I spoke to Marc Rowan, the C.E.O. of Apollo Global Management, about a provocative plan he believes could fundamentally reshape our economy and finally fix the federal budget. Whether it has a chance of being implemented is an open question, but Rowan’s ties to President Trump and the chatter the plan is generating means it could factor into budget talks later this year.
Several weeks after President Trump won the election, he invited Marc Rowan, the co-founder and chief executive of Apollo Group, the giant private equity and credit firm, to Mar-a-Lago for a job interview to become the Treasury Secretary. Rowan, who was in Asia for meeting with investors at the time, canceled all his plans and flew across the globe to meet with Trump. Rowan, who is arguably one of the most powerful financiers in the world, spoke with Trump but ultimately did not get the job. (Scott Bessent did.)
But since then he has become an increasingly influential voice on economic policy in President Trump’s orbit and even among some Democrats — and he has been pitching a very specific plan.
Rowan, the C.E.O. of Apollo, is a champion of a budget model for the federal government that he helped fund at the University of Pennsylvania’s Wharton School, where he is chair of the school’s board of advisers. Called the “Penn Wharton Budget Model,” it involves cutting taxes, but also cutting almost every tax exemption; increasing the capital gains tax rate; creating a carbon tax and rewriting the rules of immigration and health care. Its suggestions — which according to the model could by 2054 create a 38 percent reduction in federal debt, a 21 percent increase in G.D.P., and a 7 percent increase in wages — are likely to draw both boos and applause from Republicans and Democrats alike.
You’ll probably hear a lot more about the idea as crucial budget talks approach this summer. With the federal debt ballooning to a record level that worries Republican and progressive economists alike, no sudden drop in interest rates in sight, and the president set on extending tax cuts that would grow the deficit to $3.7 trillion over the next 10 years, according to the Congressional Budget Office, policymakers are shopping for unconventional solutions.
I sat down with Rowan recently to discuss the plan and how it came about. The interview has been edited and condensed.
What inspired you to start looking at these issues this way?
In 2008, I watched the Obama administration rewrite the entire U.S. economy — restructure airlines, autos, financials, insurance. And they were hostile to industry. I picked up the phone and I called the then president of the University of Pennsylvania, Amy Gutmann. I told her I will build for you a research focused, economic focused, budget focused entity if you’ll support it. And that was the genesis of the Penn Wharton Budget Model.
Why were you interested in creating the model?
There’s no budget model for the country. It’s like 28 Excel spreadsheets. And if you bring coffee and doughnuts in the morning, you get a better score than if you didn’t. If you are a committee chair or you’re a senator and you want to negotiate a bill, you can’t score your bill until afterward. Imagine you’re doing a buyout, but you can’t run the numbers until after you agree to buy it! This is how our government runs.
Given the current fiscal situation — the U.S. is expected to record a $1.9 trillion budget deficit this fiscal year — how surmountable do you think our economic challenges actually are?
There is no configuration of tax cuts and cuts in spending and changes of the current package and SALT that will result in anything meaningful because we waited too long. But that does not mean it is not possible.
So what exactly would you do?
Well, what has Trump promised? He’s promised low tax rates. I can get him low tax rates, 28 percent. He’s promised a lower corporate rate. I can get him a 15 percent corporate rate. He’s promised to balance the budget and fiscal prudence without doing a bunch of things that get to entitlements. I can do that too. This budget gives him an alternative. There’s not a single cut that’s in this budget. If they get cuts and DOGE works and they do lots of other things, that is all upside.
That’s remarkable if true. Let’s get into the details. You’re talking about lowering the top tax rate and getting rid of deductions at a time when many people believe the wealthiest are paying too little.
A low marginal rate allows you to remove a lot of distortions. At the point the top marginal tax rate becomes like 27 percent [down from 37 percent], the deduction for SALT is not worth that much. The capital gain differential, it’s just not worth that much. The tax planning and trust and gimmicks around estate planning are just not worth that much. And so what you start doing is devaluing all of this game-playing and you even start devaluing the whole notion of differences between s-corps and corporations and other things. And the simplification of not having people focus on deductions is overwhelmingly positive. The people who I have generally run this by who pay capital gains and do these things are like, “Okay, sign me up.”
