GOP Nominee Donald Trump disclosed his much-hyped tax strategy after a summer of rhetoric that guaranteed to crack down on the most affluent Americans, including hedge fund managers. His populist discussion of taxing billionaires had progressive hero Senator Elizabeth Warren saying the notion was backed by her, although she didn’t support his candidacy as a whole. Many liberals warned that Trumps discussion was simply that, and his new tax plan would disclose his real policies would wind up working for the advantage of the ultra- by favoring corporations wealthy. Surprise, surprise they were appropriate.
Donald Trump and the populist crack down on
By close the carried interest loophole used by hedge fund managers and others, allowing them to pay less in taxes by paying capital gains rates on their income trumps new tax strategy promises to quit letting hedge fund managers get away with murder. Among the difficulties with that? It virtually removes the effect of the loophole close when you factor in the severe decrease in income taxes of exactly the same hedge fund managers.
The billionaire frontrunner for his party’s presidential nomination has been swearing to make hedge fund men pay more by removing the carried interest tax write-off, which taxes private equity and hedge fund gains at 23.8 percent. But Trump’s strategy also reduces the top income tax bracket on the most affluent Americans to 25 percent from 39.6 percent, effectively minimizing the increase that the real estate star has spent months marketing.
Another glaring issue with Trumps strategy in allegedly damaging bottom line is the strategies suggestion to cut corporations taxes to 15% to hedge fund managers. A senior fellow at the Urban-Brookings Tax Policy Center, Steven Rosenthal, points out hedge fund managers could use this wind up paying less in taxes than the are and to restructure how they’re paid. Based on Rosenthal:
Now, along with their interest that is carried, managers of hedge funds bring in a fee equivalent to 2% of assets under management. Under todays code that 2% is taxed as ordinary income.
Hedge funds can be formed as small business ventures. So they could reap the benefits of another proposition in Trumps tax strategy to lower the tax rate on small business associates to 15%.
Possibly a hedge fund could increase the direction-fee part of fund managers damages, and lower or remove the interest that is carried, so more of their income would be taxed at 15%, Rosenthal said.
I think economical prodigy Trump, who promises to be a specialist on the tax code, missed these glaring holes.
Rhetoric vs. reality: other things to keep in mind when your misinformed friends, family members, co-workers and acquaintances tout Trumps tax strategy.
Rhetoric: Trump promises he’ll conserve the middle class by offering ground-breaking rests where nearly 50% of Americans dont pay national income taxes.
Fact: Most of those families already pay no federal income tax. Based on the Tax Policy Center, about 45% of American homes WOn’t owe any federal income taxes under the present tax code. Even more troubling to the middle and working class: Trump doesnt say what he’ll do with the Earned Income Tax Credit. The EITC is a lifeline for many of the low income Americans and has extensive political agreement on its effectiveness.
Rhetoric: Trumps tax strategy will make the rich pay their reasonable share.
Fact: True, the duration reasonable share in itself is up for discussion, but Trumps tax strategy wont damage the wealthy almost as much as hed have you believe. Actually, they’re the real victor in this strategy. As Politico reports:
The top tax rate dropping from 39.6 percent to 25 percent will give them a tremendous windfall, as will removing the AMT, the estate tax for their heirs, and the Obamacare surtax on capital gains and dividends. The enormous reduction in the corporate income tax may also gain the well off.
Rhetoric: Trumps tax strategy is price neutral.
Reality: New factory outlets are falling over themselves to call bullsh*t on this claim. Trump is proposing enormous tax cuts on corporations and people, with the claim this will bring their cash, and companies, back to America. Based on Bloomberg Politics:
Former chief economist for Vice President Joe Biden, Jared Bernstein, said the strategy was favored by him before he understood about what was in it.
I didnt enjoy it that much to begin with, and I enjoyed it better before I learned more about it, Bernstein said. I believe this is another one of those exceptionally regressive strategies that loses oceans of revenue from the treasury, including that Trumps claims that losses will be offset by increased national production are credible, not implausible, and not right.
Rhetoric: Trumps tax strategy is a daring, out-of-the-box strategy that’s completely unlike the other Republican candidates.
Reality: Its actually only your basic supply side old-fashioned tax strategy that closely reflects other nominees, in particular, Jeb Bush. As the New York Times put it:
You could call Mr. Trumps strategy a higher-energy variation of the tax strategy Jeb Bush declared earlier this month: similar in construction, but with lower rates and broader tax brackets, meaning individual citizens would pay even less than under Mr. Bush, and the authorities would lose even more tax revenue.
See Donald Trumps tax strategy neglect as he continues what we can only expect is the midst of the ending:
What makes all the neglects of Trumps Tax strategy especially pitiful, is that it’s his business sense that is excellent and economic know how that’s garnered so many of his followers. Way heard hes only a straight-shooting businessman who repair the market and can cut the political BS.
Trump might still be able the GOP frontrunner, but recent surveys have him neck-in-neck with Ben Carson, and Fiorina and Rubio gaining ground behind them. This tax strategy that is terrible will be one of the first nails in the coffin of this king of the clown car.
Featured picture via Gage Skidmore on Flickr.