Tax Analysts Blog

Trump's General Election Pivot Includes New Tax Ideas

 
Posted on May 10, 2016

Well, that didn't take long. After hinting for months that his positions are more fluid than they sometimes appear (and telling The New York Times that he was "flexible"), Donald Trump didn't waste any time beginning his pivot for a general election matchup with Hillary Clinton. During his first appearances on the Sunday talk shows after becoming the presumptive Republican nominee, Trump seemed to completely change his position on a higher minimum wage. He then went on to basically throw his original tax plan under the bus. The latter change is a lot more illuminating about Trump's thinking than the former.

During the Republican primary process, Trump was accused of not being a true conservative, and his most successful rival, Sen. Ted Cruz, R-Texas, frequently questioned the businessman's sincerity. Trump didn't seem to care, and neither did voters. But on two issues at least, Trump toed the usual Republican line: minimum wages and taxes. He railed against a federally mandated minimum wage, saying several times that wages were too high and were driving jobs away. And he released a tax plan that wasn't all that different in substance from something you saw from the other GOP campaigns. It included massive tax cuts, most of which benefited upper-income earners, and moved the United States to a territorial system for business taxation. The tax plan seemed design to assure people like Grover Norquist that Trump's rhetoric about carried interest compensation and Wall Street was just talk.

Now Trump says that wages absolutely must be higher. He even hinted he was thinking higher than the $15-per-hour number that is frequently pushed by progressives. He did say that the actual minimum wage floor should be left to the states and argued that there wasn't even a need for federal minimum wage laws at all. But the retreat is classic Trump. What's important to note is how quickly he decided to break with traditional GOP dogma on the issue.

After he proposed a tax plan that would cut taxes on upper-income earners during the Republican campaign (and one that put him on par with Cruz in terms of revenue losses over 10 years), Trump said May 8 that the rich must pay more in taxes. "The middle class has to be protected," the presumptive nominee said. But "the rich are probably going to end up paying more. And business might have to pay a little bit more." This couldn't have made House Speaker Paul Ryan feel any better about possibly supporting Trump down the line.

Trump retreated from his May 8 remarks the very next day, clarifying that he really meant that the rich simply wouldn't get as large of a tax cut as he originally proposed. But his message is becoming very clear. Trump simply isn't all that wedded to classic Republican fiscal policy. He won't stick to a message that lower taxes for everyone, including the wealthy and corporations, are ideal for the U.S. economy.

Trump's general election strategy is taking shape. He doesn't care much about retaining the establishment Republican vote. What he does care about is stealing Sen. Bernie Sanders's supporters from Clinton. Trump has reasoned that if he alters his rhetoric to include more progressive populist positions, he can persuade enough Sanders supporters to defect to offset any losses he suffers from Republican voters staying at home. The media has been dismissive of this strategy because it has long mischaracterized Sanders supporters as being primarily young, liberal, and well educated. That is a portion of Sanders's base. But the group that has been propelling Sanders to victory in states like Michigan is made up of white, blue-collar workers -- voters who aren't all that different in terms of demographics than the base of voters that pushed Trump to victory in the GOP race. Those types of voters don't care about supply-side economics and Republican tax orthodoxy. And that's why congressional Republicans and the establishment should be worried about what kind of tax reform would come out of a Trump White House.

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