Jeb Bush's Tax Plan Nods to Trump

First The Donald said hedge-fund managers were “getting away with murder,” and now the establishment favorite goes populist by doing away with their favorite tax break. Coincidence?

Andrew Harnik / AP

It’s long been clear that Donald Trump’s rants against illegal immigration have pulled at least some of his Republican rivals to the right. But the GOP frontrunner’s recent populist turn might be dragging them back to the left—ever so slightly—on economic policy.

Just look at Jeb Bush’s tax plan, which he released on Tuesday evening. Overall, the proposal is fairly standard conservative fare: He tries to simplify the code by collapsing seven individual income brackets into three, slashing the top rate to 28 percent from nearly 40 percent and eliminating a bunch of popular deductions to pay for it. Bush also proposes to cut corporate taxes, on the grounds that a high rate on businesses encourages companies to invest and create jobs elsewhere. The basic outlines of the plan are not all that different from Mitt Romney's platform in 2012, or the benchmarks that Republicans in Congress have supported in their annual budget proposals for years.

But one part of the Bush—er, Jeb!—tax plan stands out: “We will treat all non-investment income the same, so unless you stake capital in an investment, you won’t be able to claim the capital-gains tax rate on your market gains,” he wrote in a Wall Street Journal op-ed on Tuesday. Bush here is calling for the elimination of the so-called “carried-interest loophole,” a provision under which hedge-fund managers in particular can escape millions of dollars in taxes by claiming the lower capital-gains rate, which is capped at 20 percent, rather than the 39.6 percent at the top of the income brackets for their cut of money made for other people in the market. Democrats outside of New York have long demanded this change, but lawmakers in both parties who rely on campaign contributions from Wall Street have kept the loophole in place for years.

It just so happens, however, that Trump, the real-estate tycoon, has been hammering this provision for weeks. “They're paying nothing and it's ridiculous. I want to save the middle class,” Trump said last month on “Face the Nation.” “The hedge-fund guys didn't build this country. These are guys that shift paper around and they get lucky.”  He also said they were “getting away with murder.”

So did Bush copy the man standing ahead of him in the polls? It’s not exactly clear. A campaign aide said Wednesday that the carried-interest proposal had been under discussion going back to at least March, but Bush hadn’t mentioned it publicly before Trump restarted the debate. And unlike some Republican proposals, he didn't bury it deep within a dense white paper as a way to make the numbers add up—he hasn't said how much his plan will cost, by the way. No, Bush made sure to highlight his hit on Wall Street, both in its hometown newspaper and in an appearance Wednesday with the business-friendly crew on CNBC’s “Squawkbox.”

“We’re rewarding Main Street,” he said.

We’re not penalizing Wall Street, but right now Wall Street’s done had a pretty good ride here engineering and using great creativity and great skills to be able to make American businesses the most competitive in the world. But we are not growing. We are not investing in our own country.

Bush even boasted that the wealthy would pay a higher portion of taxes under his plan than they do now under President Obama. Republican rhetoric on income inequality isn’t new, of course. But it’s still significant that the party establishment’s favorite candidate has put pen to paper to advance even a modestly populist proposal. Liberals can probably thank Donald Trump for that.