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Alternative minimum tax
Both bills would repeal the alternative minimum tax, which is designed to make sure that the wealthy pay at least some tax. The 2005 return shows that the AMT increased Trump’s tax bill from about $5.3 million to $36.5 million. So at least in that tax year, he potentially could have saved as much as $31 million. (The capital gains tax for people in Trump’s income bracket has been increased since then, so the savings would be lower now. If Trump’s AMT bill is the result of have large net operating loss deductions, that could limit the benefit of AMT repeal because net operating loss carrybacks would be repealed.)
The House bill would dramatically slash taxes from a top rate of 39.6 percent to 25 percent on “pass-through” entities, which are companies that direct income through the individual income tax code and not the corporate tax code. The Senate bill currently is less generous, allowing a deduction of 17.4 percent of their income from taxable income, but lawmakers are discussing increasing the deduction to 20 percent, which would increase the benefit to Trump. (Effectively, this would be akin to a 30.8 percent top tax rate.)
Trump’s 2005 tax return showed that he had more than $109 million in income from businesses, partnerships and pass-through entities, which represented a large portion of his income. A letter by Trump’s tax lawyers released by the Trump campaign stated that he was the sole or principal owner in about 500 entities, “almost exclusively through sole proprietorships and/or closely held partnerships.”
So the House version of the tax bill in theory could cut the taxes on that much pass-through income by as much as $16 million, though in 2005 a lot of that income was offset by business losses. The Senate version of the bill could have cut the tax bill by about $9 million.
While the bills purport to close some loopholes, such as concerning net operating loses, there are some provisions that offer better deals for real estate investors. The impact of these provisions on Trump’s taxes is unclear, but it certainly raises an eyebrow. For instance, rent, royalties and licensing fees are eligible for reduced pass-through rates. The Senate bill would shorten the depreciation schedule for commercial property, another possible boon for a real-estate investor like Trump.
“In terms of pass-throughs, there are anti-abuse rules to make sure that wages do not avoid the top two tax rates of 35 percent and 39.6 percent,” a White House official said. “It ensures that tax relief is targeted to Main Street job creators and not wealthy individuals.”
Income tax rates
The House bill does not reduce the top income tax rate, but the Senate offers a small reduction to 38.5 percent. The other rate changes would make only a modest difference to Trump, who at least in 2005 earned relatively little (about $10.8 million) from wages, interest and dividends. Under the Senate bill, he would see a reduction of about $100,000.
Here’s one area where Trump’s taxes would increase because the bills would eliminate the deductibility of state and local taxes. The House would still allow a deduction of $10,000 for property taxes, but that’s a pittance for Trump’s properties.
In 2005, Trump had itemized deductions worth $17 million, but we do not know how much represented state and local taxes and how much represented mortgage and charitable contributions. (The mortgage and charitable deductions are relatively untouched, but the House would reduce the cap on the size of new mortgages from $1 million to $500,000.)
If we assume roughly three-quarters of Trump’s itemized deductions were from state and local taxes, the tax bill would increase his taxes by $5 million. (Note: Since Trump was covered by the AMT in 2005, he would not have received a benefit for state and local tax deductions since those are limited under the AMT.)
We would be remiss if we did not include the impact of possible repeal of the estate tax on the Trump family. While Trump would not personally benefit, it could make a big difference to his children.
The House would completely repeal the estate tax, even eliminating any tax on capital gains. The Bloomberg Billionaires Index says Trump is worth $2.86 billion, so at a 40 percent tax rate, that would be a savings of $1.1 billion. (If you believe Trump’s questionable claim that he’s worth $10 billion, that would be a savings of $4 billion.)
The Senate bill would only increase the amount of estate exempt from taxation, from about $11 million for couples to $22 million. That would save the Trump heirs only about $4 million.
"Trump never released his tax returns in a break with 40 years of precedent from presidential candidates."
— Washington Post, September 27, 2017
Americans have absolutely no way of knowing whether a revision to the tax code advocated by Trump would benefit him, for the simple reason that we have no idea what taxes Trump pays.
Now more than ever, it's important to reiterate this unprecedented conflict of interest.
We won’t believe you until you release your tax reTURN.
We don't believe you.
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