Donald Trump lost the 2016 presidential popular vote to Hillary Clinton by almost 3 million ballots. But by another seemingly meaningless measure, Trump got clobbered 38 to 0. That lopsided score represents the number of years of tax returns Democrat Clinton and Republican Trump respectively released to the American public.
But Trump’s unprecedented opacity—for the past 40 years no major party presidential candidate had withheld his or her tax returns—is about to matter again. (Not that it ever stopped mattering; polls have consistently shown that Trump and his mouthpiece Kellyanne Conway are lying when they claim “people don’t care.) That’s because this week, the Trump administration and its GOP allies in Congress unveiled their “framework” for tax reform, a multi-trillion-dollar hemorrhage of red ink from the United States Treasury certain to stuff the bank accounts of the wealthiest people in the country. But at a time of record income inequality and GOP calls to slash domestic spending, the Trump tax plan isn’t just horrible policy. Give the president’s repeated pledges that his tax plan is “going to cost me a fortune,” Trump’s payday for plutocrats represents a broken promise, too.
That broken promise dates back to the early days of the Trump campaign. In September 2015, the real estate magnate introduced his first tax plan by declaring:
“It reduces or eliminates most of the deductions and loopholes available to special interests and to the very rich. In other words, it’s going to cost me a fortune — which is actually true — while preserving charitable giving and mortgage interest deductions, very importantly.” [Emphasis mine]
Almost two years later, the president on Sept. 13 guaranteed “the rich will not be gaining at all with this plan,” adding, “We’re looking for the middle class, and we’re looking for jobs.” And among those rich people, he assured the American people on Sept. 27, was one Donald J. Trump.
"No, I don't benefit. I think there's very little benefit for people of wealth."
Given his record-setting standard for lying to the American people, Donald Trump can only disprove his obvious self-dealing by releasing his tax returns. Decades of them. The message from taxpayers—to borrow from Ronald Reagan—must be: Don’t trust, and verify.
There’s no mystery as to why. The biggest changes in the tax code ensure a huge windfall for the wealthy, especially for a family like the Trumps.
Here’s why: The GOP’s “unified” framework reduces the IRS code from seven tax brackets to three. While the top income tax bracket is lowered from 39.6 to 35 percent, the bottom rate is increased from 10 to 12 percent. For lower and middle-income filers, these rates are supposedly offset by a “doubling” of the standard deduction which, as Josh Barro explains, is in reality at best much smaller than that. Meanwhile, the statutory corporate tax rate is slashed from 35 to 20 percent, a cut certain to benefit investors (on whom the nonpartisan Congressional Budget Office says 75 percent of its burden falls). Republicans also propose reducing the tax rate on so-called “pass through” businesses from 35 to 25 percent in yet another win for millionaires, a group which CBPP estimates will haul away 79 percent of its benefits. But the GOP’s gifts to the gilded class hardly end there. And as the New York Times reported on Wednesday, House Republicans save their biggest applause for the rentier class:
Enthusiasm about cutting taxes was palpable at times. When Rep. Peter Roskam of Illinois, the tax policy chairman on the [House Ways and Means] committee, detailed plans to dump the A.M.T. and the estate taxes, the audience in the room erupted in cheers.
Of course, no one in Washington was cheering louder than Donald Trump.
Take, for example, the Alternative Minimum Tax (AMT). Originally introduced to prevent abuses by the richest taxpayers, the AMT now affects 5 million filers. It falls almost exclusively on families earning above $200,000 a year, with almost two-thirds of those earning between $500,000 and $1 million now paying the AMT. And in 2005, the one year over the last 20 in which we’ve seen anything of his tax returns, Donald Trump was among them. According to that year’s leaked return, Trump paid $38 million (or 25.3 percent) to Uncle Sam on his income of $150 million. But $31 million of Trump’s check to IRS was the result of the AMT. Without it, his tax bill would have been only $7 million, or just 4.7 percent.
While nixing the Alternative Minimum Tax would help The Donald wipe out much of his tax bill in a given year, it may well have already been down to zero for many years. As the New York Times discovered in October 2016, thanks to tax code advantages for investors like himself, Trump may have owed no federal taxes for almost two decades:
The 1995 tax records, never before disclosed, reveal the extraordinary tax benefits that Mr. Trump, the Republican presidential nominee, derived from the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan.
Tax experts hired by The Times to analyze Mr. Trump’s 1995 records said that tax rules especially advantageous to wealthy filers would have allowed Mr. Trump to use his $916 million loss to cancel out an equivalent amount of taxable income over an 18-year period.
As Matthew Yglesias explained in Vox, "You don't need 'genius' to pull off Trump's tax avoidance—you just need to be rich." The key, as tax expert David Cay Johnston documented, is the manipulation of "net operating losses" (NOLs) on top of the "already liberal tax breaks Congress gives big real-estate owners."
Trump dumped the real costs of all this on investors who saw gold in his brand name, but who lost everything even as he was paid tens of millions of tax-free dollars...
NOLs are incredibly valuable. These tax losses can be used to offset salaries, business profits, and income from, say, a television show or making neckties in China. Thanks to his $916 million of NOLs, Trump could earn much over 18 years in salaries, profits, and interest, but pay no income taxes.
