President Donald Trump stands to be a big beneficiary of his new tax plan, should it enter into law.
While little is known about Trump’s prior taxes, as he has broken with recent tradition and refused to make them public, a handful of proposals in the plan appear as if they would greatly help Trump’s bottom line.
Trump’s businesses — under the umbrella of the Trump Organisation — are currently being run by his two sons, Donald Jr. and Eric, and another senior Trump Organisation official. Trump did not made as serious a severance with his business ventures as most ethics experts insisted prior to taking office.
During an Indiana speech announcing his tax plan Wednesday, Trump insisted that the proposal was “not good for me.”
Here are the proposals in Wednesday’s release that could provide a substantial benefit to Trump:
A 25% rate for pass-through businesses
Trump’s tax plan includes a new 25% rate for pass-through businesses — which include sole proprietorships, partnerships, and S-corporations. Pass through income, which only gets taxed when it is a profit, is currently taxed at individual levels up to the very top rate of 39.6%, which is higher than the current top corporate tax rate of 35%.
Authors of the plan say they will consider rules to prevent “personal income” from getting taxed at the 25% rate. Treasury Secretary Steve Mnuchin has suggested that the rate may only apply to goods producers and not service-oriented companies — something that could play into how beneficial this change would be for Trump, as most of his businesses are service oriented.
Trump, as was revealed during the campaign, said in a deposition that he set up a number of development projects with single-use S-corporations, working through them instead of the Trump Organisation. It was also during the campaign that Democratic presidential nominee Hillary Clinton dubbed Trump’s idea for pass-through income the “Trump loophole,” arguing that it was one of the most beneficial tax proposals to Trump personally.
The phrase pass-through income means simply that the income “passes through” the business and into the individual returns of the business owner. Last year, prior to the election, CNBC’s Robert Frank cast the loophole as the biggest tax break for the wealthy in Trump’s campaign plan.
Repealing the Alternative Minimum Tax
Trump’s plan proposes to repeal the Alternative Minimum Tax — which, as known from the limited 2005 returns leaked earlier this year, once cost the president $US31 million. It accounted for most of the $US38.5 million in taxes Trump paid that year.
The AMT, which is aimed at ensuring that the wealthy pay a fair share of taxes has plenty of opponents, some of whom believe it does not accomplish that goal.
As is, the tax serves as a sort of secondary tax code that only applies to specific high-income earners, trusts, corporations, and estates.
Elimination of the Estate Tax
A longtime Republican rallying cry, Trump’s tax plan seeks to eliminate what is more commonly known as the death tax. In 2017, it only applies to inherited assets that total $US5.49 million or more, meaning very few Americans are faced with paying it.
If the estate tax were repealed permanently, it could save Trump’s estate $US564 million based on an estimated net worth of $US3 billion, as Bloomberg reported last year. Trump has said he is worth $US10 billion, meaning he would be dealt even bigger savings.
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