Tax-Cut Era Has Come to an End, Guggenheim’s Millstein Says

(Bloomberg) -- The “investor class” will have to pay for the ballooning debt stemming from the Covid-19 crisis, according to Jim Millstein, the co-chairman of Guggenheim Securities who led restructuring efforts at the U.S. Treasury Department after the financial crisis.

“There is one clear implication: The era of tax cuts is over,” Millstein said Monday in a Bloomberg Television interview. It's “inevitable” that the wealthy will face greater taxes, he said. “People who have been fortunate enough to be able to make significant incomes are going to have to make a greater contribution.”

The restructuring banker, whose firm is working with companies in the travel industry burned by the pandemic, said he's concerned about businesses taking on more debt while still unable to generate revenue during the economic lockdown.

He said unprecedented support by the U.S. Federal Reserve to backstop credit markets has benefited investors in a way they'll eventually have to pay back.

“That kind of support for the investor class is ultimately something the investor class is ultimately going to have to pay for,” Millstein said. “If we're really creating a backstop against credit losses then, you know, eventually, if this government is doing that much for that class, then that class is going to have to start paying for it.”

He said support for personal income is the best method of intervention, through direct payments to individuals.

Paul Reilly, chief executive officer of Raymond James Financial Inc., cautioned that taxing the wealthiest isn't that straightforward.

”Some have tried to tax the 1%, but truthfully there's not enough money there to tax the 1%,” James said. “Given these economic levels, if you really started repaying debt, taxes would have to go up really across the board.”