The White House likes to make it seem as if President Obama is floating just a bit above the raucous race to succeed him. Sure, he’s keeping an eye on the whole thing. But he’s not really focused on it. The president isn’t even planning to watch Wednesday’s Republican debate, just like he didn’t see the last one.
“He’s got better things to do,” spokesman Josh Earnest told reporters Tuesday.
The latest evidence that Obama is actually paying very close attention to the presidential campaign came less than 24 hours later, when he used a forum with CEOs to renew his call for raising taxes on hedge fund managers by closing the so-called “carried-interest loophole” that allows them to skirt potentially millions of dollars in income taxes. Obama and congressional Democrats have been making that case off and on for years, but it has gone nowhere in Congress. On Wednesday, the president saw a fresh opening, and he seized it.
Speaking before the Business Roundtable, Obama noted that “two leading candidates on the Republican side” were now on the record in support of closing the loophole. He was referring to Donald Trump and Jeb Bush, who have each been touting their positions on the issue in recent weeks. Ending the tax break would force hedge-fund managers to pay the top income-tax rate of 39.6 percent on most of the profits they earn for other people, rather than the much lower capital-gains rate. The change wouldn’t be a major money-saver for the government (about $18 billion over a decade), but it has become a symbol of how the tax code benefits the wealthy.
“If we close the tax loophole, we could double the number of workers in America’s job training programs,” Obama said, even as he acknowledged that some in his audience opposed the change. “We could help another 4 million students afford college.” He continued:
These are sensible choices that if you were running your business and you took a look at it, you’d make that decision. Well, America should too. And this is an example of how we can maintain fiscal responsibility while at the same time making the investments that we need to grow.
There are all sorts of tax loopholes and other provisions that Obama has targeted over the years as a means of raising revenue and reducing inequality. But only the relatively obscure carried-interest loophole now has the support of both the leading outsider Republican candidate and its most prominent establishment favorite—a pretty powerful combo with which to prod the GOP Congress.
The president wants lawmakers to change the provision as part of the budget negotiating for next year. That remains unlikely, however. While Obama wants to use the revenue to pay for additional spending, Republican leaders (including Bush) have said closing loopholes should offset reductions in tax rates as part of a broader overhaul.
The larger significance of Obama’s call on Wednesday is that it shows how the White House is planning to try to take advantage of the GOP primary circus. The president has begun pushing back on Trump’s overheated rhetoric and his down-on-America tone. (America is already great, Obama is insisting. Take a look at the last five words of his tweeted message to 14-year-old Texas teen Ahmed Mohamed.) Now he's also using the emerging policy divisions in the GOP field to build momentum for pieces of his agenda and put pressure on the Republican majority in Congress.
The strategy might not result in immediate policy victories for Obama on Capitol Hill, but at minimum, it should give Democrats a handy wedge in 2016 and push one important tax loophole for the wealthy a little closer to extinction.
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