President Donald Trump made a bold claim as he unveiled his tax reform plan this week: He says he won’t benefit from it.
Speaking at a rally in Indianapolis on Wednesday, Trump rolled out a nine-page tax plan that remains a work in progress. But some of the details included in the plan right now would likely help the President’s bottom line.
“I’m doing the right thing and it’s not good for me, believe me,” he said.
Of course, Trump was the first major-party presidential candidate since 1976 not to release his tax returns, so it’s hard to say exactly how he’ll be affected. But based on tax returns which have become public and what we know of his finances, there are at least three key ways he could benefit.
“What we’ve seen is just an outline, but it’s important to appreciate that while there’s a lot of vagueness — especially about how middle class and working class will benefit —they’re very specific about particular tax cuts they’d be doing for the wealthy and the ultra-wealthy,” said Jacob Leibenluft, a senior advisor at the Center on Budget and Policy Priorities. “There’s a lot of hand-waving in the proposal that they might have an extra higher rate for the wealthy, but there’s no indication on how they’ll do that.”
Here’s how the tax plan would be good for Trump.
Trump wouldn’t have to pay the alternative minimum tax
The alternative minimum tax, or AMT, which dates back to a tax bill passed in 1969, is a backup measure designed to ensure wealthy taxpayers don’t end up paying too little.
Since upper-class Americans can take advantage of various deductions and loopholes in the tax code, the federal government requires them to complete a secondary tax form which looks at things like trusts and estates. If that amount is higher than the tax owed on the regular form, they have to pay the difference.
According to a leaked 2005 Triump tax return, the New York real estate mogul saw his tax bill go from $5.3 million to $36.5 million thanks to the alternative minimum tax. If it had not been in effect that year, he would have saved $31 million.
Trump’s family wouldn’t have to pay the estate tax
The estate tax is levied when people inherit money from a loved one who has died — which is why conservative critics have often referred to it as the “death tax.” Under current law, the first $11 million of an estate is not taxed for a married couple, so it only applies to the wealthiest taxpayers.
The tax is calculated using a complicated formula, but at the upper end it can be as much as 40% on the inheritance over the exempt amount.
Estimates of Trump’s net worth vary, with financial journalists pegging it at about $3 billion, while Trump himself claims it is more than $10 billion. But regardless, it’s clear that Trump’s family would stand to gain if the estate tax were eliminated.
Trump’s business would benefit from the treatment of pass-through corporations
When a small-business owner makes money, is that corporate or personal income? That’s a question the tax code attempts to address with its treatment of so-called “pass-through corporations,” where the corporate income “passes through” to the owner.
Though pass-through corporations are supposed to be mom-and-pop shops, they have become more popular among the wealthy in recent years as a way of categorizing their income under the lower personal income tax rate rather than the corporate tax rate. The Tax Policy Center calculated that about 85% of the net benefit of the change would go to the top 1% of earners.
Under the plan Trump unveiled, pass-through corporations would face a 25% tax, essentially reducing the rate by 14.6 percentage points.
The Trump Organization, the President’s umbrella for his varied corporate interests, owns more than 500 pass-through business entities, all of which would see their tax rate go down.