The anti-tax group, Americans for Tax Reform, said today that Donald Trump’s tax reform proposal meets its “Taxpayer Protection Pledge” to oppose net tax increases.
In this Presidential cycle, Grover Norquist’s Americans for Tax Reform got every GOP candidate, except Trump, to sign “The Pledge” to never raise taxes for any reason.
But when Trump released the details of his tax reform plan today, it was scored by ATR as offering lower tax-rates than current law, despite a large hike for some Wall Street investors.
“Trump’s plan is certainly consistent with the Taxpayer Protection Pledge,” said Norquist. “This plan is a reform, not a tax hike.”
According to Trump’s team, the plan is intended to be revenue neutral under the nonpartisan Congressional Budget Office’s dynamic scoring analysis that takes into account the potential economic gains that could flow from the proposed tax changes.
In Trump’s plan, the only group that gets a big tax increase is Wall Street’s fabulously rich and liberal hedge and private equity fund managers. These fund managers can shield a major portion of their accumulated wealth from taxes by describing it as low-tax “carried interest.”
The 50-year-old provision was originally passed as an incentive for risk-takers to make long-term capital investments, such as putting up a building, starting a small business or investing in company stock. But a hedge and private equity manager operating as a “general partner” can roll over his or her annual non-risk fee-as-a-percentage-of-profits income (usually 20 percent of profits) into a “carried interest” in their client’s risk-taking portfolio. The manager then compounds income tax free until cashing out after a year or more, paying about half the statutory income tax rate.
With her polls beginning to slump in June, Hillary Clinton voiced her opposition to the carried interest loophole when she launched her presidential campaign on June 12 with the statement: “While many of you are working multiple jobs to make ends meet, you see the top 25 hedge fund managers making more than all of America’s kindergarten teachers combined,” yet “paying a lower tax rate” than teachers must pay.
The ATR listed the other major elements of Trump’s tax plan as follows:
- Individual tax brackets of 0, 10, 20, and 25 percent versus a top rate of 39.6 percent today. The “zero bracket” would apply to about 37 percent of married couples’ first $50,000 of income and half for singles.
- Capital gains and dividends tax reduced from 23.8 percent to 20 percent.
- Business tax rate falls from 35 percent to 15 percent.
- Inheritance Tax, Alternative Minimum Tax and Marriage Penalty tax are eliminated.
- All itemized deductions, except for charitable contributions and mortgage interest, subject to a steeper means-test phase-out.
- “Deemed repatriation” tax of 10 percent on $2.1 trillion of U.S. subsidiary corporate profits in overseas accounts and immediate taxation on future overseas profits.
- Life insurance tax-advantage for high-income taxpayers repealed.
- Business interest deduction capped.
- Number of deductions and credits eliminated for high-income taxpayers large firms. will also be eliminated, but these are not specified.
For further information on the American for Taxpayers, click here for their website.
In a debate four years ago, all the Republican candidates for President were asked at a GOP debate if they were offered a deal to cut $10 in budget spending cuts for every $1 of tax increases, “Who on this stage would walk away from that deal?” Every Republican on the stage raised their hands, because they were opposed any tax increase. Only former Utah Gov. Jon Huntsman, who finished seventh in Iowa and third in New Hampshire before dropping out of the race, refused make the commitment.