The next big plan that everyone is waiting for Donald Trump to release is his tax plan. The 2016 presidential hopeful has been making waves with many of his views, but his tax reform ideas seem to be a bit closer to what the public is looking for. They are some of his policies that have seen the most widespread approval thus far. Just about every statement from Donald Trump on taxes that has been released so far has led voters to believe that Trump will be cutting taxes for the middle class and raising them for hedge fund managers. While Trump has not released many specifics of his tax proposal so far, he hopes to release it in late September of 2015. He has, however, stated which groups he hopes to help and what he hopes the public opinion will be of the plan. He stated, “(It) will be very long on policy and will be a great plan, with a major reduction in taxes for the middle class…It’s going to be very specific, and I think it’s going to be a plan that creates incentives, and I think it’s going to be a plan that makes people happy, other than maybe the hedge fund guys, who make hundreds of millions of dollars and pay very little tax. I mean, those guys will not exactly love me.”
Trump on Hedge Fund Managers
Trump seems to have taken a particular dislike to hedge fund managers, and therefore has been targeting them with his plans. Rather than stating that he would raise taxes on higher income individuals, most of his statements so far have stated simply that he would raise taxes on hedge fund managers. Fuel was added to the fire by recent criticism of the head of Turing Pharmaceuticals, Martin Shkreli, who has been in the news lately for raising the price of an HIV treatment pill from $13.50 to $750.00. Trump went on to criticize Shkreli for his hedge fund origins, stating “He looks like a spoiled brat to me. You want to know the truth? He looks like a spoiled brat…And he’s a hedge fund guy, and as you know they’re the only ones I’m raising taxes on, they’re going to be paying up.”
In 2000 Trump made similar statements, and also saw raising taxes on the wealthy as a necessity. In his book The America We Deserve, Trump states “I would impose a one-time, 14.25% tax on individuals and trusts with a net worth over $10 million. For individuals, net worth would be calculated minus the value of their principal residence. That would raise $5.7 trillion in new revenue, which we would use to pay off the entire national debt [and shore up the Social Security Trust Fund].” Trump states that the costs this would create for the wealthy are greatly balanced by his plans to eliminate the inheritance tax. He sees this as particularly beneficial to those facing it 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.” He also said at the time that, while many would see this tax as unfair, he believed it was simply a displacement of burden to those most equipped to face it.
Trump’s 5 Point Tax Plan
While trying to sort through Trump’s mysterious and unspecific statements, many look back to tax proposals he has made in the past. In 2011, Trump explained his views on taxes in his book Time to Get Tough. The book outlines a 5 part tax plan that focuses strongly on reforming the income tax infrastructure. Trump believes that the most important thing about his tax plan is that it’s simple, stating, “The government confiscates way too much of your paycheck. The tax code is also a very complicated system that forces Americans to waste 6.1 billion hours a year trying to figure it out.” At least at this time, Trump had 4 income tax brackets outlined. They were: anyone making up to $30,000 pays 1 percent, anyone making from $30,000 to $100,000 pays 5 percent, anyone making from $100,000 to $1 million pays 10 percent, and anyone making $1 million or above pays 15 percent. Trump has recently announced that this income tax structure is what he will implement in 2016 if elected president.
Trump believes the ease of calculating this form of tax is its greatest value. He stated, “It can be filled out on the back of a postcard and will save Americans big bucks on accountants and massive amounts of time wasted attempting to decipher the tax code.” He is also of the opinion that it will help Americans build more employment opportunities for each other, lowering unemployment rates and further strengthening the economy, stating, “Imagine your paycheck was 40 percent higher than it currently is. What could you do with 40 percent more wealth? How many jobs and opportunities for others could you create?” Trump also spoke out about how the government is using income taxes, stating “But the other reason is that I hate the way our government spends our taxes. I hate the way they waste our money, trillions and trillions of dollars of waste and abuse. And I hate it.”
The biggest factor in lowering income taxes, Trump believes, is that higher income taxes detract from work the national work ethic. He went on to announce, “No doubt you work hard for your money–I know I do–and you should be permitted to keep more of it…The more you tax work, the less people are willing to work. The more you tax investments, the fewer investments you’ll get. This isn’t rocket science.” Trump draws these ideas from Reagan and Kennedy, quoting both of them in the pages of his book. Trump attributes the ideas behind the Reagan quote “The more government takes in taxes, the less incentive people have to work,” to Kennedy’s statement in 1962 saying, “The paradoxical truth is that the tax rates are too high today and tax revenues are too low and the soundest way to raise revenues in the long run is to cut rates now.”
The rest of Trump’s 5 part tax reform included plans to “kill the death tax; lower the tax on capital gains & dividends; eliminate corporate taxes; and a 20% import tax.” Trump also opposes and wishes to eliminate marriage penalty, because it causes our system to discriminate against married people. He also feels that property taxes should be lowered, as they act as a form of punishment to those who improve their properties. He also believes that the tax code needs to be simplified in order to make it more concrete and less variable, as variations in the tax code can jeopardize small businesses and retirement plans quickly and without warning.
Flip Flopping on Taxing the Wealthy
As much as Trump currently speaks about raising taxes for the wealthy, it is important to note that he has flip flopped on this issue in the past. While in 2000, when he was also considering running for president, he was making statements similar to those he is making today, and planned to impose a 14.25% tax on the assets of people and trusts worth $10 million or more, in 2010 he took a different stance. During a 2010 debate regarding tax cuts, Trump was very adamant in opposing Obama’s efforts to prevent an extension of the Bush tax cuts for those making over $200,000 a year, stating, “He’s taking away a lot of incentives from a lot of people that produce a lot of taxes. It creates the wrong image. You really have to keep the taxes down.” Trump elaborated that these people were fully equipped to simply leave the country if their taxes got too high, and that raising their taxes was a surefire way to lose, not gain, income for the government.
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