majority of President Clinton’s nominees, most of them well-known Washington hands, including Secretary of State Joe Biden and Republican Lindsey Graham as secretary of defense.

Day 4:

In a lengthy piece in the New York Times , “sources close to former President Bill Clinton” credit him for his wife’s razor-thin election victory with an “eleventh hour strategy change” that focused on North Carolina and Florida.

Day 5:

In his first interview since the inauguration, Donald Trump tells the Washington Post that “terrible” campaign advisers told him to focus on Michigan and Wisconsin instead of crucial states of Florida and North Carolina. He blasts “horrible gutless Republicans” like Jeb Bush for abandoning him. In response, Bush tweets: “Grow a pair.”

Day 6:

Echoing the earlier piece in the Times, the Washington Post offers a tick-tock of the final weeks of the Clinton-Trump race, characterizing Bill Clinton as “the mastermind” of a narrow electoral vote victory. “Nobody understood the mood of the country better than he did,” says a source. “Not even Hillary.”

Day 7:

The White House announces that Bill Clinton, as first gentleman, will immediately embark on a months-long global goodwill tour, with stops in Bangladesh, Botswana, Ecuatorial Guinea and Timbuktu.

Day 8:

With the Republican Party in disarray, and plunging in popularity, two moderate Republican senators, Susan Collins and Lisa Murkowski, announce that they will henceforth be independents. They will caucus with the Democrats, effectively giving them a 50/50 majority (with Vice President Tim Kaine the tie-breaking vote).

Day 11:

Chelsea Clinton is named senior advisor to the president and director of the brand new White House Women’s Empowerment Office. She takes an office


Daniel Halper joins Drudge Report

Matt Drudge, the founder and editor of the influential site, has hired Daniel Halper, two sources familiar with the move confirmed to POLITICO.

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