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Trump tax rhetoric stirs divide in GOP race

Donald Trump waved to the crowd as he left a Washington, D.C., rally Wednesday opposing the Iran nuclear agreement.Carolyn Kaster/AP

WASHINGTON — Donald Trump’s rhetoric on raising taxes on Wall Street “paper pushers” to “save the middle class” has scrambled the usual tax debate among Republicans, with the real estate mogul’s surprisingly populist tax message starting to seep into the plans of his primary rivals.

Jeb Bush on Wednesday criticized Trump for promoting a tax policy so liberal that it won favor from Democrat Elizabeth Warren — a notion that Bush said almost made him “spit up his Diet Coke.”

But, at the same time, Bush unveiled his own plan that had some of the same elements, calling for raising some taxes for private equity and hedge fund managers. Bush’s proposal would tax the investment dividends earned by high-dollar financial managers as income instead of at the lower capital-gains rate. More predictably, he would also cut taxes for the wealthy and corporations.

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“This is a radical departure,” Bush said Wednesday on CNBC’s “Squawk Box,” using his proposal to hit back against Trump’s charge that he is owned by the special interests of wealthy donors. “Right now, Wall Street’s had a pretty good ride here. . . . People are stuck in the middle.”

Sound familiar?

Conservatives bristled at such populist talking points from the top GOP candidates.

“It looks like Bush picked up a Trump idea that wasn’t a good idea,” said David McIntosh, president of Club for Growth, a conservative group that advocates for low taxes. “Trump’s playing into the liberal Democrats’ view that we should run on envy of people who have been successful.”

Trump, the Republican front-runner, has promised to unveil his full tax plan by the end of September. In the meantime, the billionaire has delighted in upending the Republican nominating contest as he flouts GOP convention even while vowing party loyalty and ruling out a third-party run.

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In recent media interviews, he has accused hedge fund managers of “getting away with murder” on their taxes while the middle class is “getting absolutely destroyed.”

“The hedge fund people make a lot of money and they pay very little taxes,” Trump told Bloomberg. “I do very well. I don’t mind paying some tax. The middle class is getting clobbered in this country. The middle class built this country, not the hedge fund guys.”

His provocative, at times contradictory, statements — he’s said he opposes any net tax increase — have the GOP establishment scratching their heads as to how the man atop the Republican polls will affect the field of candidates. Wary that others will be tempted to ride the populist wave, they continue to hammer Trump for violating a core Republican orthodoxy: no new taxes.

“If he’s in favor of raising tax rates on the wealthy, then I think he’s running in the wrong primary,” said Stephen Moore, a conservative economist who cofounded the Committee to Unleash Prosperity this year to get politicians to lower taxes. “The Republican party is a pro-growth, pro-tax cut party. This would be contrary to what the GOP stands for.”

But there appears to be a schism between the party establishment and its Tea Party movement base. Some Tea Party movement leaders, who espouse limiting the size and role of government and paying down the national debt, have no problem with Trump wanting to raise taxes on the rich.

“People say it’s not very Republican but I want to decide each individual issue for myself and not allow the party to decide for me,” said Amy Kremer, former chairwoman of Tea Party Express and one of the founders of the movement. “Donald Trump is talking about reforming the tax code for a more level playing field.”

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Far from creating a backlash, Trump’s seeming willingness to spout off against the party machine is specifically what has endeared him to the average voter, said Tea Party movement leaders.

“The biggest draw for Trump within the Tea Party movement is that he’s a person who can’t be bought,” said Gregg Cummings, founder of We the People Tea Party of Southern Iowa.

Trump’s message drew tepid praise from an unusual ally on Tuesday: Warren, the Massachusetts Democrat and liberal icon, who frequently rails against bankers not paying their fair share of taxes.

“Donald Trump and I both agree that there ought to be more taxation on the billionaire, the people who are making the money,” Warren said in an interview on ABC’s “The View.”

Warren’s comments prompted Bush, in his CNBC interview, to marvel at the state of the Republican race, accusing Trump, a gambling, real estate, and reality TV titan, of “preying on [Americans’] angst and anger.”

“This is Alice in Wonderland time here,” Bush said. “So as the world gets turned upside down temporarily, I think there needs to be people with a steady hand.”

With its broad tax cuts, Bush’s fiscal message appears tailored to appeal to middle-class voters while not alienating the GOP establishment. He says he would pay for the lost revenues from tax cuts by closing loopholes and eliminating and reducing deductions, but not all of them are specified.

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Pledging to close the tax break for hedge fund and private equity managers is a shift for a mainstream GOP candidate.

Former Massachusetts governor Mitt Romney, during his 2012 presidential campaign, dodged questions about whether he would keep the carried interest tax break in place given that he personally had saved millions of dollars because of the loophole in his own private equity business at Bain Capital.

While some economic conservatives say they do not agree with Bush’s elimination of the “carried interest loophole,” they praised his restructuring of the tax code to effectively lower taxes overall. Among the reforms, Bush would cut the top income tax rate from 39.6 percent down to 28 percent, double the standard deduction, and cut the corporate tax rate from 35 percent down to 20 percent.

Grover Norquist, president of Americans for Tax Reform and best known for the pledge to oppose all net tax increases that nearly all Republican candidates for office sign, said Bush’s elimination of the carried interest loophole is “just for show.”

The amount of money — $3 billion to $16 billion over 10 years — is so small as to be virtually meaningless, he said. “It’s a shiny thing that people get excited about but it’s completely meaningless in terms of the economy. It’s less than a fraction of a fraction. It’s a piece of an asterisk.”

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But Norquist said it was a good strategy, on Bush’s part, to include it even though he does not agree with it: “By matching Trump on this, everyone in the country will have to compare apples to apples when Trump releases his plan.”


Tracy Jan can be reached at tracy.jan@globe.com. Follow her on Twitter @TracyJan.