Is Hillary Clinton Just Pretending to Want to Tax Wall Streeters?
When Hillary Clinton launched her presidential campaign in April, she opted for a low-key launch, projecting an image of being a champion of “everyday Americans.” She rented a van and drove to Iowa (she said it was her first time driving herself since 1996).
After arriving, she said a few short words laying out her political vision. One line in particular was picked up by the media and used as representative of her alleged populism: “There is something wrong when hedge fund managers pay lower tax rates than nurses or the truckers that I saw on I-80 as I was driving here over the last two days.”
Clinton here was referring to the “hedge fund loophole.” Investments are taxed at a 15 percent rate, lower than most normal income. Hedge fund managers basically manage investments for their day job, so they pay 15 percent tax rates while middle-class folks pay much higher taxes.
The line produced a flurry of media coverage. “Hillary Clinton Blasts Pay For CEOs, Hedge Fund Managers In Campaign Kickoff,” wrote the Huffington Post. “Hillary Comes Out Swinging at CEOs and Hedge Fund Managers,” intoned Bloomberg Politics.
These articles set the tone: Hillary is out for the little guy, tackling Wall Street. What's remarkable is that the narrative was set by a single throwaway line at an event. There was no policy paper about taxing Wall Street or closing the hedge fund loophole, there wasn't even a concrete pledge about what to do about the issue.
This is actually very important, because shortly after this Iowa press event, Hillary hit the fundraising trail, courting many of the same Wall Street financiers who propelled her run in 2008. She reportedly raised a million dollars in a single weekend of fundraisers in New York City, largely from events hosted by individuals from the financial industry.
So why were Wall Streeters so eager to finance Clinton if she is coming after them? One explanation is that the industry has suddenly had a change of heart, and is altruistically choosing to surrender itself to higher tax rates. A more likely explanation is that they've seen this movie before.
In 2007, Hillary Clinton infused her campaign with similar rhetoric. "It offends our values as a nation when an investment manager making $50 million can pay a lower tax rate on her earned income than a teacher making $50,000 pays on her income," said Clinton in a campaign statement. "As president I will reform our tax code to ensure that the carried interest earned by some multimillionaire Wall Street managers is recognized for what it is: ordinary income that should be taxed at ordinary income tax rates."
But the rhetoric didn't last long.
As she struggled to defeat Barack Obama's insurgent campaign, Hillary actually did something very unusual for a Democratic primary; she decided to run to the right instead. At one point during the 2008 Pennsylvania primary debate, she said that perhaps she wouldn't raise the rate at all, and if she did she would only raise it to 20 percent, which is below the rate paid by someone earning around $37,000 a year.
MODERATOR: Would you say no, I'm not going to raise capital gains taxes?
CLINTON: I wouldn't raise it above 20 percent, if I raised it at all. I would not raise it above what it was in the Clinton administration.
MODERATOR: If I raised it at all. Would you propose a gain, an increase in the capital gains tax?
CLINTON: You know, Charlie, I'm going to have to look and see what what the reveneue situation is. We now have the largest budget deficit we've ever had, $311 billion. We went from a $5.6 trillion projected surplus to what we have today which is a $9 trillion debt. I don't want to raise taxes on anybody.
Watch the exchange:
Clinton then went on to attack Obama's suggestion of raising the payroll tax cap (currently people only pay into social insurance programs up to $117,000 of income, income after that is tax free). She even suggested doing so would raise taxes on teachers and firefighters.
After this exchange, Politifact decided to look into Clinton's actual position. It wrote that in her entire legislative history as a senator, they “couldn't find a clear position on Sen. Hillary Clinton on whether to raise the tax or not.”
During another visit to Iowa in May, Clinton again repeated her line about hedge funders paying less in taxes than average folks. Yet again, she did not name any specific rate, giving herself plenty of room to maneuver in the future.