A Project of The Annenberg Public Policy Center

Bush’s Hollow Attack on Trump


Jeb Bush mocked Donald Trump by saying liberal Sen. Elizabeth Warren supports Trump’s “tax plan.” Warren simply praised Trump’s call to raise taxes on hedge fund managers. Bush’s own tax plan calls for that very same thing.

Indeed, Trump hasn’t released an actual tax plan — he reportedly will do so later this month — and his comments about taxes on the campaign trail have been ambiguous, at best.

Trump on Taxes

In an interview with Time published on Aug. 20, Trump said he was open to considering a fair or flat tax but said it would probably be “simplest” to “leave the tax code the way it is and simplify it.” How would that look? Trump said only that he wanted to “save the middle class” and that he didn’t think “hedge fund guys” were paying their fair share. He also said he would not propose any changes that would result in an increase in the net amount of taxes.

Trump has since taken several shots at hedge fund managers, who are paid based on a percentage of their portfolio and the portfolio’s profits. For investments held for more than a year, those profits are called “carried interest” and are taxed as capital gains. Capital gains are taxed at a lower maximum rate — 23.8 percent, including a 3.8 percent tax in the Affordable Care Act — than most ordinary income, which carries a top tax rate of 39.6 percent.

During an interview on CBS’ “Face the Nation” on Aug. 23, Trump said of hedge fund managers, “These are guys that shift paper around and they get lucky. … Half of them, look, they’re energetic, they’re very smart, but a lot of them, it’s like they’re paper pushers. They make a fortune, they pay no tax. It’s ridiculous, OK? … The hedge fund guys are getting away with murder. They’re making a tremendous amount of money. They have to pay taxes. I want to lower the rates for the middle class. The middle class is the one, they’re getting absolutely destroyed.”

And in an Aug. 26 interview with Bloomberg’s “With All Due Respect,” Trump said he would “take carried interest out, and I would let people making hundreds of millions of dollars a year pay some tax, because right now they are paying very little tax and I think it’s outrageous.”

One of the hosts, John Heilemann, noted that that would affect not only hedge fund managers, but also people in limited real estate partnerships “of which you are in a fair number.”

“So you are proposing you’d like to raise taxes on yourself?” Heilemann asked. 

“That’s right. That’s right. I’m OK with it,” Trump said. “You’ve seen my statements, I do very well, I don’t mind paying some taxes. The middle class is getting clobbered in this country. You know the middle class built this country, not the hedge fund guys, but I know people in hedge funds, they pay almost nothing and it’s ridiculous, OK?”

Bush on Taxes and Trump

In an appearance on ABC’s “The View” on Sept. 8, Democratic Sen. Elizabeth Warren of Massachusetts praised Trump’s stance on the so-called tax loophole for hedge fund managers. “Donald Trump and I both agree that there ought to be more taxation of the billionaires, the people who are making their money on Wall Street,” Warren said (starting at about the 3-minute mark).

Warren and Trump on the same page? Bush used that as fodder to attack Trump’s conservative credentials.

“I mean, when Elizabeth Warren. … Yesterday, I almost like, spit up my Diet Coke — Elizabeth Warren applauded Donald Trump for his tax policies,” Bush said on CNBC’s “Squawk Box.” “I mean, come on. This is ‘Alice in Wonderland’ time here.”

Bush hit on the same theme in an interview on NH1 News in New Hampshire on Sept. 10: “Donald Trump’s tax plan was supported by Elizabeth Warren. Wow. She’s thankfully critical of my plan. That makes me feel better. I would have lost my footing if Elizabeth Warren was saying good things about my plan. But she likes Trump’s. That’s the problem with Donald Trump. He says things off the cuff, he hasn’t thought them through. He’s not grounded in conservative philosophy.”

But Warren never offered blanket praise for Trump’s “tax policies” or “tax plan.” As we said earlier, there really isn’t a Trump tax plan yet, at least not one that has been publicly released. Warren’s praise was limited to Trump’s stated support for taxing profits made by hedge fund managers as ordinary income.

And ironically, that’s one issue on which Warren, Trump and Bush seem to agree. Bush released a detailed tax plan on Sept. 9, and it calls for taxing carried interest at 28 percent, Bush’s proposed highest tax rate for ordinary income.

Backgrounder: Jeb Bush’s Tax Reform Plan: The Reform and Growth Act of 2017, Sept. 9: All non-investment income will be taxed at ordinary rates. That is, only those putting real capital at risk will be able to benefit from the lower rate on capital gains. Specifically, “carried interest” without real capital at risk will no longer receive the same tax treatment as real investment income, but instead will face a top rate of 28 percent.

As the lede of a Sept. 10 story in the New York Times put it: “What do Jeb Bush, Elizabeth Warren and Donald J. Trump have in common? They would like to raise taxes on ‘the hedge fund guys.’ ”

Grover Norquist, president of the anti-tax group Americans for Tax Reform, dismissed Bush’s position as an attempt to neutralize “the populist impulse that Trump was tapping into” and said the revenue it raises would be fairly insignificant.

Indeed, when Obama proposed taxing carried interest as ordinary income as part of his 2016 budget proposal, the Joint Committee on Taxation estimated it would bring in an additional $15.6 billion over the next 10 years. (Bush’s plan, which proposes a top tax bracket of 28 percent, as opposed to the current 39.6 percent, would bring in even less.)

That amounts to a “rounding error” in the federal budget, Roberton Williams, the Sol Price fellow at the nonpartisan Tax Policy Center, told us in a phone interview. “Bottom line, there isn’t a lot of money there.” Alone, he said, it would not provide much room for relief to middle-class taxpayers, as Trump suggests.

But when it comes to tax plans, the full impact lies in the details, and there isn’t enough to go on from Trump yet to know how his plan might affect lower-, middle- and upper-income taxpayers, Williams said.

“We don’t know what he’ll release,” Williams said. “We’ll see what he comes up with.”

Bush has released a detailed tax plan, and while the Tax Policy Center has not yet released its analysis, Williams said the “bottom line, if you look at the pieces of it, is it looks like a great big tax cut for the rich.” That’s because Bush proposes to cut the top tax rate from 39.6 percent to 28 percent.

Bush would take away some of the “loopholes” and “special tax provisions” in the current tax code — which would offset tax savings to many wealthy taxpayers. But even still, while Bush’s plan would cut taxes and lead to higher after-tax incomes for taxpayers at all levels of income, those at the very top of the income spectrum would see the highest percentage tax decreases, according to an analysis by the Tax Foundation.

— Robert Farley