Reality Check: Trump’s New Plan Cuts Taxes For Rich, Hedge Fund Managers And Corporations (VIDEO)


GOP Candidate Donald Trump revealed his much-hyped tax plan Monday after a summer of rhetoric that promised to crackdown on the richest Americans, including hedge fund managers. His populist talk of taxing billionaires even had progressive hero Senator Elizabeth Warren saying she backed the idea, although she didn’t support his candidacy as a whole.  Many liberals warned that Trump’s talk was just that, and his new tax plan would reveal his actual policies would end up working for the benefit of the ultra-rich by favoring corporations. Surprise, surprise — they were right.

Donald Trump and the populist crackdown on hedge fund managers that wasn’t.

Trump’s new tax plan claims to stop letting hedge fund managers get away with “murder” by closing the “carried interest loophole” used by hedge fund managers and others, which allows them to pay less in taxes by paying capital gains rates on their income. One of the problems with that? When you factor in the drastic reduction in income taxes of the same hedge fund managers, it practically eliminates the effect of the loophole closing.

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The billionaire front-runner for his party’s presidential nomination has been promising to make “hedge fund guys” pay more by eliminating the carried-interest deduction, which taxes private equity and hedge fund profits at 23.8 percent. But Trump’s plan also reduces the top income tax bracket on the wealthiest Americans to 25 percent from 39.6 percent, effectively minimizing the hike that the real estate celebrity has spent months promoting.

Another glaring problem with Trump’s plan in supposedly hurting hedge fund manager’s bottom line is the plan’s proposal to cut corporation’s taxes to 15%. A senior fellow at the Urban-Brookings Tax Policy Center, Steven Rosenthal, points out hedge fund managers could use this to restructure how they are paid and end up paying less in taxes than the are now. According to Rosenthal:

Currently, in addition to their carried interest, managers of hedge funds earn a fee equal to 2% of assets under management. Under today’s code that 2% is taxed as ordinary income.

Hedge funds can be organized as small business partnerships. So they could benefit from a separate proposal in Trump’s tax plan to lower the tax rate on small business partners to 15%.

Conceivably a hedge fund could raise the management-fee portion of fund managers’ compensation, and lower or eliminate the carried interest, so more of their income would be taxed at 15%, Rosenthal said.

I guess “economic genius” Trump, who claims to be an expert on the tax code, missed these glaring holes.

Rhetoric vs. reality: other things to keep in mind when your misinformed friends, family members, colleagues and acquaintances tout Trump’s tax plan.

Rhetoric: Trump claims he will save the middle class by offering “revolutionary” breaks where almost 50% of Americans don’t pay federal income taxes.

Reality: Most of those families already pay no federal income tax. According to the Tax Policy Center, roughly 45% of American households will not owe any federal income taxes this year under the existing tax code. Even more troubling to the working and middle class: Trump doesn’t say what he will do with the Earned Income Tax Credit. The EITC is a lifeline for many of the low-income Americans and has broad political agreement on its effectiveness.


Rhetoric: Trump’s tax plan will make the wealthy pay “their fair share.”

Reality: Admittedly, the term fair share in itself is up for debate, but Trump’s tax plan won’t hurt the rich nearly as much as he’d have you believe. In fact, they are the real winners in this plan. As Politico reports:

The top tax rate falling from 39.6 percent to 25 percent will give them a huge windfall, as will eliminating the AMT, the estate tax for their heirs, and the Obamacare surtax on capital gains and dividends. The huge cut in the corporate income tax will also benefit the well-off.


Rhetoric: Trump’s tax plan is cost neutral.

Reality: New outlets are falling over themselves to call bullsh*t on this claim.  Trump is proposing huge tax cuts on both individuals and corporations, with the claim this will bring businesses, and their money, back to the United States. According to Bloomberg Politics:

Jared Bernstein, former chief economist for Vice President Joe Biden, said he preferred the plan before he knew more about what was in it.

“I liked it better before I learned more about it, and I didn’t like it that much to begin with,” Bernstein said. “I think this is another one of those highly regressive plans that loses oceans of revenue from the treasury,” adding that Trump’s claims that losses will be offset by increased domestic production are “not credible,” “not plausible,” and “not correct.”


Rhetoric: Trump’s tax plan is a bold, out-of-the-box plan that is totally unlike the other Republican candidates.

Reality: It’s really just your basic supply side conservative tax plan that closely mirrors other candidates, in particular, Jeb Bush. As the New York Times put it:

You could call Mr. Trump’s plan a higher-energy version of the tax plan Jeb Bush announced earlier this month: similar in structure, but with lower rates and wider tax brackets, meaning individual taxpayers would pay even less than under Mr. Bush, and the government would lose even more tax revenue.

Watch Donald Trump’s tax plan fail as he continues what we can only hope is the middle of the end:

What makes all the fails of Trump’s Tax plan particularly pathetic, is that it is his great “business sense” and “economic know-how” that has garnered so many of his followers. Far too many times we’ve heard “he’s just a straight-shooting businessman who can cut the political BS and fix the economy.”

Trump may still be the GOP frontrunner, but recent polls have him neck-in-neck with Ben Carson, and Rubio and Fiorina gaining ground behind them. Hopefully, this horrible tax plan will be one of the first nails in the coffin of this king of the clown car.

Featured image via Gage Skidmore on Flickr.

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