Tax Shift Marks Trump’s Latest Test of Conservative Orthodoxy

If he sticks to his position Sunday, it would mark a departure from Republican candidates dating back to Reagan. Still, he’s famously fickle and said Monday he’d been misunderstood.

Tax Shift: Trump Makes Break From Conservative Orthodoxy

Donald Trump made a break from conservative orthodoxy on Sunday when he backed away from proposing large tax cuts for wealthy Americans.

“On my plan they're going down. But by the time it's negotiated, they'll go up,” the presumptive Republican presidential nominee said on ABC's This Week. “I am willing to pay more,” he said. “And you know what? The wealthy are willing to pay more. We've had a very good run.”

The remarks departed from the tax plan Trump unveiled in September, which proposed to lower the rate paid by the highest earners from 39.6 percent to 25 percent. The nonpartisan Tax Policy Center estimated the plan would cost $9.5 trillion over a decade and lavish the top 0.1 percent of income earners with a tax break of $1.3 million on average in 2017 alone—a 19-percent gain on after-tax income, or four times as much as middle-income households would get.

QuickTake How the U.S. Elects Its Presidents

Trump on Sunday stuck to other aspects of his tax plan, saying he'd “make sure the middle class gets good tax breaks.” But for upper incomes, he said he expected that “the taxes for the rich will go up somewhat.” On NBC's Meet the Press, Trump described his plan as a “floor” for negotiations with Congress. “The middle class has to be protected,” he said. 

The shift added to a list of conservative policy heresies ranging from slashing legal, skilled immigration to rejecting free-trade agreements to refusing to commit to cutting safety-net programs like Social Security as Trump seeks to remake the Republican Party in his image.

Still, the populist billionaire has been famously fickle when it comes to his proposals. In April he abruptly abandoned a three-week-old proposal to eliminate the national debt during his presidency. In March, he took three positions on abortion in the span of three hours. During his interview on ABC on Sunday, Trump also acknowledged softening his opposition to a higher minimum wage after saying U.S. wages were “too high” during a November debate. “I'm allowed to change. You need flexibility,” he said.

On Monday, he said his comments about tax rates for the wealthy had been misunderstood.

“If I increase it on the wealthy that means they're still going to be paying less than they pay now,” Trump said on CNN. “I'm not talking about increasing from this point. I'm talking about increasing from my tax proposal.”

‘Big Deal’

James Pethokoukis, a policy writer with the conservative American Enterprise Institute, described Trump's Sunday comments as “a big deal” for the Republican Party.

“Ronald Reagan's tax cuts were a generation ago. The economy boomed even with the Clinton tax increases and tanked after the Bush tax cuts. Whatever the accuracy of that causality, that sequence plus rising inequality has increased voter skepticism about tax cuts,” Pethokoukis said in an e-mail. “The public clearly sees the GOP as the ‘party of the rich,’ and it needs to re-establish trust with the middle and working class. Imagine a future Republican presidential primary where it isn't always 1980, where GOP candidates don't feel compelled to mimic Reagan and offer fantasy tax plans as the price of admission.”

Trump's Sunday comments on taxes come less than a week after he eliminated his last two remaining Republican rivals with a crushing win in Indiana, to become the party's presumptive nominee. If sustained, they would mark a departure from Republican candidates dating back to Reagan, who embraced across-the-board tax breaks, a litmus-test plank for conservative activists and some major donors. Democrats, who defeated Mitt Romney in 2012 by painting him as a candidate interested in serving the rich at the expense of the middle class, have been gearing up to make a similar case against Trump in November.

“Trump offered a big tax cut in the primaries in what now looks like a transparent ruse to win over the supply-side wing of the party,” Pethokoukis said. “But seeing as those tax cuts aren't popular, he is shifting away from them.”

Norm Ornstein, a political scholar at the American Enterprise Institute, attributed Trump's Sunday shift to three factors. First, Ornstein argued, Trump has “no anchors” in conservative ideology and thus is “not wedded to that orthodoxy.” Second, he's sending a signal to House Speaker Paul Ryan about who's in charge, as Ryan withholds his endorsement of Trump. “If you were playing by normal politics, the Speaker would have some leverage here. And Trump is basically telling him ‘No you don't,’” Ornstein said. Third, he said, the end of the Republican primary contest gives Trump “more freedom to say” what he wants to.

General-Election ‘Makeover’

Democratic front-runner Hillary Clinton's allies are on the attack. 

“There has never been a more reckless and risky tax proposal put forward by a presidential candidate,” Gene Sperling, former director of the National Economic Council, told reporters Monday in a conference call organized by the Clinton campaign.

Polling indicates that proposing lower taxes on already very wealthy Americans is not a winning general-election strategy. According to Gallup tracking surveys in April, six in 10 Americans believe upper-income people pay too little in taxes, while just 15 percent say they pay too much. A 2015 YouGov survey found that by a 45 percent to 29 percent margin, Americans reject the trickle-down economics theory that reducing taxes on wealthy groups and individuals stimulates the economy and leads to shared prosperity. (Notably, Republicans agreed with that position by a margin of 50 percent to 30 percent.)

Dan Pfeiffer, a former senior adviser to President Barack Obama, said of Trump's Sunday tax comments that flip-flopping is “never great,” but “flipping to the more popular position is better than the opposite.”

“I'm one that believes the path to victory for Clinton requires a very different message than the one we used against Romney in 2012,” Pfeiffer said in an e-mail. “Romney's tax cut was a problem because it reinforced what voters thought about him. Trump's tax cut plan is pretty far down his voluminous list of vulnerabilities.”

Ryan Rejection

Trump's weekend comments could loom large on Thursday, when he's scheduled to meet with Ryan, the Republican Party's chief policy visionary and gatekeeper. Ryan said last week he's “just not ready” to support Trump, because “what Republicans want to see is that we have a standard bearer that bears our standards.” Trump's departures on the benefits of free-trade deals, cutting entitlement spending and now upper-income tax cuts are a de facto rejection of the ideas that Ryan has fought for throughout his career.

From his time on the powerful House Ways and Means and Budget committees to his rise as speaker, Ryan has worked to build consensus around policies such as lowering taxes across the board, inking trade deals like the Trans-Pacific Partnership accord, permitting more high-skilled immigrants to the U.S., and cutting programs like Medicare and Social Security. These positions are shared by many Republican leaders, donors, and elites. But Trump has crafted a winning campaign around a vastly different agenda: an emphatic rejection of “horrible” trade deals like TPP and NAFTA, an immigration crackdown with cutbacks to H-1B skilled guest worker visas, and a promise not to touch Social Security.

After vanquishing establishment-backed candidates including former Florida Governor Jeb Bush and Florida Senator Marco Rubio, who styled himself after Reagan, Trump feels empowered. “I am not ready to support Speaker Ryan's agenda,” he said in a statement after Ryan rebuked him. And Sunday, Trump reminded his party that millions of Americans—more than 10.6 million so far—had voted for him.

“I have to say true to my principles also,” he said on ABC. “And I'm a conservative, but don't forget, this is called the Republican Party. It's not called the Conservative Party.”

Trump's runaway win in the primary race exposes the yawning gap between Republican leaders and many of their voters. The divisions are profound—a variety of conservative politicians, policy wonks, and opinion-makers say they'll refuse to support Trump—and raise questions about the extent to which the brash New Yorker's nomination will reshape the party beyond 2016. 

“This is a going to be a very significant ongoing struggle that is partly over ideology, and partly over power,” Ornstein said. “Who's going to control the party? There is an anti-leadership, populist, Trumpist wing that's not going away, even if he loses.”

—With assistance from Kevin Cirilli.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE