GOP donors are PISSED that tax cut wasn’t larger! (this is good news too!)
By Tristam Pratorius
On December 22nd 2017, no more than 5 months ago, president Trump signed into law an enormous tax cut. It was mostly aimed at big business.
The law lowered tax rates on corporations from 35% to 21%, lowered pass-through rates and it lowered the top-marginal tax rate from 39.6% to 37%. While not formally repealed, the estate tax threshold was raised by $11 million, so the estate tax has become even more of a sitting duck than it already was. This is despite the ET already being gutted ruthlessly after the dual ‘’Bush’’ tax cuts in 2001 and 2003.
That all sounds like a huge boon to the wealthy, does it not? Apparently, the big money donors don’t seem to think that is enough.
‘’Republican donors, who collectively donated $50 million in the 2016 election cycle, seem to be holding back this year’’…
‘’Why? They’re upset they didn’t get as big a tax cut as corporations did in the tax law President Donald Trump signed into law late last year.’’
…‘’But some of the Republican Party’s powerhouse donors in fact feel deeply stung by the law and have made their displeasure known to party leaders by keeping their wallets shut, according to multiple sources familiar with the situation, who spoke with CNN on condition of anonymity. Although some of the donors have not sworn off contributions to individual campaigns or even the Republican National Committee, all have so far withheld contributions to the House and Senate Republican campaign arms — which are key players in the 2018 midterm elections — as a way to send a message over the law.
The donors who have boycotted, all of whom are leaders of prominent hedge funds, include Paul Singer, of Elliott Management; Citadel’s Ken Griffin; Warren Stephens of Stephens Inc.; Cliff Asness of AQR; Bruce Kovner, formerly of Caxton; and Third Point’s Daniel Loeb. Combined, their donations accounted for more than $50 million to Republican groups during the 2016 election cycle; Singer ranked among the top 10 donors of either party, while Griffin and Stephens ranked in the top 20.
Collectively, they have bristled at what they view as favored treatment for corporations under the law. While the corporate tax rate was slashed from 35% to 21%, hedge funds are largely taxed at the top individual rate, which ticked down from 39.6% to 37%.’’
Essentially, Republican donors (including wealthy individuals and hedge funds) who pay the top-marginal tax rate are upset their savings were not as large as the corporate savings.
Going completely by the statutory rates, corporations had their taxes reduced more or less 40%. You can play around with this calculator here. If the top marginal tax rate were reduced by this much, it would end up at 23%.
And that’s the point.
Republicans have been trying to make the tax code increasingly regressive for decades. As part of the 1986 Tax Reform Act, otherwise known as the second ‘’Raegan tax cut,’’ the top marginal tax rate was lowered from a high 50% to 28%. The famous tax increases of 1990 raised that to 31%, which in-turn outraged the conservative base and lost Herbert Walker Bush his reelection. Clinton again raised the top marginal tax rate to 39.6%, amidst yet more conservative yelping.
‘’It will kill jobs, kill businesses, and yes, even kill the higher tax revenues these suicidal tax increases hope to gain.’’
Rep. Christopher Cox, (R-CA), May 27, 1993
Ever since the 39.6% rate was established, Republicans have been trying to push the wealthy back down towards middle and lower class tax rates. The Bush tax cuts of 2001 and 2003 lowered the top rate to 35%, which was a form of subtle, but meaningful incrementalism. To GOP frustration, Obama reestablished the 39.6% rate and set the whole regressive tax code fantasy back.
And now is opportune for the wealthy donors that are moaning. They understand that the GOP is vulnerable to Democrats in the mid-terms, so to keep that cash flow rollin’, I speculate that they will force Republicans to meet their requests.
However, this is also a good chance for Democrats and progressives. The lack of enthusiasm from the donors means that the Republicans could be toast. This whole hedge fund temper tantrum is expending the political capital that has kept them in control of congress since the Tea Party wave. Considering that they need to raise campaign money as fast as possible, time is running out for the Republicans.
Democrats can respond to yet more unpopular tax cut pushes with potent progressive activism. That strategy would be wise, because the GOP would be effectively cornered. Dammed if you do, dammed if you don’t. If the Republicans choose not to heed this ‘’hedge fund temper tantrum,’’ then their donors would pick up and leave. If the Republicans desperately pass new legislation to please hedge funds and investors, then voters (especially voters looking for populists) would feel betrayed.
That’s the good news!
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