Bush will present a tax plan on Wednesday that curbs a lucrative perk for hedge fund managers and private equity magnates -- a proposal that mirrors those of his top rivals in the 2016 presidential election.
The plan, outlined in a Wall Street Journal op-ed distributed to reporters Tuesday night, is short on details. But one of the few concrete terms would eliminate the carried interest loophole, which allows wealthy fund managers to avoid billions of dollars in taxes by treating their income as capital gains rather than as salaries. Capital gains are taxed at a lower rate than regular income, resulting in a massive tax break for many financiers.
The first hints of Bush's move came in a March Politico story, but the candidate was too slow to announce publicly what he seemed to be mulling in private: Two weeks ago, Trump came out swinging against the carried interest loophole, using far more vitriolic language than the former Florida governor did in his opaque op-ed.
In July, Clinton said she’d close the loophole (with a big carve-out for venture capitalists).
Trump has surged ahead of Bush in the polls for the GOP nomination, hammering Bush as a weak, "low-energy" candidate. Bush has responded by accusing Trump of being insufficiently conservative.
Bush's plan is vague, but appears to be subject to similar mathematical problems as those that plagued the tax plan offered in 2012 by then-GOP presidential nominee Mitt Romney. Economists at the time dinged Romney for promising big tax cuts for the wealthy that would have required tax increases on those less fortunate to avoid swelling the deficit.
The former Florida governor appears to be avoiding that critique by guaranteeing additional tax cuts for the poor in the form of an expanded Earned Income Tax Credit. The EITC serves as a subsidy for poor working families, especially those with children, many of whom receive net payouts from the federal government in lieu of a tax liability. Bush does not fully explain how these tax perks will be paid for (he claims that removing deductions will help, without providing specifics), but claims nonetheless that "roughly 15 million Americans will no longer bear any income-tax liability" as a result of his plan. It is unclear whether this group of 15 million people is in addition to the roughly 76 million Americans who currently don't pay taxes. The Bush campaign did not immediately respond to a request for further detail.
Like Romney, Bush offers up a massive tax cut for the richest Americans, calling in his op-ed to slash the top tax rate from 39.6 percent to just 28 percent. In an effort to simplify what Bush calls the burdensome complexity of the tax code, he says he'd eliminate some current deductions, like the one that allows companies to write off the cost of borrowing.
But Bush diverges from Romney by vowing to expand the standard deduction and increase the EITC. Bush says his plan will "unleash increased investment, higher wages and sustained 4% economic growth."
Still, when paired with a huge cut to regular income taxes, Bush's move to tax the income of hedge fund and private equity managers as regular income is less populist cudgel and more elite donor-class cuddle, as the Roosevelt Institute's Mike Konczal has pointed out.