The following is a transcript of an interview with IBM vice chairman Gary Cohn that aired on March 10, 2024.
MARGARET BRENNAN: And we’re joined now by the vice chairman of IBM, Gary Cohn, who also served as former President Trump’s top economic adviser in the White House. Welcome back.
GARY COHN: Great to be here.
MARGARET BRENNAN: I want to talk to you about a few things with the economy, but also what President Biden took aim at in terms of taxes, because you were the architect of this tax policy. Tax rates for most Americans could go up as soon as December of 2025. Because that’s just an expiration date unless Congress acts. Secretary Yellen said if Biden wins reelection, he’ll seek tax cut extensions only for people earning less than $400,000 a year. What do you think of that plan?
COHN: So Margaret, let me explain. So when we redid taxes in 2017, the personal side of the tax code expires December 31 of 2025. So as of January 1 2026, we revert back to the very complicated tax code that we had in 2017. So people have to remember that it was extremely complicated. You bring in all these things as personal deductions, itemized deductions, now you bring it in- in- in- SALT deductions. We raise tax rates–
MARGARET BRENNAN: State and local taxes.
COHN: Right. We raise tax rates, but you bring in all the loopholes that we got rid of. So what we tried to do when we rewrote taxes, and we tried to simplify it, and we tried to get rid of all the loopholes that basically the wealthy people in America use. And that was a way that we tried to- to make the tax code fair. And the data shows that we’ve made the tax code fair. If you actually look at who pays taxes in this country, the bottom 50% of earners in the United States pay 2.3% of tax collected, and the top 10% pays over 70% of tax collected in this country.
MARGARET BRENNAN: That is- that sounds like the exact opposite of what President Biden described in the State of the Union, because he took aim at billionaires, he said they pay a lower tax rate than teachers, he proposed minimum taxes of 25% on billionaires. How do you respond to that?
COHN: Well, I- again, I think you’ve got to take one little step back here. A billionaire is a measure of net worth. It’s not a description of their taxable income. You could be a billionaire and have no taxable income, you could not have a billion dollars and have a high taxable income. So when you look at the way people are–
MARGARET BRENNAN: Because it could be, you’re just sitting on assets.
COHN: You’re just sitting on assets, and you could be sitting on illiquid assets, you could be sitting on liquid assets. We do a very good job in this country of taxing income. That’s what the Constitution talks about. The Constitution talks about taxing your income. There is no income in this country, unless you buy a tax free bond, that doesn’t get taxed at a minimum of 20%, whether it’s interest or dividends or capital gains. So there’s no billionaire in this country that has income that is not paying at least 20%.
MARGARET BRENNAN: But the President is tapping into, at least a perception, that wealthy people have far more of an advantage, and that corporations are taking advantage of the little guy. I mean, he went down to the 10% fewer Snickers in the bag analogy in his speech–
COHN: He did, he did.
MARGARET BRENNAN: –basically saying you’re getting ripped off. So what do you make of- of that idea, though, and- and the explanation he’s trying to make for why people are experiencing inflation, even though the rate is coming down?
COHN: Well, let’s- let’s talk about inflation for a minute. Because I think it’s a really important concept for everyone to understand. Inflation has a compounding effect, meaning as you look at inflation, year over year, you’re adding up those numbers. You’re not starting at a 0 every year. So if we had 6% inflation last year, 7% inflation, and now we have 4% inflation, that’s 10% inflation. So if you take a basket of groceries at the beginning of 2020, just a simple basic basket that cost $100, it costs well over $125 today, because those 4% one year and 7% one year and 7% the next year, they add up, they’re cumulative. So there’s a huge cumulative effect, inflation.
MARGARET BRENNAN: So, when people are being told, consumers, you’re wrong, inflation’s- no, they’re right.
COHN: They’re completely right.
MARGARET BRENNAN: It is, actually, more expensive.
COHN: They’re completely right. And what they’re more right about is we, at least finally, have gotten to the position where wage growth is faster than inflation. But we had not been there until the last few months. So people were losing purchasing power. And that’s why people were angry, and then take on top of that the high interest rate environment, where if you thought you might have been in a position to buy a house, because you save money, you go out to get a mortgage at 7% or 8%, you can’t afford a house. So people got very frustrated because the cost of their everyday lives got very expensive, and the cost of investing in their future by buying a home got nearly impossible.
