Trump’s Tax Plan: A Billion or Three for Guys Like Him

[Distributed via OtherWords.org]

If the president’s tax plan passes, it’ll be like he’s cutting himself a check from the Treasury.

What’s the largest personal stake a U.S. president has ever had in legislation he signed into law? Whatever it was, it’ll be dwarfed by what Donald Trump’s signature will be worth — to himself — if Congress passes his proposed tax plan and puts it on his desk.

If that happens, Trump will be effectively cutting himself a check from the U.S. Treasury for several billion dollars.

Call me cynical, but it seems that’s exactly what Trump has in mind. His plan just fits his tax situation — or what we know of it, without access to his tax returns — too perfectly.

The president’s tax proposal eliminates two taxes that mostly benefit the wealthy, and cuts a third tax roughly in half. That would bestow a windfall worth billions on the Trump family.

First, there’s the elimination of the alternative minimum tax, or AMT.

The AMT applies to taxpayers whose income tax liability otherwise would be reduced excessively by certain deductions, including deductions commonly claimed by real estate owners like Trump. It’s like an alternative tax system in which the rates are lower but fewer deductions are allowed.

The one glimpse we’ve had of Trump’s tax returns suggests he stands to benefit massively from the repeal of the AMT. In 2005, Trump’s income exceeded $150 million, but his regular tax liability was barely over $5.3 million — that’s barely a 3.5 percent tax rate.

But the AMT increased Trump’s tax liability that year by over $31 million. Had Trump’s tax plan been in effect in 2005, it would’ve saved him that $31 million.

Still, that’s chump change in comparison to the tax windfall he hopes to bestow upon himself by cutting the top tax rate on the bulk of his income by more than half, from nearly 40 percent to 15.

We’re not talking about the corporate tax rate here. Trump could reap a tidy personal benefit from slashing the corporate income tax too, but the far bigger prize in his plan is its treatment of income from businesses that don’t pay corporate taxes.

Under current law, the income of those businesses is taxed to their owners at individual income tax rates. Under Trump’s plan, income from those businesses would receive preferential tax treatment, with a maximum tax rate of 15 percent.

That would be the final act in turning our nation’s tax policy on its head.

In 1980, before Ronald Reagan’s election, the maximum rate on workers’ wages — earned income — was less than the maximum rate applicable to all other types of income except long-term capital gains.

Under Trump’s tax plan, the maximum tax rate workers pay, after accounting for employment taxes, will be higher than the rate applicable to any other type of income.

That means no matter how Trump invests his billions — in real estate, bonds, stocks, business ventures, etc. — the income he generates would be taxed at a rate lower than what workers pay on their wages.

Trump’s preferential rate for business income is unprecedented. Is it coincidence that the first politician to propose it just happens to be a real estate magnate with interests in literally hundreds of unincorporated businesses?

The biggest tax windfall Trump hopes to secure for himself, however, is the one he won’t live to enjoy. I’m referring to the estate tax, of course — a federal levy on estates worth over $5.5 million for individuals.

Trump’s plan would eliminate that tax, no matter how large the estate. For Trump, that would mean as much as $1.4 billion on an estate estimated by Forbes at $3.5 billion.

The bottom line: If Trump’s tax plan passes, he’ll have secured for himself billions in tax benefits in less than a year as president. Not bad work if you can get it, huh?

OtherWords columnist Bob Lord is a veteran tax lawyer who practices and blogs in Phoenix, Arizona. He’s an associate fellow of the Institute for Policy Studies. 

10 Responses to Trump’s Tax Plan: A Billion or Three for Guys Like Him

  1. For Sure Not Tom

    But… but… I thought Trump “divested” himself from all his businesses?

    If he lied I’m shocked!

    This will all turn out for the best. New York AG Schneiderman appears to be going after the Trump and Kushner ‘klans’ for money laundering and other financial crimes.

    So eventually, the taxpayers will up with all Trumps stuff under the RICO statutes.

    • And since AG Schneiderman is not Federal there’s Trump would not be able pardon anyone, least of all himself.

      • For Sure Not Tom

        I know! That’s my favorite part!

        And if he does pardon friends (I don’t think he has any) and family, it complicates his friends (I mean, really, does anyone claim to be his BFF?) and family’s defense in the NY courts.

        Tick…. tick…. tick…..

        • “I know! That’s my favorite part! Tick…. tick…. tick…..”

          I know that this whole thing with AG Schneiderman is near and dear to your heart, but I am not sure but what he may have overplayed his hand in this Trump thing. He has made no secret of his hatred of Trump and has devoted considerable resources to pursuing him. It almost has the apprearance of a vendetta. I think Schneiderman may find himself in the position of being viewed as an AG misusing the power of his office to pursue a personal agenda. I don’t know if it will rise to the level of prosecutorial misconduct, but it can certainly taint any prosecution he pursues…especially if actually prosecutes the case himself.

    • “So eventually, the taxpayers will up with all Trumps stuff under the RICO statutes.”

      Aren’t the RICO Statutes Federal Law? Can a State Prosecutor pursue someone and charge them with Federal Crimes? I am not certain, but if I am correct, the RICO Statutes will still be a Presidentially pardonable event.

      • For Sure Not Tom

        I believe New York, and other states, have “little RICO” laws, to crack down on racketeering.

        • “I believe New York, and other states, have “little RICO” laws, to crack down on racketeering.”

          Well, that would make sense, I guess. It seems rather redundant, but there is a lot of redundancy in laws between the States and the Feds, so it is reasonable to think that is the case. Thank you for the feedback!

        • “Here’s what it’s like trying to have a serious discussion with Steve.” [Three Stooges film attachment]

          I suppose it can be difficult sometimes; but at least I am in with good company because the Three Stooges are pretty classic. ;o)