By Tony Nitti
Earlier today, real estate mogul, reality TV star and noted gasbag Donald Trump announced that he is running for President. If my math is correct, approximately 37% of the population is now seeking the Republican nomination and the right to take on Hillary Clinton for a spot in the White House.
While Trump’s announcement will be widely dismissed and derided by political pundits, I welcome his willingness to throw his hairpiece into an already-crowded Republican ring. For one, Trump would be the first President who doubles as a regular caller on Howard Stern. In the past, Howard has had to engage impressionists to call in as Mitt Romney or Bill Clinton or George Bush and say outrageous and embarrassing things; anyone who has listened to Trump on Stern, however, knows the Donald would be more than happy to take on that task himself.
Second, Trump offers a nice capitalist Yin to the religious-right Yang of the other Republican candidates. While Marco Rubio and Ted Cruz and Rick Perry and Rand Paul are debating over who loves Jesus most, Trump may very well add some intrigue by professing his belief that churches are a waste of prime real estate. Good times.
Finally, if you’ve been reading my write-ups on the candidacy’s of Rubio, Cruz, Perry, et al…, you know that I’ve been rather critical of their tax proposals, chiding them as either unimaginative — the “flat taxes” of Cruz and Perry and Paul — or untenable — the Rubio plan that cuts so much in tax that even Republicans have distanced themselves from it. With a self-proclaimed net worth of nearly $9 million, you can bet that Trump will have a passionate view towards tax reform, and when Trump is passionate about something, he’s liable to say and do just about anything.
While we wait for Trump’s stance on the taw law to become fully-formed, his many previous flirtations with running for President offer some insight into his views. And if you’ve ever listened to Trump on Howard, you won’t be surprised to find that those views are all over the map.
During the buildup to the 2000 Presidential election eventually won (won??? OK, won) by George W. Bush, Trump made a claim that surprised many given his exorbitant wealth — a one-time tax of 14.25% should be assessed on the assets of every American individual and trust in excess of $10 million. Trump would have permitted the resulting tax, estimated at that time to be $5.7 trillion – to be paid over 10 years, with the revenue used to pay off America’s deficit.
The one-time wealth tax would be coupled with the elimination of the estate tax, which in 1999 was at 55%; today it stands at 40%. Despite his willingness to do away with the estate tax, Trump explained that as evidenced by his one-time wealth tax, he was not in favor of coddling the rich. As Trump put it then:
My proposal would also allow us to entirely repeal the 55% federal inheritance tax. The inheritance tax is a particularly lousy tax because it can often be a double tax. If you put the money into trust for your children, you pay the inheritance tax upon your death. When the trust matures and your children go to use it, they’re taxed again. It’s the worst. Some will say that my plan is unfair to the extremely wealthy. I say it is only reasonable to shift the burden to those most able to pay.
In later years, Trump seemed to distance himself from this “soak the rich” philosophy. In April 2011, as expiration of the so-called “Bush Tax Cuts” neared and President Obama professed a desire to allow those cuts to expire for those earning over $250,000 — thus raising the top rate on those taxpayers from 35% to 39.6% — Trump opposed the plan, telling Fox News, “He’s taking away a lot of incentives from a lot of people that produce a lot of taxes” and adding that Obama’s proposal would drive the wealthy out of the country.
Months later, Trump took his position a step further by proposing a rate structure, or what he called his “Five Part Tax Plan.” The plan would create the following brackets:
- Up to $30,000 of taxable income: 1%
- From $30,000 to $100,000: 5%
- From $100,000 to $1 million: 10%
- On $1 million or above: 15%
As you likely already know, this would stand in stark contrast to the current seven bracket system, where rates range from a low of 10% to a high of 39.6%. The resulting loss in tax revenue would be enormous, which one would expect would only add to the national deficit that Trump had endeavored to pay off a decade prior.
In addition to reworking the rates, Trump’s plan would eliminate the estate tax, lower the tax rates on capital gains and qualified dividends, which stood at 15% at the time, completely eliminate the corporate income tax, and create 20% “import tax” that was never adequately explained.
So in summary, Trump’s five point plan would drastically cut individual rates, eliminate the corporate income and estate taxes, and further reduce the already-favorable rate on capital gains and qualified dividends. In addition, Trump showed no inclination to offset the trillions in lost revenue that would result from these changes by eliminating the deductions and preferences found throughout the tax code. Thus, it would appear that Trump would put his faith in the beliefs of Ronald Reagan and John F. Kennedy, who thought the best way to increase tax revenue in the future was to lower tax rates today, thereby providing extra cash to wealthy business owners who will in turn expand their business, hire more employees, and pay those employees more. In other words, the “a rising tide lifts all boats” approach to tax reform.
Interestingly, Trump’s 2011 plan appears contradictory not only to his earlier “soak the rich” mentality, but also to a previously-stated distaste for the flat tax embraced by many Republican candidates. In 2000, Trump stated that he objected to a flat tax because it was unfair to the poor (because it eliminates credits like the Earned Income Credit), unfair to workers (by taxing them on health insurance benefits), would represent a windfall to the rich (by dropping the top rate to a flat rate in the neighborhood of 17%), and, as Trump put it, “the flat tax wouldn’t generate enough revenue to keep the government running.” This last shortcoming would most certainly be duplicated in Trump’s five-part plan.
At this point, that’s all the insight we have into what Trump’s tax proposals may look like. They have likely evolved since 2011, and assuming he continues to object to the flat tax, whatever plan he ultimately pitches could make for some fascinating debate fodder with his flat tax-loving Republican counterparts.
If nothing else, Trump is always entertaining. The announcement that he will run for President has instantly transformed what promised to be tedious Republican primaries into must-see TV.