Citadel's Griffin Says Trump's 15% Tax Rate Isn't Realistic

  • Hedge-fund founder says deficit dictates smaller tax cuts
  • Mega-donor speaks at Koch brothers’ political network meeting

Paul Ryan's Tax-Overhaul Pep Talk

Billionaire hedge fund founder Ken Griffin said President Donald Trump isn’t being realistic when it comes to the tax cuts he has proposed, if the nation wants to remain fiscally responsible and deal with its deficits.

“The bitter truth is we’re not going to see rates as low as those proposed by the administration,” Griffin, the founder of Chicago-based Citadel LLC, said Monday during a panel discussion before donors at a Koch political network summit in Colorado.

“We’re not going to dramatically reduce rates,” said Griffin, a Republican who has donated to the Koch organization. “We’ve just been through eight years of spending that we’ve never seen before in the history of the country. Our deficits are stunning.”

Griffin appeared on the final day of a three-day conclave at a luxury resort in the foothills of the Rocky Mountains that attracted more than 400 conservative donors to the network founded by billionaire industrialists Charles and David Koch.

Trump has promised the largest tax cut in history, including a reduction in the 35 percent corporate rate to 15 percent, a rate that would also be available to pass-through entities, including partnerships and limited liability companies. Pass-through businesses, which can range from small mom-and-pop restaurants to doctors’ and lawyers’ offices to international hedge funds, don’t pay taxes themselves, but pass their earnings to their owners, who -- under current law -- pay tax at their individual rates.

Trump has also called for reducing the number of individual tax rates to three from the current seven, and cutting the top rate to 35 percent from 39.6 percent -- a change that would represent a major tax reduction for the highest earners.

House Republican leaders, including Speaker Paul Ryan, have proposed a 20 percent corporate tax rate and a 25 percent rate for pass-throughs. Trump’s White House, which released only a one-page list of bullet points in April, has promised a more detailed plan -- one that’s agreed-upon by House and Senate leaders -- by early September.

‘Pipe Dream’

Tax experts have previously said Trump’s 15 percent rate for businesses may be unrealistic. David Rosenbloom, an international tax lawyer at Caplin & Drysdale who served in the U.S. Treasury Department from 1978 to 1981, called the rates suggested by Trump and Ryan “almost certainly a pipe dream” because they lack an easy way to pay for such large cuts.

A shallower cut could jeopardize Trump’s goal of spurring job creation and economic growth, and do little to prevent U.S. companies from shifting their income and tax liabilities offshore to lower-tax countries, economists say.

Griffin didn’t cite a specific number for what he’d like to see as a corporate tax rate. “We need to come down, materially, from where we are in the 30s,” he said.

The billionaire also urged Republicans to move more quickly on legislation and be pragmatic, if they want to remain competitive in 2018.

“I really do believe that the administration now needs to head towards passing tax reform,” he said. “I would not let the perfect get in the way of the good.”

Griffin gave $100,000 to Trump’s inauguration celebration, but was not a major donor to him during last year’s campaign. Since Trump’s election, he’s been brought into the White House for a policy discussion along with other donors, Politico reported. He also recently gave $20 million to Republican Illinois Governor Bruce Rauner’s re-election bid, adding fuel to a 2018 state race in which there are no campaign contribution limits.

Panelist Sarah Ketterer, the chief executive officer of Causeway Capital Management LLC, also suggested that 15 percent might be too low.

“It doesn’t have to be 15, but it has to come down from 35,” said Ketterer, who also called for a reduction in deductions. “We seem like a Neanderthal country in that respect.”

— With assistance by Lynnley Browning

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