Donald Trump recently made waves in the GOP when he proposed a tax increase on the rich to his populist base of supporters. It’s one more example where the logic of running as a Republican for elected office has been turned on its head. It’s not so strange a suggestion when you dig deeper at Republican voter sentiment. A tug-of-war for the narrative of Conservative populism is presenting itself. That wouldn’t have been possible a without Trump to speak for that divide.
In 2007 Conservative voters were livid over the bank bailouts. TARP stirred a deep sense of resentment among Main Street Conservatives. They felt the Republican Party was capitulating to a big government agenda that rewarded crony corporate interests over ordinary Americans. Banks got bailed out, we got sold out may have been an Occupy Wall Street slogan of 2011, but white working-class Republicans were experiencing the same economic decline and witnessing the same profiteering in the financial industry while the national debt skyrocketed in 2008. Much of the anger was redirected at President Obama, an easy target being a Democratic president, but with his presidency coming to an end the schism is reappearing. What energy didn’t go into being angry at the president was redirected away from the populist anger at the relationship between the Bush government, the Republican Party, and banks, and towards Tea Party activism.
The Tea Party mobilized conservatives to oppose new taxes, intensifying the heat on Republicans who were cajoled into supporting the Grover Norquist no new tax pledge. The wealthy, in alliance with a new cadre of “authentic” conservatives elected to the House in 2010 managed to reassert control over the fiscal narrative. Taxes must be lowered, and entitlements slashed to pay for it.
Now Trump comes along, and he’s saying the opposite. He won’t touch social security, but he will raise taxes on the rich to strengthen the middle class; the people in the audience at his events. Turns out they’re receptive to the message, as long as its presented by the right messenger, one of their own.
Okay, now let’s take a look at the Jeb Bush plan for tax reform.
Jeb uses the same laundry-list of tax talking points we’ve become accustomed to from establishment Republicans. He starts by neglecting to mention that the unemployment rate sits at just over 5%, the Federal Reserve’s own target for a healthy economy. The candidate also conflates the reemergence of the 39.6% tax rate with an Obama tax increase, when its merely the top tax rate before Jeb’s brother came along and unbalanced the federal budget. Bush say’s he’ll rid the tax code of many of it’s loopholes, but maintains the charitable deduction the wealthy are notorious for taking advantage of. Additionally, he names the U.S. corporate tax rate as the highest in the industrialized world and proposes to slash it, but we know that corporate taxes are rarely paid at that level because of loopholes that have resulted in companies even paying negative tax rates (getting money back, for making billions). Bush proposes an 8.75% one-time tax on the 2 trillion dollars corporations have kept abroad. This was tried. It was great for corporations, and soon led to a new buildup of overseas wealth stashing.
Jeb Bush is pledging 4% growth, lower taxes, and makes no mention of what impact the plan would have on the national debt. We’ve been down this road before, and trickle-down failed the vast majority of Americans. If this is the best the middling candidate can muster for 2016, Trump could have a smoother path to nomination than first predicted. If Trump controls the narrative, we may see a radical reshaping of what’s considered acceptable for entitlement reform and tax reform. If Bush controls it, it’s back to business-as-usual, and the populist wave will have once again rolled back.