MARGARET BRENNAN: So, President- former President Trump is campaigning, talking a lot about the frustration consumers have, and I want to ask you specifically about this idea he’s floating, of tariffs. He’s said tariffs as much as 60% on- on China. Last night he outlined these plans.
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DONALD TRUMP: If China or any other country makes us pay a tariff or tax, let’s say 100% or 200%, we will make them pay a reciprocal tariff of 100% or 200% right back. It’s called you screw us and we screw you, and everybody’s happy.
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MARGARET BRENNAN: You’ve said on this program in the past, Trump’s tariffs in the last administration hurt consumers. Will this hurt consumers?
COHN: So remember what a tariff is. A tariff is a tax that the importer pays at the border of the United States. That tariff then gets passed on to consumers here in the United States. It is a consumption tax. Now look, I want to refine that a little bit. If we manufacture those products in the United States, and we’re using a tariff to protect our manufacturers, because China can produce cheaper, because they don’t pay fair wages, they don’t have health care, they don’t have to have a return on capital, I’m okay with the president or- or the president nominee or whoever it is putting a tariff on. But if we’re putting tariffs on things that we do not manufacture in this country, and everyday citizens need to consume those products, that is highly inflationary, and it will really have a dramatic impact on our economy.
MARGARET BRENNAN: So when he’s talked about tariffs on Mexico or tariffs on other countries, you’re saying that’s going to cost consumers more at the end of the day?
COHN: So if you’re buying something, if you’re buying a baby stroller or baby formula, and it costs x today, and it’s now x plus 60% at the border, you are paying that as the consumer. No one’s absorbing those tariffs except for the ultimate consumer. And- and if you have to buy those goods, you’re going to have an inflationary impact on the economy.
MARGARET BRENNAN: So in terms of what you are thinking, as someone from the business community going into this election, there’s the presumption that the business community will be with Trump. Do you have any misgivings about him and his plans, given what he has done, including bringing autocrats to Mar-a-Lago as he did with Viktor Orban this week?
COHN: Look, I think the business community at this point is still open minded. I think the business community really wants to hear the policies. You know, there’s a lot of big policies out here- we- we touched on taxes. You know, what’s going to happen in taxes by the end of the- end of ’25, where are we going to be- that’s very important. Energy policy, very important to business. Business consumes a lot of energy. We haven’t even talked on AI. AI is a huge consumer of electricity, it’s going to change our demand profile dramatically in this country. The southern border, what’s gonna go on at the southern border. Legal- legal immigration, we need skilled laborers in this country, we need to bring in 2 million skilled laborers in this country. The business community is going to look at those topics and they’re going to look at the platforms of the candidates. And I think that’s going to have a huge impact on how they vote.
MARGARET BRENNAN: You’re saying it’s still open- you would be open to voting for either Joe Biden or Donald Trump at this point?
COHN: I think based on those policies that’s going to influence the corporate community, because those are the factors that really impact how they can run their businesses. Look, I can throw regulation on there, the ability to- to merge, the ability to consolidate, the ability to buy back stock, all of those things really have dramatic impact on the corporate community and how they look at the campaigns.
MARGARET BRENNAN: So President Biden, in his State of the Union said, Wall Street didn’t build America, unions built America, but he ad libbed, but they’re not bad guys. So you’re not a bad guy, Gary, according to Joe Biden–
COHN: — Thank you. I appreciate that, I appreciate that.
MARGARET BRENNAN: But, I mean, in- in the rhetoric alone, does there need to be outreach or you’re saying it’s actually going to come down to the dollars and cents of it?
COHN: There has- there has to be outreach. There has to be outreach. The current administration is an administration that is standing in the way of business and business growing and business trying to grow jobs. You know, business want to invest capital in this country. One of the other things we did in the 2017 tax plan is we made companies repatriate their offshore earnings. Companies want to reinvest that capital in the United States, but they want to make sure they can reinvest it in a sound way that will give their shareholders a return. When they invest the capital, it creates jobs. But they want to make sure the regulatory environment makes sense for them to invest capital.
MARGARET BRENNAN: Gary Cohn, thank you for coming in. We have to leave it there.
COHN: Thank you for having me.
MARGARET BRENNAN: We’ll be back in a moment.
