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A Project of The Annenberg Public Policy Center

Club for Growth vs. Trump

A lawyer for Donald Trump fired off a letter to the conservative Club for Growth threatening a “multi-million dollar lawsuit” if the group does not pull its TV ad claiming Trump “supports higher taxes.” Trump’s lawyer says the claim is false, and libelous.

Club for Growth Action, the super PAC of the anti-tax group, says it is merely exposing Trump’s “very liberal” record.

So who is right?

It’s not easy to pin down Trump’s precise position on taxes (though Trump says he plans to release a “very specific” tax plan next week). We can say this, however: Club for Growth Action’s ad relies on statements made by Trump 15 years ago, and those statements are not consistent with the proposals — albeit sketchy, so far — that Trump has provided as a candidate this year.

Trump told Time on Aug. 18 that his tax changes would not increase the net amount of taxes, but that does not mean it will not raise taxes on some taxpayers – as Trump himself has said. Trump has said his plan will make “people happy, other than maybe the hedge fund guys, who make hundreds of millions of dollars and pay very little tax.” His attorney said Trump’s overall plan would lower taxes.

The ad from Club for Growth Action, which began airing on Sept. 17, is part of a $1 million campaign in Iowa aimed at weakening the Republican front-runner’s campaign. The ad, called “Politician,” begins by showing images of Democratic presidential candidates Bernie Sanders and Hillary Clinton and asks which presidential candidate supports higher taxes.  “It’s Donald Trump,” the narrator says.

Asked for backup, the Club for Growth referred us to a Feb. 15, 2000, article in The Advocate in which Trump states, “My plan to impose a onetime net worth tax of 14.25 percent on the super-wealthy, when combined with our current projected surpluses, will raise enough to pay off the national debt.”

At that time, Trump was mulling a presidential bid, and in a formal statement in November 1999 that laid out his plan, Trump did, in fact, propose a one-time 14.25% tax on people and trusts with a net worth of over $10 million (minus the value of their principal residence). The revenue it generated, he said, would be used to pay off the debt, then $5.7 trillion, to give a middle-class tax cut and to shore up the Social Security trust fund.

But Trump isn’t advocating anything like that in 2015. In his Aug. 18 interview with Time, Trump said he would not propose changes that increase the net amount of taxes. But he also stopped short of agreeing to sign the Americans for Tax Reform pledge against raising taxes because “I may want to switch taxes around.”

Specifically, Trump has repeatedly said that he would lower taxes for the middle class and would raise taxes on “carried interest” earned by hedge fund managers.

In an Aug. 26 interview with Bloomberg’s “With All Due Respect,” 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?”

Some interpreted those remarks as Trump agreeing to raise taxes on the wealthy. But that may not be the case. Again, his comments have been limited to raising taxes on carried interest earned by hedge fund managers. Hedge fund managers are paid, in part, based on the performance of their funds. 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.

As is the case with Bush’s tax plan, Trump could unveil a plan that lowers the highest tax rate, and thereby provides tax relief to the majority of wealthy taxpayers.

In his letter to Club for Growth, Trump attorney Alan Garten stated, “To be clear, Mr. Trump’s tax plan, which is scheduled to be released later this week, supports a lowering of taxes.”

On Sept. 23, Trump said the plan will be unveiled next week.

“(It) will be very long on policy and will be a great plan, with a major reduction in taxes for the middle class,” Trump said at a town hall meeting in South Carolina. “… It’s going to be very specific. And I think it’s going to be a plan that creates incentives, and I think it’s going to be a plan that makes people happy, other than maybe the hedge fund guys, who make hundreds of millions of dollars and pay very little tax. I mean, those guys will not exactly love me.”

In response to the letter from Trump’s attorney, Club for Growth Action released this statement from Club for Growth president David McIntosh: “Tough guy Donald Trump starts whining when his liberal record is revealed. Trump has advocated higher taxes numerous times over many years, … Trump’s own statements prove that our ads are accurate. They will continue to run.”

The group also passed along a video urging viewers to “listen to Trump’s own words.”

The video begins with CNN’s Jake Tapper asking Trump on June 28 about his proposal in 2000 for a 14.25 percent tax on the wealthy, in part to pay off the debt. The video cuts to Trump saying that if a 14 percent tax on the wealthy today would knock out the debt, “I’d do that all day long.” But in that same interview, Trump went on to say, “Well now we can’t do that because the debt is so big.” Asked why, Trump responded, “Because it wouldn’t work, because it’s too much. You have to bring in jobs you have to take the jobs back from China, you have to take the jobs back from Mexico.”

The Club for Growth video then cuts to a Trump interview on “Fox and Friends” on Aug. 24, in which Trump says, “Rich people are paying the same as people who make very little money. And I think there should be a graduation of some kind, because as you make a certain amount of money, I think you should have to graduate upward.” But that was a response to a question about a flat tax, in which everyone pays the same rate, regardless of income. As Trump noted (at about the 3:25 mark) in the same interview, support for a graduated income tax — as we currently have — “doesn’t mean a raise in taxes. That means rich people might be paying less than they are paying right now.”

On the corporate side, the New York Times notes that “Trump has threatened to impose tariffs on American companies that put their factories in other countries … And he has vowed to change laws that allow American companies to benefit from cheaper tax rates by using mergers to base their operations outside the United States.”

In other words, it is possible there would be some who pay higher taxes under Trump’s plan. But without a detailed plan, it’s simply impossible to know who those people might be, how many it might be or how much they might pay. As Vox noted, it is possible (perhaps even probable) under Jeb Bush’s tax plan — which also would tax carried interest as ordinary income — for those very hedge fund managers to see an overall tax decrease, due to the lowering of the top rate.

It may be tempting to attack Trump’s tax plan, in part because he has been vague about details. But contrary to the Club for Growth Action’s blanket claim that Trump “supports higher taxes” (present tense), Trump has said that he would not raise taxes on net.

Robert Farley