Donald Trump’s apparent ability to get conservatives on board with tax hikes was among the biggest shocks of his summer surge. The billionaire unashamedly told crowds — bigger crowds than any Republican rival could muster — that “the hedge fund guys” needed to pay higher taxes, and that the rich could afford to pay more generally. The pro-Jeb Bush super PAC Right to Rise literally flew a banner over one of those rallies, in Alabama, warning about tax hikes. Trump kept on talking taxes, and didn’t suffer at all.
Yet today, upon the release of his tax reform white paper, the Republican front-runner won over the GOP’s unofficial pope of tax cuts. “Trump’s plan is certainly consistent with the Taxpayer Protection Pledge,” said Grover Norquist, president of Americans for Tax Reform, in a statement. “Trump has said he opposes net tax hikes and has made clear that the real problem is spending. This plan is a reform, not a tax hike.”
Club for Growth Action, which has been fending off a Trump lawsuit threat over its attacks on his old tax ideas, was less generous than Norquist — but came to the same conclusion. “Donald Trump has a long history of calling for the largest tax increase in U.S. history, of calling for higher corporate taxes to pay for government-run health care, of loudly advocating for sky-high tariffs that will act as a 25 percent – 35 percent sales tax on every family budget, and of using Obama-like rhetoric to claim that higher taxes should be imposed on those he deems worthy of such punishment,” said Club for Growth President David McIntosh. “In just the past 24 hours Trump said he still supports universal health care. So, his tax plan begs the question: Does this mean you were completely wrong about all your liberal policies on taxes, trade, health care, bailouts, and eminent domain?”
Trump, not one to ever admit an error, addressed none of this in his press conference today. But it’s true: the plan contained few real traces of the populism that he’s dabbled in since 1999. That year, Trump favored a one-time surtax of 14.25 percent on people worth more than $10 million. “The plan would cost me $700 million personally in the short term,” Trump wrote, “but it would be worth it.” If Trump’s back-of-the-classy-monogrammed-handkerchief math was correct, the surtax would have wiped at the debt.
Come 2015, this tax gimmick only survived as a way for the Club, Jeb Bush, and other mainline conservatives to accuse Trump of favoring “the largest tax increase in American history.” Unsurprisingly, it did not make it into the plan. What did were tax changes described (but not validated) as “revenue neutral,” which flatted out some rates in a way that actually made them easier on the very rich. Exhibit A: Cutting the tax on small business, or “pass-through,” income from 39.6 percent to 15 percent.
“By lowering the rate of pass-through income to 15 percent he’s creating a massive new loophole,” said Jared Bernstein, who served as chief economist and economic adviser to Vice President Joe Biden. “Every single person in the top bracket would have a huge incentive to incorporate somehow.”
There was not much for progressive economists to love in the Trump plan. Dean Baker, a co-founder of the Center for Economic and Policy Research, credited Trump for the “very good” idea of eliminating corporate tax loopholes. The problem was in how that disguised the closing of a loophole that worked for a lot of the people now showing up for Trump’s rallies.
“It looks like he will tax people on employer-provided health care insurance,” said Baker. “I have mixed feelings on that one, but it would be a big hit for a lot of middle income families that may suddenly be taxed on $15k in income that they are not seeing.”
The hard details of tax plans do not, typically, sink in with the electorate. Broad strokes do. Trump had been making a tribal argument to conservative voters. It was not that they were getting taxed unfairly; the people responsible for sending their jobs overseas were getting showered with benefits. By reducing taxes for even more lower-income people, Trump breaks from the conservative line that people who don’t pay net taxes are “takers.” But that’s as populist as he gets.