Presidential candidate Jeb Bush, in a seemingly radical departure from traditional conservative policy, is proposing a tax plan that removes provisions which benefit wealthy Americans.
The plan eliminates a “carried interest” loophole that has been advantageous to hedge fund managers for years.
The announcement comes after rival Donald Trump proposed a similar rule change.
Bush’s proposed plan also reduces corporate taxes and personal income taxes while cutting deductions and certain loopholes which currently benefit America’s wealthiest citizens. The goal of the plan is to spur economic growth by providing companies incentives to invest money domestically while reducing tax burdens on low and middle class families.
According to Bush, an annual economic growth rate of 4% is to be expected.
Bush’s plan involves reducing individual tax brackets from seven to three. Incomes would be taxed at 28%, 25%, and 10%. This plan doubles the standard tax deductions that most taxpayers take. This also ends what is referred to by Republicans as the “death tax” on estates of the deceased. It also makes marriage more beneficial for taxing purposes. Furthermore, the proposal reduces the corporate tax rate from 35% to 20%. Bush emphasizes that this is five percentage points below China’s rate.
In order to pay for these tax cuts, Bush says he plans to end the practice of worldwide taxation that has resulted in the trend of “corporate inversions”, or the use of cross-border mergers by companies to benefit from lower rates of taxation abroad. Additionally, Bush plans to assess a one-time tax on corporate cash that is stashed overseas, and he also says that he would eliminate the interest deductions the companies take when they borrow money.
Bush also mentions carried interest. He states that fund managers will no longer be able to benefit from lower interest rates on investments. According to his plan, unless capital is staked in an investment, investors will not be able to claim the capital-gains tax rate on their market gains.
A spokeswoman for Bush’s presidential campaign refused to answer how long Bush projects it would take to reach the expected 4% economic growth. Additionally, the impacts that the tax would have on short term deficits are unclear.
Democrats were quick to attack Bush, stating that the tax strategy would mostly benefit the rich, while imposing new costs on middle class Americans. Democratic National Committee spokeswoman Holly Shulman said, “More massive tax cuts for the wealthy and corporations, all while exploding the deficit or shifting the burden onto the middle class — an even more extreme plan than his brother’s.”