Certain political truths have stood the test of time.
Republicans’ love for tax cuts has been one of those political truths.
Modern Republican presidents are responsible for the most significant cuts in history.
President Ronald Reagan signed into law the Economic Recovery Act of 1981, which lowered the highest individual tax rate from 70% to 50% and the lowest to 11% from 14%, along with the Tax Reform Act of 1986, which lowered the highest capital gains tax rate from 28% to 20%.
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President George W. Bush enacted the 2001 and 2003 tax cuts that gave the top 1% of households an average tax cut of over $570,000 between 2004 and 2012, increasing their after-tax income by more than 5% each of those years.
President Donald Trump continued that legacy wth the 2017 Tax Cuts and Jobs Act, which lowered the top marginal tax rate from 39.6% to 37% and increased the standard deductions for single and married filers, among other changes.
Those provisions are scheduled to expire in December, but the Republican-controlled Senate and House of Representatives are working on legislation making them permanent.
JP Morgan (JPM) ‘s CEO has been smart enough to describe himself as politically agnostic, calling himself “barely a Democrat” and telling CNBC, “My heart is Democratic but my brain is kind of Republican.”
New comments from Dimon at the Reagan National Economic Forum make it seem that Dimon’s brain is also moving over to the Democratic side.
President Donald Trump has numerous tax agendas on the table.
Image source: Win McNamee/Getty Images
Jamie Dimon wants to close the carried interest tax loophole
On Friday, Jamie Dimon told the mostly Republican crowd in Washington, D.C., that he supports taxing carried interest, the compensation paid to private investment fund managers.
This compensation is taxed at a much lower rate than regular income, giving a significant tax benefit for the lucky few Americans who qualify.
According to Reuters, Dimon said, “We absolutely should be taxing carried interest,” echoing President Donald Trump’s sentiment.
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This change, which has received bipartisan support over the years but never came to pass, would severely hurt the bottom line for hedge funds, private equity firms, and similar financial institutions.
Even in 2015, Trump said, “The hedge fund guys are getting away with murder,“ but nothing changed during his presidency.
It’s estimated that the government loses about $20 billion in annual tax revenue from the rule.
Are Republicans realizing they need to raise revenue?
Dimon and Trump’s stance on this tax loophole may indicate that the country’s finances are reaching their tipping point.
Despite Moody’s recent unprecedented credit downgrade, the White House’s latest budget proposal is expected to explode the deficit.
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The bill includes a slate of tax cuts, including increases to the Social Security income tax deduction and breaks for tips and overtime, as well as a revamped State and Local Tax (SALT) deduction.
According to the Tax Foundation, the bill would increase the country’s 10-year budget deficit by $2.6 trillion while reducing federal tax revenue by $4.1 trillion.
In essence, it increases spending while taking in less income than the government already does.
But the $20 billion from closing the tax loopholes is better than nothing.
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