The proposal, unveiled on Wednesday afternoon by Treasury Secretary Steven Mnuchin and National Economic Council Director Gary Cohn ― both alumni of Goldman Sachs ― offers more than a few breaks for the country’s millionaires.
At least three of these changes would almost certainly benefit the president or his family ― the elimination of the alternative minimum tax or AMT, the repeal of the estate tax, and a reduction on the tax rate for small business owners.
We know almost nothing about the current state of Trump’s personal taxes or that of his family business. The president could make it clear exactly how he and his family would benefit from his tax plan by releasing his tax returns, but he has consistently refused to do so, saying it’s impossible because he is under audit. (The head of the IRS said last year that being audited did not prevent an individual from releasing returns.)
At Wednesday’s press conference, Mnuchin said he didn’t know details about the president’s tax returns, so he couldn’t say how the tax plan would affect Trump and his family.
After he won the presidency, Trump said his victory meant his lack of financial transparency was no longer an issue.
What we do know about the president’s taxes comes from two leaked, partial copies of his returns from 1995 and 2005. The partial personal return from 1995, obtained by The New York Times in October 2016, showed that Trump took a $916 million loss. That massive deduction might have enabled him to avoid paying taxes for almost two decades.
The 2005 partial personal return obtained by David Cay Johnston and MSNBC, however, showed that Trump paid $38 million in taxes on $150 million in income that year.
Trump’s effective personal tax rate would have been a mere 4 percent if not for the alternative minimum tax. The AMT is meant to increase taxes on generally rich people ― typically those making at least $200,000 a year ― who otherwise wouldn’t pay that much due to particular deductions or accounting arrangements.
In other words, the AMT did exactly what it was supposed to do to Trump in 2005: soak him. Trump is now proposing to eliminate the one tax we know significantly increased his tax burden.
Trump is not by any means alone in his loathing of the AMT. Plenty of other Republicans and rich people would certainly like to see it gone, as would none other than Sen. Bernie Sanders (I-Vt.).
Sanders’ proposal to eliminate the AMT, however, comes as part of a plan that would dramatically increase taxes on wealthy Americans to expand the social safety net.
Not only do Trump’s 2005 returns indicate that he may personally benefit from gutting the AMT, but he is not proposing any broader increase in taxes on the rich and has proposed a budget and health care legislation that would gut social programs.
Trump’s heirs would also presumably benefit from the proposed repeal of the estate tax, the cut the government takes from an inheritance greater than $5.5 million that Trump and other Republicans like to call the “death tax.” Republicans have been trying to get rid of it for decades.
The move would essentially benefit the relatives of millionaires and billionaires. For instance, the tax rate for rich heirs receiving inheritances is 40 percent ― so if Trump is, in fact, worth $10 billion as he claims, his tax plan is a $4 billion gift to his family.
The tax proposal would also lower taxes on business owners who structure their companies as what are called pass-through entities, which means their business income gets taxed at personal income rates. Like many real estate partnerships, Trump’s family business is a pass-through entity and would benefit from a reduction in pass-through rates. Trump’s tax plan cuts pass-through rates to 15 percent. Currently, the top personal income tax bracket is taxed at a 39.6 percent rate.
The Trump plan also aims to provide “tax relief for families with child and dependent care expenses,” but offered no further details on how that would work. Judging by Trump’s child care proposals during the campaign, even this benefit would likely confer bigger returns to Trump and his millionaire peers.
At his daughter Ivanka’s prompting, Trump outlined over the summer a benefit that would allow parents to deduct the cost of child care and other related expenses from their taxes. This kind of benefit naturally accrues to higher-earning parents who have higher child care expenses and higher tax liability.
One analysis found that a typical family of four with two kids in an upper-income neighborhood would get a $7,000 tax break from Trump’s child care tax break. A lower-income family would get around $5 a year.
Under the plan Trump floated, a stay-at-home parent ― like Melania ― could get a deduction for taking care of a dependent under age 13.
This story has been updated with additional information about Trump’s tax plan.