"I want to eliminate the convoluted, lobbyist-created loopholes in the code," Bush wrote
Trump, who has yet to formally unveil his tax plan, has called for similar changes in the tax code
Former Florida Gov. Jeb Bush wants to crack down on hedge fund managers, putting him in rare alignment with his top sparring partner on the campaign trail: Donald Trump.
Bush on Wednesday unveiled his proposal to reform the tax code, a system he repeatedly describes as “convoluted” and that he says is driving American companies to move overseas.
“Taxes should be lower, simpler, fair and clear,” Bush said at an event in Garner, North Carolina.
One of his major pitches for increasing revenue is cracking down on a loophole that allows hedge fund managers to pay low tax rates on income they get from managing investments. The so-called “carried interest” policy allows the profits from managing funds to be taxed as if they are investment gains instead of income.
“I want to eliminate the convoluted, lobbyist-created loopholes in the code,” Bush wrote in his tax plan that was published on his campaign website Tuesday. “We will treat all noninvestment 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.”
It’s not clear if Bush’s tax plan would be revenue neutral.
His targeting of hedge fund managers echoes calls made by Trump, who, although he has yet to formally unveil his tax plan, has called for similar changes in the tax code. Trump assailed hedge fund managers in an August “Face the Nation” interview on CBS and said the taxes on them need to be changed.
“They’re paying nothing and it’s ridiculous. I want to save the middle class,” Trump said. “The hedge fund guys didn’t build this country. These are guys that shift paper around and they get lucky.”
Both Bush and Trump are familiar with Wall Street. Trump acknowledged in the “Face the Nation” interview that “some of them are friends,” referring to hedge fund managers, and Bush was paid millions to advise Lehman Brothers and Barclay’s after leaving the Florida governor’s mansion.
The two candidates’ calls are also in line with those of Hillary Clinton and Bernie Sanders, who have also assailed the tax rate for hedge fund managers.
But Bush’s plan might not go after hedge fund managers as much as the candidate says it will.
Roberton Williams, a senior fellow at the Urban-Brookings Tax Policy Center, noted that because Bush is bringing the highest tax bracket down more than 11 percentage points, the jump for taxing carried interest will also shrink by the same amount. Overall, Williams said, Bush’s plan appears to lower taxes much more than it raises them.
“It’s not as big a tax increase on folks getting carried interest as it would be under today’s ordinary tax rates,” he said.
Tax policy aside, Bush still took shots at Trump as he unveiled his policy in his speech, dinging Trump’s infamous call for a wall with Mexico and his protectionist trade proposals.
“Those on the left, and even some people who call themselves Republicans these days, will tell you that to save American jobs, we have to throw up a bunch of walls and tariffs,” Bush said. “That’s a siren call of surrender, and I won’t go for it, and I hope you won’t either.”
He added: “Protectionism has never worked … it kills jobs.”
Bush calls for cutting taxes
Bush has not signed the pledge of anti-tax crusader Grover Norquist’s group, Americans for Tax Reform, which calls on candidates to promise not to raise taxes. When asked why he hasn’t signed the pledge, Bush has repeatedly referred to his history of cutting taxes as Florida’s governor.
On Wednesday, Norquist’s group published an initial analysis of Bush’s proposal, putting the carried interest policy as the only bullet point under “the bad” aspects of the plan.
In a Wall Street Journal op-ed released Tuesday night, Bush also called for lowering the corporate tax rate to 20% and reducing the number of individual tax brackets to three, leaving about 15 million Americans exempt from any income-tax liability.
Details from his plan were published on the eve of the Garner speech, marking his next step in a series of policy addresses that have already focused on foreign policy and government reform.
The tax pitch comes as Bush attempts to steal back some of the spotlight from the GOP front-runner Trump, focusing on his record of cutting taxes while pointing out that Trump wants to raise rates on the wealthy.
In his op-ed, Bush blasted the tax code as “a labyrinth littered with thousands of special-interest giveaways, subsidies and other breaks written to favor Washington insiders.”
It advances what he called President Barack Obama’s agenda of “low growth, crony capitalism and easy debt,” he wrote.
Bush proposes reducing individual rates to three brackets down from seven – 28%, 25% and 10% – and he would lower the corporate tax rate to 20%, down from 35%.
His plan also eliminates “the marriage penalty, expands the Earned Income Tax Credit, ends the death tax, retires the Alternative Minimum Tax and ends the employee’s share of the Social Security tax on earnings for workers older than 67,” he wrote.
Businesses would be allowed to deduct new capital investment.
To help bring businesses back from other countries, he wants to place a one-time tax of 8.75% on the more than $2 trillion in corporate profits sitting overseas. The amount would be payable over 10 years.
A campaign official confirmed that Bush met Tuesday with three high-profile conservatives who favor large tax cuts – economist Stephen Moore with the Heritage Foundation, publishing executive Steve Forbes and CNBC’s Larry Kudlow. The Washington Post first reported the meeting.
Last week, Bush previewed the general themes of his tax proposal while campaigning in New Hampshire.
“The tax code is rife with – well-intended perhaps – but ideas that stifle the ability of people to invest in their own dreams,” he said, advocating for a plan that lowers “tax rates as low as possible – personal and corporate taxes – and eliminate(s) the deductions as much as possible.”
Bush’s tax proposal is another chance to draw a contrast with Trump, who also wants to lower corporate taxes but favors raising taxes on the wealthy. Bush, for example, frequently points out that he cut taxes by $19 billion while serving as governor of Florida.
Critics, however, like to highlight that the $19 billion figure was in part owed to the federal repeal of the estate tax.
“Donald Trump has proposed, in his most recent past, the highest tax increase in American history,” he said Thursday at a town hall in Laconia, New Hampshire.