Donald Trump Has a Point on Raising Taxes

WASHINGTON, DC - SEPTEMBER 09:  Republican presidential candidate Donald Trump (2nd L) talks with journalists during a rally
WASHINGTON, DC - SEPTEMBER 09: Republican presidential candidate Donald Trump (2nd L) talks with journalists during a rally against the Iran nuclear deal on the West Lawn of the U.S. Capitol September 9, 2015 in Washington, DC. Thousands of people gathered for the rally, organized by the Tea Party Patriots, which featured conservative pundits and politicians. (Photo by Chip Somodevilla/Getty Images)

Donald Trump's rhetoric on taxes is profoundly at odds with Republican Party orthodoxy.

For all his outbursts and overly-zealous irrationalities on protectionism and demonizing illegal immigrants, Donald Trump does surprisingly speak the truth on taxes.

His repudiation of Republican conservative orthodoxy appears no more evident than his advocation to significantly raise taxes on hedge funds. On Face the Nation, Trump outlined his grievances and made the case that "They're [hedgefund managers] paying nothing, and it's ridiculous. I want to save the middle class. The hedge fund guys didn't build this country. These are guys that shift paper and they get lucky." Trump concluded by offering a policy prescription to this injustice: "They're making a tremendous amount of money -- they have to pay taxes."

The foundation of Trump's argument is this: It's not fair that hedge fund managers and investors often pay a 20% capital gains tax rate, whereas the top rate tax bracket for regular income is 39.6%. And yet, this argument is at odds with a Republican Party that Donald Trump is seeking the nomination from. Jeb Bush has labeled Trump a 'fake conservative' for advocating an increase in the capital gains tax. Added to this, in a Boston Herald interview, presidential candidate Marco Rubio lamented Trump's call for a tax increase by stating "I think if someone wants to raise taxes, they should run for the Democratic nomination. That party loves to raise taxes, I want to keep taxes low." Rubio's statement highlights remarkably how the Republican Party ideology and partisanship appears to upend compromise.

It is a profound contrast, of course, because there is deep Grover Norquist-style religiosity inherent within the modern day Republican Party to reject any call for any such tax increase.

Nowhere was that religiosity more evident than at an 2011 Ames Iowa Fox News Republican debate, whereby each of the eight potential candidates were asked if they would reject a deal of $10 of spending cuts for every $1 in tax increases. Every hand went up, every Republican would reject that compromise. It is obviously understandable to detest raising taxes as a conservative party, but there comes a point where political dogmatism can far too easily supersede pragmatism and compromise.

In his most recent New York Times op-ed titled, 'Trump Is Right on Economics', Paul Krugman argues that while Trump is of course an 'ignorant blowhard', he doesn't subscribe to imprudent tax cuts that candidates such as Jeb Bush advocate. Bush has been attacking Trump on this tax-increasing rhetoric, though Krugman adeptly argues that, "the issues the Bush campaign is using to attack its unexpected nemesis are precisely the issues on which Mr. Trump happens to be right, and the Republican establishment has been proved utterly wrong."

Krugman is right, Trump is right. Robert Greenstein of the Center on Budget and Policy Priorities is also right in arguing that,"The tax code strongly favors income from capital gains -- i.e., increases in the value of assets such as stocks -- over income from wages and salaries. This imbalance fuels inefficient tax avoidance and unproductive asset-hoarding. It's also very regressive, since the top 1 percent of households hold about 42 percent of total wealth."

Donald Trump is bombastic, yet for all his faults, he manages to reject the Republican Party's religious proclivity for tax cuts. He is wildly irrational, though his tax-increasing stance does appear to show a glimmer of prudence, as he attempts to represent a party where such prudence is amiss.