Many of the nation's richest people said after the January 6, 2021 attack on the U.S. Capitol that they would never support former President Trump again.
Now, they are changing their minds.
Why? Their taxes could rise by millions of dollars if President Biden wins re-election and is able to enact key elements of his agenda for his second term.
Between Trump's courtroom dramas and chatter about Biden's age, it may seem as if the 2024 election is about more than personalities.
The smart money knows better: There are real risks that will directly impact the lives of Americans. The upcoming debate on taxes provides a clear example of this.
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Trump's wealthy friends
Nelson Peltz, the billionaire investor who lost his battle over control of Walt Disney Company, prominently apologized after January 6 for his past support of Trump.
“I'm sorry I did that,” he told CNBC.
He told the Financial Times he would probably do it again now.
Peltz recently hosted a breakfast at his mansion in Palm Beach, Florida, for Trump and several fellow billionaires, the Washington Post reported. Steve Wynn, Elon Musk, and Isaac Perlmutter, the former head of Marvel, were all in attendance.
Rich people who disagree with Trump on policy but support him anyway may be especially common in California. His opposition to abortion and immigration, for example, is unpopular in Silicon Valley, but for many tech executives, concern about high taxes trumps all else.
Oracle's Larry Ellison backed former South Carolina Governor Nikki Haley in the Republican primary. He is now said to be dating Trump.
Richard and Elizabeth Uehlein, heirs to the Schlitz beer fortune, supported Florida Governor Ron DeSantis in the primary. They are also back with Trump.
The shift comes at an important time for Trump: His campaign committees have far less money than Biden's. Even if Trump is willing to spend his own money — he spent none in 2020 — his finances are under pressure from court rulings and legal fees.
The next tax battle
Like everyone else, wealthy people can have more than one reason for their political choices. For example, Peltz, 81, said he believes Biden, who is also 81, is too old to be president.
But there is one thread that runs through much of the wealthy opposition to the president: taxes.
“At the end of 2025, on December 31, all of the individual tax provisions in the 2017 tax bill will expire,” said Howard Glickman of the Tax Policy Center in Washington. This includes some common provisions such as a higher standard deduction and lower tax rates for ordinary taxpayers.
The 2017 tax bill cut taxes so much on the top end that it was easy for Democrats to portray the bill as a tax cut for the rich, even though it lowered rates for most taxpayers.
Allowing it to expire “would amount to a huge tax increase for most American families,” Glickman said.
Congress will have a limited set of options:
Allow all popular tax breaks to expire and risk angering voters. Expanding it and causing the federal deficit to swell by about $3.5 trillion over the next decade. (Both parties have repeatedly allowed massive deficit expansions, but near-record interest rates and debt have changed the calculus.) Find ways to offset the costs while preserving tax breaks for ordinary Americans.
The third option is the scenario that many super-rich Americans seem worried about.
Targeting the rich
If Congress decides that some or all of the cost of renewing the tax cut must be offset, which party has the majority and whether Trump or Biden occupies the White House will have enormous influence.
Republicans have had difficulty for more than a decade uniting behind any concrete plan to reduce the federal deficit. Their dilemma has become more difficult to solve as the Republican voter base has become less affluent. Proposals to cut the cost of large federal benefits programs, a hallmark of the Republican Party before Trump, have lost popularity.
The Republican-controlled Congress may not be able to come together on anything other than stirring up more red ink.
By contrast, Democrats mostly agreed on the solution: a tax on the rich. The two Senate Democrats who opposed higher taxes on top earners, Sens. Kyrsten Sinema of Arizona and Joe Manchin III of West Virginia, are scheduled to retire this year.
Biden's proposed 2024 budget includes $4.3 trillion in tax increases over the next decade, according to Treasury Department estimates.
Taxpayers with income exceeding $400,000 annually ($450,000 for taxpayers filing jointly) would face a tax rate of 39.6%, up from 37%. Those with income of more than $1 million per year will see an increase in capital gains taxes. Owners of private equity firms and hedge funds will be harmed. Biden will change the laws regarding taxation of so-called pass-through income, ending provisions that greatly benefit them. Taxpayers with stocks, bonds and other capital assets worth more than $100 million may face a new 25% tax on the increase in the value of their property, regardless of whether it is sold or not.
Political dilemma
Biden has already tested a slogan for this fight:
“No billionaire should pay a lower tax rate than a teacher, janitor, or nurse!” Biden made the announcement in his State of the Union address in March. He cited Treasury Department estimates that America's billionaires on average pay an effective tax rate of just 8%.
By contrast, Trump rarely talks about taxes. When he was president, he once delivered a memorable line on the subject in the middle of a speech, declaring it “boring.”
This reflects the difference between the two men, but it also reflects the politics of the issue: raising taxes on the very wealthy and large corporations is well received in opinion polls – and not just among Democrats.
The nonpartisan Pew Research Center found last year that about three-quarters of Democrats and more than 4 in 10 Republicans said they were “a lot” bothered by the feeling that the rich don't pay their fair share.
For decades, wealthy Americans have been able to rely on their friends in Congress, especially in the Senate, to suppress popular ideas to raise taxes on higher incomes. But as both parties have become more populist, this strategy has become less certain.
Instead, many wealthy Americans appear to have settled on a different way to hedge their bets: backing a fellow billionaire to the White House.
What should you read?
MUST READ: Trump's fate “may depend on whether, for another seven months, he can retain more support among black and Latino voters” than any Republican in more than six decades, even as he stokes racial resentment among his base Of older eggs. Conservatives, writes political analyst Ronald Brownstein.
Poll of the Week: Four in 10 American adults say Jews face a lot of discrimination in our society, and 44% say Muslims face a lot of discrimination, according to a new Pew Research Center poll. Pew Center found that the rate of discrimination against Jews has doubled in the past three years.
Los Angeles Times Special: Newsom and Democratic lawmakers detail first California budget cuts totaling $17 billion.
Note: On Biden and the economy
How good is Biden's economic record? It's a good thing, but Democrats shouldn't kid themselves into thinking it's anything unusual, Matthew Yglesias writes.
