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June 16, 2015
Trump's Views on Taxes Are Many and Varied
by Paul C. Barton

Full Text Published by Tax Analysts®

On his hit television show The Apprentice, real estate mogul Donald Trump said one of the keys to a successful business is: "I make life interesting [for employees]. It's always different. It's always exciting."

The same could be said of his views on tax policy, which have ranged from wanting to eliminate the national debt by imposing a one-time wealth tax on the richest Americans to imposing a special tax on goods from China. In an obscenity-laced tirade before a Republican audience in Las Vegas in April 2011, he warned the Chinese, "We're going to tax you 25 percent!" Trump contends his idea would bring manufacturing back to the United States. Others warn it would incite a trade war.

After making noises about running for the White House in almost every presidential election year since 2000 -- the year he did run briefly as a Reform Party candidate -- Trump has scheduled an announcement about his 2016 plans for June 16 in New York. He and his aides have predicted it will be "major," "dramatic," and "surprising." Some political observers are taking him more seriously this time, because he has formed an exploratory committee and has organized staff in early caucus and primary states such as Iowa, New Hampshire, and South Carolina. He has also announced plans to visit Iowa and New Hampshire immediately after his announcement.

Maybe more significant is that Trump said in March that he was opting out of another season of his television show. Still, some warn, the June 16 announcement could just be about a new super political action committee or something similar. C-SPAN, however, seems convinced, having added coverage of his "presidential" announcement to its June 16 schedule.

Trump's Year 2000 Ideas

Even though he is a lifelong Republican, Trump entered a few primaries in 2000 as a candidate in the Reform Party, founded by Ross Perot. Trump had an extensive plank on tax policy then, including his 1-5-10-15 plan, which called for income taxes of:
  • 1 percent on incomes of $30,000 or less;
  • 5 percent on incomes from $30,000 to $100,000;
  • 10 percent on incomes from $100,000 to $1 million; and
  • 15 percent on incomes above $1 million.

Also that year, Trump called for eliminating the estate tax, lowering taxes on capital gains and dividends, eliminating corporate taxes, and implementing a 20 percent tax on imported products in order to bring jobs back to the United States.

But his most noticed proposal was a call for a one-time levy of 14.25 percent on individuals and trusts with a net worth of $10 million or more. At the time, Trump said it would generate $5.7 trillion, enough to pay off the national debt, shore up Social Security, and pay for middle-income tax cuts. The national debt has since increased to more than $18 trillion.

Trump, in a November 1999 interview with CBS News, said the wealth tax would have cost him at least $725 million personally. "It's a big hit for me, but I think it's worth it," he said.

Critics, however, saw the wealth tax as flawed and unrealistic.

Bruce Bartlett, a conservative economist who was a Treasury deputy assistant secretary under former President George H.W. Bush, wrote in The Wall Street Journal in November 1999: "Paying off the debt may be a worthwhile goal, but it is not one worth imposing new taxes to accomplish. Trump's plan would do more harm to the economy than any conceivable benefits from making the federal government debt-free. Even at the rate he has proposed, the economic disruption would be enormous. At rates several times higher, which would be necessary to actually raise $5.7 trillion, the disruption would be devastating."

And David J. Roberts, an associate professor of accounting at DePaul University, wrote in Tax Analysts that same month, "You have to hand it to Trump. A tax plan that appears to sock it to the wealthy will likely have great populist appeal, especially among the many Americans who have the misconception that the wealthy are not paying much in taxes."

But Roberts, like Bartlett, questioned the math. "One problem is that the numbers are questionable, even when viewed on a static basis," he wrote. "Based on some estimates of the net worth of U.S. households, it is doubtful whether the tax as designed would generate anywhere near the amount necessary to pay off the debt. So, depending on the actual net worth numbers, the resulting tax revenue may not be sufficient, even on a static basis. And if there was ever a case where a static model won't work, this is it."

As for Trump's other ideas in that campaign, Howard G. Gleckman of the Urban-Brookings Tax Policy Center told Tax Analysts, "The 1-5-10-15 would be an enormous tax cut that would add trillions of dollars to the national debt and contradict the stated goal of his wealth tax." In 2014, Gleckman said, those with incomes of $1 million and above had an effective tax rate of 34.6 percent. "Under [Trump's] plan, they'd pay less than half that," he said.

Trump's Comments on Other Tax Issues

While he has not mentioned his wealth tax or the 1-5-10-15 plan in recent years, Trump has continued to voice other positions on tax policy questions, including:
  • On tax simplification: "Believe me, you would have a simplified tax code as one of the many things you could do in a Trump administration," he said during an April 15 interview with Fox News. When asked in the same interview about the proposals of some of the already announced GOP candidates, including Florida Sen. Marco Rubio's plan to consolidate seven individual tax brackets into two, set at 15 percent and 35 percent, Trump said: "It works because it really does simplify things, and a thing like that would work . . . but a lot of people really do like the simplification and fairness of a flat tax."
  • On President Obama wanting to raise taxes on the wealthy: "You can't take away job incentives. You can't take away employer incentives. People want to have incentives. The last thing you should be doing now is raising taxes for anyone," Trump said during a Fox News interview in August 2011.
  • On President Obama paying an effective rate of 18.4 percent on his 2012 income: "It would be nice if everyone could be down at that level," Trump said during an April 2013 appearance on Fox News.
  • On tax subsidies for oil companies: "For us to be subsidizing oil companies is absolutely insane," Trump said in an August 2011 appearance on ABC's Good Morning America. When asked why many congressional Republicans and Tea Party members don't agree with him, he added, "When explained to the Tea Party, I can't imagine anybody is going to stick up for Exxon Mobil or some of these big oil companies that are making a fortune and paying relatively little in taxes."
  • On eliminating the mortgage interest deduction: Trump was quoted March 5, 2006, in The New York Times Magazine as saying such a step would lead to a "total catastrophe" for the U.S. economy. He added, "It will lead to a major recession, if not a depression."
What to Make of Trump's Positions

"In the past he has been all over the place with his opinions on tax policy," Kyle E. Pomerleau of the Tax Foundation told Tax Analysts. "So it is hard to judge exactly what he would propose this time around." In general, Pomerleau said, lower taxes on savings and investment are good, but Trump's four-bracket income tax plan, with a top rate of only 15 percent, "would be a large tax cut and would cost a lot of revenue."

Harvey J. Tucker, political scientist at Texas A&M University, said in an e-mail, "His ideas will not be taken seriously on their own merit, but anything can go viral on the Internet or in the news media." Tucker also said: "The main business of Trump's that voters know about is the entertainment business. He has had real estate failures as well as successes. Voters are aware of the successes only. They will learn about the failures if Trump is viewed as a threat by stronger candidates."

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