President Trump unveiled his administration’s long awaited tax plan on Wednesday.
In the weeks and months leading up to this, Trump promised to “get rid of the loopholes and complexity that primarily benefit the wealthiest Americans,” and even suggested that his own taxes would rise under his plan, telling a crowd in Missouri in August that by eliminating special interest loopholes, he is acting against his best interests.
Trump echoed this sentiment again at an event in Indianapolis on Wednesday where he announced the plan, saying it does not help the “wealthy and well-connected” and is “not good” for him.
After stating that his tax plan will not benefit him personally, Trump pivoted to two measures in his tax plan that would benefit him personally: repealing the estate tax and the eliminating the alternative minimum tax.
What little we know about Trump’s own taxes comes from a leaked portion of Trump’s 2005 tax return. Because of a tax measure called the Alternative Minimum Tax (AMT), Trump was required to pay a substantial amount in income taxes that year, roughly $31 million taxed at 24 percent. Without the AMT, he would have only had to pay 4 percent of his income due to a number of deductions. Under Trump’s tax plan the AMT is eliminated, providing a substantial tax cut to upper-middle class and affluent households.
The estate tax, meanwhile, only impacts roughly less than one percent of all estates today, according to IRS figures. There are currently 14 senators who represent states where the number of people who benefit from the estate tax is so small, that for security reasons, the IRS can’t disclose how many people receive it because it would be to easy to tell who those people are. This is a far cry from the “tremendous burden” Trump describes the estate tax as.
While only 500 Americans have estates that are wealthy enough to pay the estate tax, 13 of Trump’s 24 cabinet members qualify. This gives some of Trump’s closest advisers a generous $1.5 billion dollar tax cut. As Fortune notes, this is the equivalent to twice the amount of money the Trump administration’s budget is proposing to cut from Federal Emergency Management Agency’s state and local disaster-preparedness grants.
Trump himself would personally receive a tax cut of about $4 billion if the estate tax is repealed, assuming Trump is worth the $10 billion that he says he is. Without knowing how much he is worth, there’s no way of knowing the exact extent to which his tax plan benefits him.
The proposed tax plan says it will “deliver fiscally responsible tax reform by broadening the tax base, closing loopholes and growing the economy,” but offers no specifics whatsoever as to which loopholes will be closed. In fact, the plan appears to create a loophole that would benefit people like Donald Trump.
His plan allows for a special, preferential income tax rate for “pass through” corporations. Pass through businesses include partnerships and limited liability companies (LLCs), of which the Trump Organization owns more than 500. These businesses do not pay the corporate rate, instead their owners pay taxes on their share of the profits from the business at their own personal rate, which is currently at 39.6 percent. Under the new Trump plan, there’s a provision that would cap the rate on income from pass-through businesses at just 25 percent. This opens the door for high-income taxpayers to claim portions of their salaries as “business income” in order to claim the lower rate. Additionally, this could effectively lower Trump’s own tax bill by a third or more every year.
In addition, Trump can stand to benefit from his own tax plan if he has offshore profits awaiting repatriation. He promised to tax overseas income at just 10 percent in a bid to repatriate some of the trillions of dollars currently sitting in offshore accounts. While the plan does include a provision allowing companies to repatriate their overseas profits, the plan doesn’t specify the tax rate.
Missing from the plan is any mention of how these tax cuts would be paid for, the details of which could threaten one of Trump’s central promises about shrinking both the deficit and the debt.