In a Thursday interview with PBS NewsHour, former Utah Gov. Jon Huntsman (R) indicated that as president, he would ask rich Americans to share in the sacrifice of strengthening the American economy and reducing the nation’s debt and deficits. Though that is a significant departure from the stances held by many of his fellow Republican presidential candidates, Huntsman remained attached to certain conservative lines, saying he would support means testing popular entitlement programs as opposed to raising taxes on the wealthiest Americans.
But Friday, Huntsman seemed to signal he would support raising revenues directly from some of the richest Americans when he told Bloomberg’s editorial board that he would be willing to break with Republicans on two significant areas of tax reform. Bloomberg reports:
In an on-the-record conversation at a Bloomberg View editorial meeting, the former Utah governor and ambassador to China said that in his effort to reform the tax code and reduce the deficit he would be willing to:
1.) take away the deduction for interest on home mortgages;
2.) treat capital gains as regular income;
3.) do the same with carried interest (that is, the profit share paid to hedge-fund managers and private-equity folks).
Huntsman campaign spokesman Tim Miller clarified the position later:
Governor Huntsman believes that tax reform should have no sacred cows, but as he’s said many times he does not believe in raising taxes and that any tax reform should be revenue neutral. In that vein, he does not support any policy that would increase the capital gains or carried interest rates.
The normal argument against taxing capital gains and carried interest as income is that it would discourage investment and slow economic growth, even though the evidence to support that notion is lacking, as economic guru Warren Buffett notes:
I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976–77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off.
Taxing capital gains as ordinary income could bring in $38 billion in revenues that would come primarily from corporations and wealthy American investors. Likewise, taxing carried interest as income would primarily affect wealthy hedge-fund managers and those in the private-equity sector.
The GOP has continually opposed raising tax rates on the rich in favor of new taxes on the poor and middle class, even as the top-tier of American income earners continue to see their incomes go up while their tax rates go down. That Huntsman initially supported treating capital gains and carried interest as income again seemed to illustrate that he is the most reasonable candidate in the Republican field. The fact that he had to so quickly walk it back, however, seemingly indicates how little room that field has for a “reasonable” candidate.