Donald Trump doesn’t like a lot of people -- losers, Mexican immigrants and hedge fund managers.
With his unique blend of populism and a willful lack of self-reflection, the Republican presidential hopeful says hedge fund managers are just lucky financial speculators whose taxes should be raised because they add little real value to the economy. “The hedge fund guys are getting away with murder,” he said on Aug. 23.
Trump has pledged to do away with the carried interest tax loophole, which allows wealthy fund managers to avoid billions of dollars in taxes by treating their income as capital gains rather than salaries.
But hedge fund managers who spoke to The Huffington Post don’t seem to be holding back their support for Trump because his tax policy would cost them. It’s his personality, and the rest of his policies, that they can’t stand.
“I don’t have anything against the guy,” a West Coast hedge fund manager told HuffPost on background, so he could speak candidly. “I think he’s a cartoon character.” He went on to call Trump "a complete phony -- a made-up sitcom character. He could be on 'Modern Family.'"
“The misogynist, racist, anti-environmentalist, and foreign policy and trade issues aside, he just isn't presidential," said a proprietary trader, also speaking on background. Trump's campaign, he said, is entirely about himself and not the American people. “The only thing I do like about him is that he wants to eliminate the carried interest loophole.”
"I don't know anyone who is a Donald Trump supporter,” a Wall Street CEO told Politico’s Ben White.
In substance, Trump isn’t wrong to point out that the carried interest tax loophole is unfair and bad public policy. New York University economics professor Paul Romer told HuffPost that it's a bad idea to use the tax code to reward behavior that society wants to encourage. It’s unclear if tax breaks are actually worth the lost revenue, he said, and often, tax breaks get expanded and exploited in perverse ways over time.
Trump is less credible in singling out hedge fund managers’ tax breaks, though, because he’s personally benefited throughout his career from a variety of other tax incentives. Indeed, Cliff Asness, co-founder of AQR Capital Management, which has $136 billion in hedge fund and conventional assets, attacked Trump in a Sept. 22 column for not talking about "how tricky tax arguments, and a fair amount of cronyism, have motivated so many big real-estate transactions." Real estate developers like Trump may argue that, unlike hedge fund managers, they conduct activity that has some social value.
"I’m not sure that people outside of the real estate business would necessarily agree with that," said Romer.
Trump’s own career has been made by a series of debt-fueled, tax-break enabled speculative bets on cyclically volatile assets, and he's filed for bankruptcy four times. But he would probably argue that he built things with his tax breaks, while hedge fund managers -- "a lot of them," he said -- "it's like they're paper pushers."
Like a lot of Trump's opinions, that’s a characterization rooted in resentment that the proper distribution of economic entitlement has been upended. To Trump, it is the vigorous, victorious businessman (and in his mind, it's always a man) who erects the city and deserves the tax breaks he gets, while the nebbish, desk-bound investor in financial assets destroys the American middle class. While Trump believes he got his tax breaks through hard work -- The New York Times’ Josh Barro documents him cajoling public officials into granting “tax abatements and zoning variances” one building at a time -- he thinks investors enjoy a too-easy, blanket exemption.
The Trump campaign did not respond to a request for comment from HuffPost.
“Hedge funds are an easy target,” and always have been, said Mitch Ackles, CEO of Hedge Fund PR. That’s largely because most people lump hedge funds in with big banks and other financial institutions.
“The term ‘hedge fund guys’ is kind of an empty vessel. I’m not quite sure what he means by it. I just sort of take that as ‘generic rich guy from New York,’ which is what I think its meaning is, really,” said Ryan Ellis, tax policy director at Americans for Tax Reform.
Hedge funds aren’t even the businesses that use carried interest the most -- that's private equity firms. For now, the private equity world is waiting for Trump to actually release a tax plan before reacting. “We look forward to reviewing Mr. Trump’s tax plan,” said James Maloney of the Private Equity Growth Capital Council.
Politically, Ellis said both Trump and his GOP rival Jeb Bush -- who also supports ending the carried interest tax loophole -- are “doing something that isn’t very intelligent: they’re taking a tactical call of the Democrats, who have a very different policy objective than what they have, and they’re adopting it as their own, which is kind of silly if you’re in a shooting war.”
As a policy matter, Ellis argued that the fees investment managers receive are indisputably capital gains, and says treating them like regular income is “not serious tax policy.”
Culturally and socially, Trump has been isolated from, and by, the elite circles his wealth should qualify him to be a part of. “Trump has never really been part of the New York City business community or particularly engaged with the real estate community," Kathryn Wylde, president and CEO of the Partnership for New York City, told Politico. "There’s certainly no close set of relations there. He’s really a lone wolf."
“I think he’s a little bit at risk here,” Romer said of Trump’s carried interest proposal. The point of taxing capital gains at a lower rate, he explained, is to spur entreprenuership and investment in new businesses, and “once people start to look carefully at what real estate developers do compared to what Steve Jobs does, people may say, 'Wait we wanted it more like Steve Jobs. We didn’t want more Trump Towers.’"
That risk assumes Trump has a sense of shame or a propensity for self-criticism that he has never demonstrated. But Trump has always presented himself as a businessman beyond criticism -- energetic, "a winner," to use his vocabulary. It's an image he's successfully created and maintained for decades.
Trump's disdain for hedge fund managers may be part of his populist plutocrat posturing, but his tax policy is not that radical anymore.
There is an increasing consensus on his specific point about ending the carried interest loophole. Bush belatedly announced he agreed with Trump two weeks ago, and Hillary Clinton and President Barack Obama have both been in favor of ending it since 2007.
Romer noted that this mood strikes American politics periodically, as it did under President Ronald Reagan, when Congress passed the Tax Reform Act of 1986. “It could be that what’s emerging is a consensus from various parts of the political spectrum ... that the complexity and special treatment and special favors have just gotten to be too much,” he said.
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