Club for Growth and Populist Taxes

Donald Trump
AP Photo/LM Otero

Donald Trump is currently involved in a vicious argument with the Club for Growth over tax policy. The Club for Growth is running ads against Trump in Iowa accusing him of several offenses against growth-oriented conservatism, including a proposal to raise taxes. They added a bare-knuckle punch proclaiming Trump to be more liberal than Hillary Clinton, or even Bernie Sanders, and called him “the worst kind of politician.”

Trump’s response included producing a copy of the million-dollar donation letter from the Club for Growth he turned down, and accusing them of lying about his tax proposals as revenge for his refusal to donate:

Trump has not released a tax reform proposal yet, so until he does, attacking him as a worse tax-and-spender than the Democrats is over the top… way over the top in the case of Bernie Sanders, who wants to seize and spend other people’s money on a staggering scale, beyond even what Barack Obama has done.

No one who has listened to a Bernie Sanders speech can possibly think Trump, or any other Republican candidate, would be worse on taxes and spending than the socialist senator from Vermont. It’s downright dangerous to underestimate Sanders that way. A key part of his appeal is his vow to wage war against capitalism with an intensity that Obama and Clinton, both plugged into Wall Street culture, could never manage.

When Sanders recently spoke to a conservative crowd at Liberty University, he declared no one in the room could make the case that America is “a just society, or anything resembling a just society, today,” because there is “massive injustice in terms of income and wealth inequality,” due to a “rigged economy designed by the wealthiest people in this country to benefit the wealthiest people in this country at the expense of everybody else.”

Nothing Donald Trump has said about his view of government’s role in the private-sector economy comes anywhere near what Sanders envisions. Trump has vaguely endorsed the idea of raising taxes on high income earners, in terms similar to those used by nearly all millionaires who approve of higher tax rates for their income bracket: “I would be happy to pay a lot more if it would help solve our country’s many problems.” He has been especially forceful about taxing what he describes as “the paper-pushing hedge fund guys.”

He has also expressed a desire to lower taxes for the middle class on several occasions, and discussed growth-oriented reductions to corporate taxes, while also criticizing certain corporate behavior, such as the “inversion” practice of merging with foreign companies and then shifting income overseas to escape U.S. tax rates. It’s not clear if he plans to punish any of these disfavored activities with tax penalties.

However these views might influence Trump’s concrete proposals, it’s absurd to accuse him of having anything close to the Bernie Sanders agenda in mind.

The Left will happily outbid any Republican’s tax-the-rich proposal. Trump seems to be leaning toward a higher rate for top earners, a lower rate for middle-income workers, and maybe a bit of the restructuring usually described as “tightening loopholes.” It would be more interesting if he proposed a dramatic reform, along the lines of the Flat or Fair Tax, which also tweaked effective rates for high- and middle-income earners.

Sanders, on the other hand, is eager to begin the wholesale looting of American taxpayers, with at least $18 trillion in new spending as his opening bid.

There is no way to finance that level of socialist redistribution by modestly raising taxes on hedge-fund managers or billionaires. It cannot be done by outright confiscating the wealth of those groups… although while we’re on the subject, Sanders has floated the idea of 90 percent tax rates. If Sanders finances his agenda with more Obama-style madcap deficit spending today, he’ll just be setting up massive economy-killing tax increases for tomorrow – and anyone who resists will be compared to a cheapskate skipping out on his bill at a diner, as Obama is fond of doing.

If I could offer some advice to Trump, I would suggest avoiding “tax the rich to benefit the middle class” ideas. It’s easy to see their populist appeal, and lowering the tax burden on middle-income employees and entrepreneurs is certainly a desirable pro-growth goal.  However, government spending and regulatory costs are the critical problem.

Also, the Left has a long history of weaseling out from any deal that would “pay” for either targeted tax relief or fiscal discipline with higher taxes. Tax hikes to “pay off the deficit” only lead to more spending. Democrat minorities in Congress don’t proclaim themselves helpless and refuse to fight for what their base demands, as Republicans do. I would not assume that even a Republican president backed by GOP majorities in both houses could implement a carefully balanced tax deal without significant liberal revisions. Conceding that the rich aren’t paying their “fair share” at the outset of the deal gives the Left too much to work with.

Taxing the rich to give cuts to the Middle Class provides temporary relief for the latter at best. The Leviathan State will always find ways to claw that Middle Class money back. They have to. The Middle Class is too large – it’s the source of all serious money in the country. Rich as the rich might be, they collectively don’t generate enough income to feed Leviathan’s appetites, not even at frankly confiscatory rates that would destroy the engines of capitalism.

You may notice that long decades of soaking the Evil Rich to provide benefits to the poor and middle class have not produced any sense of gratitude, or justice served, among the beneficiaries. On the contrary, class resentment, the sense of entitlement, and feelings of grievance have only grown worse. Once they grew accustomed to the idea that they “deserve” things they have not earned, and that people who did earn them don’t really “deserve” to keep them, people became willing to view free commerce as exploitation, and government control as their only hope for “social justice.”

Also, never forget that the political definition of terms like “rich” and “middle class” is extremely fluid.  The early Obama years gave us the bleak socialist comedy of Democrats scrambling to re-define “millionaires” as people who make $200,000 per year. The worst of the taxes our middle-class workers and entrepreneurs are groaning under, such as the Alternative Minimum Tax – indeed, the income tax itself – were originally pitched as special levies on a tiny number of super-rich people who needed to “pay their fair share.”

The fiscal problem with government is not insufficient revenue – it’s excessive spending. This government is ridiculously over-funded. The extra money is splurged on a vast federal payroll, which is unionized into an army marching perpetually against the interests of taxpayers. It’s spent on “mission creep” efforts to expand every agency and department’s power and wealth, by finding new aspects of American life for it to control. It’s poured into the pockets of Big Government’s cronies, and flat-out stolen by fraudsters whose task is made easier because few in Washington care about the sea of money they wade through every morning. They know there will always be more.

Donald Trump is a sharp enough businessman and deal-maker to understand all this. He has often spoken of the need for Republicans to drive harder bargains with tougher opening bids, criticizing them for conceding too much at the outset. I recommend he drive a very hard bargain tax reform. He isn’t going to bid weaker on behalf of American taxpayers than Bernie Sanders or Hillary Clinton.


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