Since Donald Trump launched his theatrical campaign for the presidency three months ago, he has stood out from the rest of the field. So it came as a surprise on Monday when Trump released a tax plan that largely blends into the crowd.
The plan is, in most ways, a traditionally structured package of Republican tax policies — so much so that several conservative economists likened it to the plan put forward by Jeb Bush, with whom Trump would admit to having little common ground. Trump is proposing to simplify the individual-rate structure, slash individual taxes across the board — with particularly dramatic cuts for the top-tax bracket — and lower the corporate-tax rate 35 to 15 percent. Where his plan stands out, conservative tax-policy experts say, is in just how much it would add to the deficit, his claims to the contrary notwithstanding.
“It’s a fantasy plan,” says AEI’s James Pethokoukis. The plan has yet to be thoroughly analyzed to produce an exact figure, but based on what is out there, Pethokoukis says, “I’m sure it would lose more money than any other tax plan being offered in either this presidential cycle or previous ones.”
That’s saying something, because Trump’s proposal arrives in an election environment where other candidates have not been shy about putting forward plans that would increase the deficit. According to the conservative Tax Foundation, Marco Rubio’s plan would increase the deficit by $4 trillion over the next decade, not counting any increased economic growth it might produce. Bush’s plan would add $3.6 million to the deficit over ten years, again, not accounting for any resulting boost in growth.
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Tax Foundation economist Alan Cole expects Trump’s plan, once analyzed, to amount to an even larger decrease in revenue. And he expresses skepticism that the elimination of deductions, repatriation of American corporate money, and slight increase in the carried-interest–tax rate with which Trump proposes to cover that loss will actually do the trick.
“You would have to pay for it by doing additional spending cuts — and probably lots of them,” Cole tells National Review.
Trump, in his press conference Monday, said the economic growth generated by his presidency would make up for the lost revenue. “We’re reducing taxes, but at the same time, if I win, if I become president, we will be able to cut so much money and have a better country,” Trump said. “We won’t be losing anything.”
While Trump’s candidacy has created mass upheaval within the wider Republican primary more broadly, his tax plan isn’t making many waves.
While Trump’s candidacy has created mass upheaval within the wider Republican primary more broadly, his tax plan isn’t making many waves.
“It’s not a terrible plan at all,” says Veronique de Rugy, senior research fellow at the Mercatus Institute. “I think it’s very similar to the [Jeb] Bush tax plan.”
Several hours after Trump announced his plan, Bush ran an op-ed in USA Today extolling the virtues of the tax plan he released earlier this month, and contrasting it with Hillary Clinton’s plan. He made no mention of Trump.
#share#Trump’s plan would zero out the income tax for individuals making less than $25,000 a year or couples making less than $50,000 a year.
As for Americans in the top bracket, of which Trump is one, the business mogul claimed today that the plan would “cost me a fortune.” But conservative economic experts say the plan’s biggest benefits will still likely accrue to the wealthiest, who will see their income-tax rate cut more than any other group, from 39.6 percent to 25 percent.
That reality runs somewhat counter to Trump’s populist rhetoric about helping the middle class and punishing hedge funds.
“The middle class is getting clobbered in this country,” Trump told Bloomberg in August. “You know, the middle class built this country, not the hedge-fund guys. But I know people in hedge funds that pay almost nothing. And it’s ridiculous.” At the second Republican primary debate earlier this month, Trump reiterated his claim about “hedge-fund guys” paying next-to-nothing in taxes, and predicted that when he put out his tax plan, the hedge-funders “won’t like me as much as they like me right now.”
#related#Trump’s plan would increase the tax rate on carried interest, something that would force hedge funds, among other companies, to pay more money. It’s a move that has drawn protests from several conservative economists — the Competitive Enterprise Institute’s John Berlau calls it “impractical,” and de Rugy says she would prefer it not be changed. Still, the increase is slight — from 23.8 percent to 25 percent — and the move puts Trump in sync with a number of other Republicans: Bush’s plan would actually raise the carried-interest–tax rate more than Trump’s, to 28 percent, while Former Ways and Means Committee Chairman Dave Camp proposed raising the rate to 35 percent in 2014. What’s more, Trump’s plan would apply the increase to fewer people, as it seems to distinguish between hedge funds and other types of partnerships that deal with carried interest.
“For all his vaunted populism and ‘he’s gonna soak it to Wall Street’ talk, he really doesn’t,” says Pethokoukis.
Politically, Trump’s proposal was met with skepticism by the conservative Club for Growth, who put out a statement noting just how much the plan departed from policies he has supported in the past. In some ways, it is exactly those fears that the proposal seems designed to allay. Trump is simultaneously accused of not being a real Republican — because of his past donations to Democrats and Democrat-friendly stances on issues — and of being too far to the right for some of his rhetoric and proposals on immigration policy.
His tax plan, however, puts him pretty squarely in the Republican mainstream.
— Alexis Levinson is the senior political reporter for National Review.