Then there’s that issue of lowering the tax rate for “pass-through businesses.” During one of his debates with Hillary Clinton, Trump proclaimed, “Under my plan, I'll be reducing taxes tremendously, from 35 percent to 15 percent for companies, small and big businesses.” While this week’s GOP outline only seeks to drop that rate to 25 percent, Donald Trump and his family will nevertheless still be big winners. That’s because, as Trump's tax attorneys explained in his campaign's March 2016 required financial disclosure, the Trump Organization is one of those “companies, small and big businesses” the candidate was talking about:
"You hold interests as the sole or principal owner in approximately 500 separate entities. These entities are referred to and do business as The Trump Organization. ... Because you operate these businesses almost exclusively through sole proprietorships and/or closely held partnerships, your personal federal income tax returns are inordinately large and complex for an individual."
And that would mean really YUGE savings for President Donald Trump.
As the Center on Budget and Policy Priorities (CBPP) explained, "Pass-through income is claimed by business entities that aren't subject to the corporate income tax, which currently has a top statutory rate of 35 percent (though most corporations pay an effective tax rate considerably lower than 35 percent). Pass-through income is business income that "passes through" the business and is instead reported on the individual tax returns of the business owners and taxed at the owners' tax rates."
But as CBPP also documented, "'pass-throughs' are not synonymous with 'small businesses' and "pass-through income is highly concentrated at the top":
Mr. Trump, who has proposed a 15 percent corporate tax rate, proposes a pass-through rate of 15 percent as well. The Trump pass-through proposal would be an expensive tax cut that would flow primarily to the wealthiest Americans. That's because more than two-thirds of pass-through business income flows to the highest-income 1 percent of tax filers.
Many businesses, such as law firms, and groups of wealthy investors choose to be taxed as pass-through entities instead of as corporations and often do so to lower the overall taxes they owe. In recent decades, many businesses and their owners have reaped sizable tax savings by doing so. A special 15 percent tax rate on pass-through income such as the Trump tax plan proposes would offer them another large tax cut.
As the Washington Post reported, "Trump would tax pass-through income at a rate of 15 percent, compared to the 40 percent personal income tax rate a wealthy business owner would pay today." And as the Post's Jim Tankersley explained, one of those wealthy business owners is Donald Trump himself:
A little-noticed provision in Donald Trump's tax reform plan has the potential to deliver a large tax cut to companies in the Republican presidential nominee's vast business empire, experts say.
Trump's plan would dramatically reduce taxes on what is known in tax circles as "pass-through" entities, which do not pay corporate income taxes, but whose owners are taxed at individual rates on their share of profits. Those entities are the most common structure for small businesses and increasingly popular for larger ones as well. They are also a cornerstone of the Trump Organization. On his 2015 presidential financial disclosure report, Trump listed holdings of more than 200 limited liability corporations, which is a form of pass-through.
It's no wonder Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center, said "It's a really nice deal" for Trump and pass-through owners like him. It was with good reason Hillary Clinton called it "the Trump Loophole."
But it's not the only one The Donald is proposing for himself, Ivanka, Eric, Donald Jr., and his other offspring.
As you might recall, his campaign finance disclosures claim he has a net worth of $10 billion and earned $557 million between January 2015 and May 2016. (His 2017 disclosure put his haul at up to $650 million for the previous year.) While his income sources are no doubt diverse, President Trump would surely reap millions from candidate Trump's income tax and capital gains tax rate reductions alone. And if he is telling the truth about his net worth, The Donald's heirs could pocket more than $7 billion from his promise to do away with the estate tax now paid by only the richest 0.2 percent of family fortunes.
(If Congressional Republicans succeed at killing the estate tax, the likes of Tiffany Trump won’t have to worry about the tax man when her father shuffles off this mortal coil. Her siblings might be another matter: As Newsweek reported, Ivanka and Donald Jr. purportedly sought to cut their sister out of their father’s will.)
And so it goes with the Trump tax plan. It’s not true, as the president boasted, that it’s “going to cost me a fortune.” The so-called “blue-collar billionaire” will benefit a lot, even if actual blue-collar workers do not. Then again, it was never true, as then Treasury nominee Steve Mnuchin bragged, that “Any reductions we have in upper income taxes will be offset by less deductions, so that there will be no tax—absolute tax cut for the upper class.” Another Mnuchin tax plan myth, “This will pay for itself with growth and with the reduction of different deductions and closing loopholes,” has been debunked since the first time Arthur Laffer sketched his curve on a cocktail napkin more than 40 years ago. (This week, Trump once again predicted his plan would produce 6 percent annual economic growth, despite the fact that no president has averaged even 4 percent since LBJ.) On Wednesday, the deficit hawks at the Committee for a Responsible Federal Budget (CRFB) repeated that lesson for the Big Six Tax Writers, warning the GOP framework will still add $2.2 trillion in new debt over the next decade—and that’s assuming you believe the Republicans’ claim they will close $3.6 trillion-worth of tax loopholes, deductions, and breaks. And that optimistic $2 trillion-plus in additional red ink comes on top of the $20 trillion Uncle Sam already owes and the $10 trillion CBO estimates the federal government will run up over the next 10 years. For a Republican party supposedly dedicated to balancing the budget in 10 years, cutting $37 trillion out of $53 trillion in projected spending—a mind-boggling 70 percent reduction—is both a dangerous fantasy and completely impossible.
Impossible unless, as Donald Trump promised us in the spring of 2016, you’re Donald Trump. How long did candidate Trump say it would take President Trump to eliminate the entire national debt of the United States?
"Well, I would say over a period of eight years."
If you believe that, you’ll believe this: Donald Trump won’t benefit from Donald Trump’s tax plan. But if you’re skeptical—as you should be—then demand the White House and Capitol Hill Republicans answer this question about their “once-in-a-generation” tax plan. What will Trump pay?