Despite his cartoonish ways, Donald Trump occasionally makes a decent point. In recent interviews, the presidential hopeful took aim at a little-known tax loophole designed almost exclusively for hedge fund managers. Although Trump has previously made outlandish remarks on immigration and war heroes, this is the first attack pitting him against his equals in wealth.
“I want to save the middle class. And I have hedge fund guys that are making a lot of money that aren’t paying anything, okay,” said Trump. “I know a lot of bad people in this country that are making a hell of a lot of money and not paying taxes.” (Source: Time Magazine, August 20, 2015.)
Mr. Trump is referring to a special exemption known as the “carried interest” loophole. It allows hedge fund and private equity managers to file their income at the capital gains tax rate rather than the earned income rate. Many restructure their pay packages to artificially reduce what they owe in taxes. (Source: The Atlantic, January 17, 2012.)
Taking advantage of the law is perfectly fair, but Trump is arguing that such loopholes give an edge to those who can afford the most expensive accountants. “I spent millions of dollars every year on lawyers and accountants just to do a tax return,” he said. “The tax law is totally screwed up.”
Donald Trump’s Only Allegiance is to Himself
The celebrity billionaire is currently polling at 23.5% in a crowded field of Republican candidates, more than doubling the popular support for his nearest competitor. Many political journalists are dumbfounded by his ascendance to frontrunner status, but there is a method to his madness.
Trump is managing to keep his conservative credentials intact while outflanking liberals with populist rants against Wall Street. He is strategically choosing to position himself with the majority of voters on an issue-by-issue basis.
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At first he needed to engage with the GOP base, hence the fierce attack on illegal immigration. A Rasmussen poll found that 70% of Republican voters agree with his proposal to build a wall along the Southern border. (Source: Rasmussen Reports, August 19, 2015.)
Next he needed to outflank the Democrats. As China begins to eclipse the United States on the world stage, more Americans are worried about their country’s sphere of influence. A Gallup poll shows a drastic increase in the number of people wanting a U.S.-led global economy, from 39% in 2007 to 50% in 2015. (Source: Gallup, March 2, 2015.)
Here’s the Bottom Line
Trump’s license to criss-cross the political spectrum comes from his vast personal fortune. While every other presidential candidate is constantly fundraising, tying their political lifeline to the whims of special interests, Trump has purposefully avoided all donors. This could very well win him the GOP primaries.