While there was much not to like about the CNN-hosted Republican presidential debate Wednesday — including a seemingly ADD-like format that focused on personal attacks but slighted policy detail despite the event's bladder-taxing 3-hour length — the scant attention paid to the looming federal budget showdown was a particularly egregious omission. Unless one counts demonizing Planned Parenthood based on bogus information (a point on which all the candidates disgracefully agree) or a brief foray into flat taxes and tithing, there was precious little about what Congress needs to do in the next two weeks aside from avoiding a politically disastrous shutdown. (Thank you, Ohio Gov. John "Captain Obvious" Kasich.)
That was a serious shortcoming, not only because primary voters should be interested in how a Republican presidential nominee might actually govern in some of Washington's deeper trenches but because at least two of the leading contenders have something rather important to say on tax policy. Both Donald Trump, the leading candidate in the field, and former Florida Gov. Jeb Bush (Number 2 or 3 depending on the poll) have come out in favor of dropping the so-called "carried-interest" tax loophole that unfairly benefits hedge fund managers.
Put those two in a room with President Barack Obama and leading Democratic candidate Hillary Clinton, and you would have four people who feel exactly the same way. Under most circumstances, that's a pretty powerful statement — a clear indication that the tax loophole is so egregious that it offends not only a Democratic president and the leading Democratic candidate but the major Republican candidates seeking the same office. Considering how much political hay Republicans have made by being against raising taxes, you know the carried-interest provision has got to be really, really bad to unite the populist Mr. Trump and the cautious Mr. Bush.
So how offensive is it? Decide for yourself. Under the carried-interest provision, private equity and hedge fund managers have a major chunk of their earnings (a share of the profits they've created) taxed as capital gains instead of income. The difference can be substantial — a tax rate in the neighborhood of 20 percent instead of 40 percent. That represents an $18 billion handout to Wall Street billionaires over the next decade, according to U.S. Treasury estimates.
Mr. Trump has made closing that loophole a talking point in his campaign and — not surprisingly — it reliably gets a roar approval from his audiences. He usually caps off the point, as he did at the Ronald Reagan Presidential Library Wednesday night, with a reminder that he can pursue such policy because he's self-funding his campaign and owes nothing to hedge fund managers or other big donors. Conversely, Mr. Bush, whose campaign has received substantial support from major Wall Street players, may have endorsed closing the loophole (as part of a broader tax reform package) to help insulate himself from criticism over those same ties.
Obviously, ending the carried-interest tax dodge won't by itself balance the budget, but it would send a powerful message: First, that bipartisan compromise is possible, second that Washington is paying attention to the will of the people and their concerns about income inequality and, third, that Republicans in Congress aren't necessarily the playthings of Wall Street fat cats. And make no mistake, it could also help meet the short-term needs of the federal government — $18 billion may not be a lot in comparison to projected federal deficits, but it is real money.
Alas, that Mr. Trump has been so visibly in favor of it probably works against it, as passage now might be seen as handing him a victory and thereby a leg up in the primary. President Obama has been advocating for the reform since 2008 and couldn't interest a Democratically-controlled Congress, let alone the current Republican majority that is generally against whatever he's for. And the influence of big donors hasn't exactly waned in recent years. Still, this is a subject that deserves greater public scrutiny, as the more people know about how the one-tenth of 1-percenters get treated like royalty under the tax code, the better. At least one can hope.
In the meantime, the budget clock is ticking toward a government shutdown, and Republican presidential candidates are either insulting each other, demonstrating an extraordinary lack of knowledge of women's health issues or treating a law-breaking Kentucky court clerk like she was the victim of discrimination when she's actually the perpetrator. The often-apoplectic panel that appeared in Simi Valley seems to believe the nation's got urgent problems, they just don't seem to be interested in doing anything meaningful about them.