‘It’s Policy That Matters’

Donald Trump’s dwindling cadre of advocates urge reporters and voters to focus on his substance, not his sins. His tax plan, however, would not benefit from such scrutiny.

Mike Segar / Reuters

That which was always self-evident has become blindingly obvious: Republicans will not win the White House if the November election is a referendum on Donald Trump’s moral piety. So, in the last few days, several of his Republican advocates have urged voters to see the substance behind the sin, encouraging them to focus on the issues that elevated his candidacy, like immigration, trade, and economic growth.

"It's policy that matters," said Gary Bauer, the president of American Values, a nonprofit organization that advocates for conservative social policy. To begin with, Bauer encouraged voters to focus on “growing the economy, shrinking government, [and] lower taxes.”

But consider a thought experiment: Imagine Donald Trump as a blameless mensch, pure of all transgression. In a policy-to-policy comparison with Hillary Clinton on, say, taxes and the economy, how does Trump fare?

On Tuesday, the Tax Policy Center (TPC) released detailed analyses of the tax plans by Donald Trump and Hillary Clinton. The upshot is that Clinton's proposal would raise taxes on the rich, increase tax benefits for the poor, and raise about $1.4 trillion in revenue in the next decade. Meanwhile, the TPC found, Trump's proposals would cut taxes across the board, with massive benefits going to the top 1 and 0.1 percent. His plans would reduce government revenues by as much as $7 trillion in the first 10 years. When it comes to reducing deficits on the revenue side, there is little comparison: Clinton’s proposal would slightly raise revenue, while Trump’s proposal would require massive (and mostly unspecified) cuts to government spending to avoid a record run-up of debt.

The 1980s and 2000s offered little evidence to support trickle-down economics, the idea that tax cuts for the rich fertilize wage growth for the poor. Economic stagnation may be the great challenge of our time, but starving social insurance programs to give million-dollar tax cuts to the top 0.1 percent is an awfully bizarre strategy to grow the middle class. Yet apparently, that’s Trump’s strategy.

Here are the TPC’s estimates for how Clinton and Trump’s plans would change each households’ post-tax income—from the poorest 20 percent to the richest 0.1 percent.

Comparing Trump and Clinton’s Tax Plans
Thompson/TPC Data

On taxes, U.S. public opinion is clear: Americans want the rich to pay more, which means they side with the Clinton plan. In 2016, more than 60 percent of respondents told Gallup that upper-income households pay "too little" in taxes. This year is no outlier. More than 60 percent of respondents said the rich should pay more in 2012, and 2008, and 2004, and in every survey conducted between 1992 and 2000. Judged purely on the basis of the numbers in his plan, Trump’s tax policy seems to embrace the Paul Ryan wing of his party rather than the repeatedly-expressed interest of surveyed voters.

But wait: Whatever his stance on income taxes may be, doesn’t Trump deserve some credit for at least trying to raise other taxes on the richest households? In one of the more substantive portions of Sunday’s debate, he called for closing the so-called “carried interest loophole,” which gives hedge-fund managers a tax break on the income they earn from their clients before taking a cut of their fund’s total growth. It is one of the most egregious parts of the tax code; as former U.S. Treasury Secretary Lawrence Summers once said, “Rarely has a policy existed so long with such weak arguments in its favor.” Trump didn’t just slam the policy; he also accused Clinton of refusing to tweak carried-interest laws because they benefit her rich buddies in the investing community.

But there are three significant problems with Trump’s claim. First, Clinton had no power to single-handedly change the tax treatment of carried interest as a New York senator; in fact, it was the Republican President George W. Bush who threatened to veto laws to raise the tax. Second, as the TPC analysis confirms, “Clinton would tax ‘carried interest’ as ordinary income” and raise taxes on capital gains held between one and six years, to encourage investors to make more long-term investments. Third, although Trump criticized tax breaks for investors at Sunday’s town hall, his plan would in fact create new tax breaks for those same investors. As TPC explains:

Under [Trump’s] proposal, carried interest would be treated as labor income subject to ordinary income tax and payroll tax. However, hedge funds and private equity partnerships, which earn a substantial portion of income in the form of carried interest, would qualify for the special 15-percent business tax rate and thus would retain a substantial tax advantage on their income compared with wage earners.

In short, Trump would close the carried-interest loophole, only to open a nearly identical loophole for many of the same people, thus allowing him to criticize tax breaks for the rich while offering the rich even more tax breaks. And guess which sort of businesses would most benefit from this tax alteration? Closely held businesses, like Trump’s.

Trump’s advocates would like to shift the analysis of their candidate away from his checkered personal history and toward his ideas. But most of his policies wilt under the punishing light of numerate analysis. Trump presents himself as a “blue-collar worker” who rails against special interests and condemns a tax code made crooked by the coastal elite. But on paper, Trump promises fresh benefits to the most special interest in his life: Trump, Inc. His tax plan is indefensible, both by any standard interpretation of the public’s will and by his own standard of raising taxes on the rich. But I suppose that when you’re a star, you can do anything.