History shows that corruption rarely comes in black and white; it thrives on shades of gray. Did Halliburton get a multi-billion dollar, no-bid contract to operate Iraqi oil wells because it was the best deal the government could get, or because Vice President Dick Cheney wanted to help the company he had led for five years, and in which he still held stock options? Hank Paulson placed his assets in a blind trust when he became treasury secretary—but was that enough to make him truly disinterested in the fate of Goldman Sachs, the bank where he had worked for more than 30 years, during the financial crisis of 2008? Sophisticated investors even seem to expect that powerful officials will favor companies with which they have relationships: According to research by Daron Acemoglu, Simon Johnson, Amir Kermani, Todd Mitton, and me, financial institutions with connections to Tim Geithner enjoyed extraordinary stock-price gains when he was nominated to be treasury secretary in November 2008.
The potential to use public power to further private interests goes far beyond a president cutting a good deal for his own company. In fact, the single biggest thing Donald Trump could do to enrich his family is something that has nothing to do with his business interests: repealing the estate tax.
Though Trump has never disclosed his precise net worth—Forbes puts it at $3.7 billion—his family stands to lose 40 percent of it to the estate tax. Put another way, eliminating the tax would increase his family’s after-tax wealth by two-thirds—more than $1 billion, based on the estimate from Forbes. It’s hard to imagine anything the president-elect could do that would increase the value of his businesses by that much.
Trump will be able to boost his family’s wealth without the slightest hint of impropriety, because estate-tax repeal has been a Republican Party priority for years. But why is getting rid of a tax that affects only the richest 0.2 percent of families at the top of the Republican majority’s to-do list? Because, as the political scientists Martin Gilens and Benjamin Page have shown, our political system responds to the preferences of the very wealthy, not those of ordinary people.
Of course, proponents wouldn’t describe repealing the estate tax as a giveaway to the very rich. Instead, from President-elect Trump and House Speaker Paul Ryan on down, they argue that, because it only affects money a person doesn’t use during his or her lifetime, the estate tax discourages savings, so repealing it will increase savings and investment, turbocharging economic growth. Economists who have surveyed the recent research, such as Eric Toder and Kim Rueben at the nonpartisan Tax Policy Center and Jane Gravelle and Donald Marples at the Congressional Research Service, however, find that the evidence for this theoretical proposition is flimsy at best. This type of naive or disingenuous belief that the world operates according to the dictates of Economics 101 serves to disguise the interests of wealthy politicians and their even wealthier donors as sound economic policy. (And estate-tax repeal is only the tip of the iceberg. According to research by the Tax Policy Center, eliminating the estate tax would cost $174 billion over the next 10 years; Trump’s proposed 15 percent tax on corporations and other businesses is worth $3.2 trillion.)