Bush would remove tax loophole targeted by Dems
Republican presidential candidate Jeb Bush has outlined a tax reform plan that would raise taxes on some private equity managers and other investors.
In doing so, the plan would fulfill a goal often called for by liberal tax analysts and, more recently, fellow Republican candidate Donald Trump.
Bush’s tax plan, sketched out in an op-ed published on the Wall Street Journal’s website Tuesday evening, contains many conventional Republican ideas and provisions, including the broad goal of lowering tax rates.
Like the plan submitted by Mitt Romney in his 2012 presidential run, Bush’s plan would cut the top individual income rate from the current 39.6 percent to 28 percent, the same rate as under Ronald Reagan.
It would also lower the top corporate rate from 35 percent to 20 percent, while broadening the tax base by eliminating many credits, deductions and preferences.
In a departure from Republican orthodoxy, however, Bush writes in his op-ed that “we will treat all non-investment income the same, so unless you stake capital in an investment, you won’t be able to claim the capital-gains tax rate on your market gains.”
Such a move would eliminate a feature of the tax code called the “carried interest loophole” by many analysts, which allows managers of some investment funds to pay the lower rate on capital gains on their income from the funds they invest for clients. Under the current tax code, capital gains taxes are 23.8 percent.
Critics on the left have criticized the carried interest feature of the tax code as a handout to rich investors. Many analysts on the right have defended it as necessary to prevent double-taxation of investment.
In recent weeks, the billionaire businessman and reality TV star Donald Trump, currently perched atop the GOP polls, has suggested that hedge fund and private equity managers need to pay more on their income.
Bush, in his op-ed, calls for eliminating the provision directly after a passage in which he states the need to “eliminate the convoluted, lobbyist-created loopholes in the code.”
Notably, Bush would also allow companies to immediately deduct investments from their taxes, a provision in line with supply-side thinking meant to spur innovation and business growth.
He would also forgo the punitive measures favored by international organizations to prevent companies from shopping among different countries for low tax rates. Instead, he would seek to attract companies to the U.S. with the low corporate tax rate and the elimination of taxation on profits earned overseas.
Bush, touting his economic record as the governor of Florida, claims that his plan will result in a “much simpler, leaner and fairer tax code.”
The candidate, currently trying to make up ground on Trump, is set to release details of the tax plan on Wednesday.