Donald Trump's big tax plan is exactly what you would expect from someone who wants to build an impregnable 2,000-mile wall along the U.S.-Mexico border, politely round up and deport millions of illegal immigrants, and intimidate Vladimir Putin and Xi Jinping through sheer force of will.
It is a fantasy. Maybe even a joke — though one played on frustrated middle-class voters who thought Trump the populist would soak the undeserved rich, especially Wall Street. (Silicon Valley billionaires, don't worry, it's cool.)
And yet, despite the Trump tax plan's dissonance with reality, and its failure to live up to Trump's populist rhetoric, it clearly proves that this big-talking businessman is serious about trying to win not only the GOP's nativist wing, but its tax-cutting factions, too. Donald Trump thinks he can win the presidency, and he thinks this tax plan will help.
As for the (ludicrous) plan itself: It's as though Trump read a copy of the Jeb Bush plan, thought about it for a moment, and then tossed it at an underling, yelling, "We should do this, but make it more tremendous, more marvelous!" That's pretty much what Trump is offering. Bush would cut the top income tax rate for rich people to 28 percent, Trump to 25 percent. Bush would lower the corporate tax rate to 20 percent, Trump to 15 percent. Bush would take 15 million Americans off the income tax rolls, Trump would take off 75 million — all of whom, according to Trump, would get "a new one page form to send the IRS saying, 'I win.'" Oh, and while the Bush plan would lose $3 trillion over a decade — not counting economic feedback — Trump's might lose multiples of that. No amount of "dynamic scoring" is likely to make Trump's numbers even approach balance.
And remember how Trump made a big deal that he was going to really sock it to the hedge funds and private equity guys? Not so much, it turns out.
In his plan, Trump does indeed promise to end "the current tax treatment of carried interest for speculative partnerships that do not grow businesses or create jobs and are not risking their own capital." But what you have to understand is hedgies are paid in two ways. Typically there is a management fee equal to 2 percent of assets, which is subject to regular income tax rates as high as 40 percent. Then there is the controversial 20 percent of profits incentive, or performance fee, taxed at lower investment rates. Trump would make that performance fee subject to those higher regular income tax rates. So far, so good — at least if you are a pitchfork-carrying populist.
But Trump would also slash those regular rates to 25 percent. Even the anti-tax Americans for Tax Reform notes that the tax hike on performance fees "is fairly modest, rising from 23.8 percent today to 25 percent under the Trump plan." At the same time, managers would be paying much lower top rates, 25 percent instead of 40 percent, on their management fees. And who knows? Investment pros with really clever accountants might just end up paying that super-low 15 percent business rate.
Bottom line: The Trump plan broadly resembles most every other big GOP tax plan in recent years — deep tax cuts for the rich, gushers of red ink — just, you know, more of everything. Tax-hating activist Grover Norquist (president of the aforementioned Americans for Tax Reform) said Trump's plan would likely win the support of every single Republican in Congress. All of which suggests Trump is actually serious about capturing the Republican presidential nomination. Mass deportations to lock down the nativist bit of the base, and tax cuts for all to reassure the rest.
Trump claims to be a master deal maker. His tax plan looks like he is trying to cut one with skeptical GOP voters worried he is just a moderate with a big mouth.