You’re also talking about lowering the corporate rate to 15 percent.
We have a 21 percent corporate rate. But the effective rate is 13.6. So we collect taxes based on something close to 15, but we incentivize companies to make decisions off of 21. All of a sudden everyone would be making the marginal decision at 15 and we would collect no more or less money. We’re changing behavior.
What gets you from 21 to 13.6 are a series of distortions — the Christmas tree of ornaments: Pharmaceutical write-offs, R & D credits, all the distortions that get the rate from 21 to 13.6. Once you go to 15, why would you go to Ireland or Bermuda? At that point, all the incentives to move income around the world through this shell game just also disappear.
You’re effectively arguing that a 15 percent tax rate is actually even higher than what the average is today?
Yes. You reward growth on the margin. You reward people who work more because the next dollar, they’re going to keep more of. Which is what you want. It’s an incentive. And you reward corporations to record more of their income in the U.S. because the marginal rate will be taxed at 15 rather than 21.
The progressive side would say that taxes should be even more progressive than they are. People at the high end of the income strata like you are at an even higher end than they ever were. And therefore, they’d say, we should be thinking about how to tax that cohort in a different way given the bifurcation in income these days.
Look, this has been tried everywhere in the world. It hasn’t worked. Everyone who’s tried it has basically given up on it. New York is hollowing out its tax base. California is hollowing at its tax base. It just doesn’t work because fundamentally the wealthiest in the world are the most flexible in terms of what they’re prepared to do to move. We are, as you know, the single most progressive Western country when it comes to tax code. The percentage of tax paid by the rich for this proposal and for people like me, my taxes go up the first day.
You’ll pay more under this?
I pay more under this than I do otherwise.
You get rid of the “step up basis at death,” a provision that erases capital gains in a deceased person’s portfolio and values everything at the date of death, which most Republicans wouldn’t like.
I like that we allow a generation of entrepreneurs to build wealth and to keep their wealth and to keep more of it. But when they die, they don’t get to pass it on tax-free. That feels incredibly American to me.
I think that if you grow your wealth and you’re still working, you will like this plan because although you’ll pay more today, everything you do going forward, you will keep more of it until you die.
But not everyone makes out?
On the other hand, if you are the idle rich, you will not like this plan because you will pay more today on capital gains. I don’t think that’s a bad outcome.
The model includes this idea of requiring illegal immigrants to pay for health insurance. How would that work and what’s the impact?
We’re going to end up with a massive portion of the population uncovered by health insurance because of cost. With this plan, we end up with near universal health coverage.
How so?
Premiums come way down because you add this massive requirement for young immigrants to be in the health care pool, which takes premiums down almost a third.
So you’re not for deporting all illegal immigrants?
What I’m talking about is smart deportations. Get rid of the people you need to get rid of because they are a risk to society. Recognize that you have lots of people here who are here for economic reasons, who serve valid functions, but don’t let them free ride on the economy.
But won’t the cost of insurance just get passed onto the employer and therefore the consumer?
For those industries that have benefited from illegal immigration, this will impose costs on those industries because there will be some splitting of the incremental costs between the immigrant and business.
What kind of reaction have you gotten to all of this?
I never expected this. The interest I’m getting is off the charts, and it’s not from Republicans or Democrats because depending on the glasses you use, this could be a really Republican bill — lower marginal tax rates, you know, lower corporate tax rates, right? Or it could be a really Democratic bill, which is no capital gains tax break, no benefit at death, right? Requirement for health insurance. It allows people to look at this with their own view as to what it is.
Honestly, how realistic do you think all of this is?
Washington, left to its own devices, will absolutely not do anything other than the status quo. They will shuck and jive and budget gimmick and they will achieve nothing. And the deficit will continue to go up. It is only if they get some amount of market pushback or it becomes politically infeasible to pass a status quo budget that they will consider an alternative.
Thanks for reading! We’ll see you Monday.
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