How Trump’s tax plan helps Trump

Donald Trump, who has refused to release his tax returns, says under his latest tax plan you will be better off and he will be worse off. “Tax reform will protect low-income and middle-income households, not the wealthy and well-connected,” he said Wednesday. “And it’s not good for me, believe me.” So, can we believe him? No. If he really is worth $10 billion, his family stands to save $4 billion. Depending on how he generates income — which we don’t know and at this rate never will — his income tax bill could shrink by as much as 85% and almost certainly will be cut in half.

At the same time, millions of middleclass Americans will see their tax burden grow because the bottom tax rate would increase to 12% from 10%, and the 15% tax rate would be eliminated, making the next step up a hefty 25%.

Plus, the rejiggering of deductions and exemptions means many middle-class families will be losers. When asked whether he can promise that taxes won’t go up for those in the middle, Trump’s economic adviser, Gary Cohn, Thursday said that while the plan is “purely aimed at middle-class families,” — a joke and a lie — “it depends which state you live in.” Moreover, “I can’t guarantee anything.” Basically, the Trump plan is for you to get a little tax savings — or, for millions of households, pay more — while the superrich pay much less. First, a little historical perspective. Since 1961, the incomes of the vast majority have grown very little. Yet the 90% of households who made less than $127,695 in 2013 forked over a penny more on each dollar to Uncle Sam that year than they did back in 1961, when newspapers called China red and the Ford Mustang was not even imagined yet.

The people with the 400 highest incomes did better, giving Uncle Sam 20 cents less out of each dollar they earned in 2013.

For each after-tax dollar the vast majority had in 1961, they had just $1.25 in 2013, my analysis of IRS data shows after adjusting for inflation.

The vast majority’s after-tax average income in 2013 was $5,500 more than back in 1961. Think of that money filling a shoe box standing on end.

How did the Top 400 do? They have more shoeboxes, of course. A lot more. More than 35,000 more. Stacked one atop another, their shoeboxes filled with aftertax cash would reach 7 miles skyward, up where the jumbo jets fly.

And now, Trump’s tax plan says their stack of cash-filled boxes is not nearly tall enough. He wants to cut the tax on business owners from a maximum of almost 40% to 25%. Trump owns more than 500 such businesses.

He wants to eliminate the Alternative Minimum Tax. That would have reduced his income taxes by 85%, based on his 2005 income tax return, which I got in the mail in March.

Eliminating the AMT would have saved him $31.3 million that year, leaving him with an income tax of $5.3 million on $152.7 million of income.

That’s a tax rate of less than 3.5%. It is also a lower tax rate than was paid that year by the poorest half of taxpayers, whose average income was just $16,000.

Then there is Trump’s proposal to eliminate the estate tax. If Trump really is worth $10 billion, his children would avoid paying $4 billion in estate taxes. If Trump’s only worth a single billion, he would still save $400 million in taxes.

Fewer than 4,900 of the 2.6 million Americans who die each year pay any estate tax. That’s fewer than one in 500 people. The tax applies mostly to gains in wealth that have never been taxed, though you are going to hear a lot from Trump that the money has already been taxed multiple times.

Trump would also cut the corporate income tax rate from 35% to 20%. And he would let American multinational corporations that siphoned profits out of America as tax-deductible expenses bring the money back home with little or no tax. It’s hard to tell from his talking points memo which it is.

Trump pushes corporate tax cuts by saying, “My plan is for the working people, and my plan is for jobs. I don’t benefit.”

We gave multinationals a tax holiday on offshore profits in 2006. It was supposed to create more than 600,000 jobs. Instead, the biggest beneficiaries fired people by the thousands and used the tax savings to buy back stock, which in turn made executive stock options more valuable. And what of those vast majority? Many will get small tax cuts, while — based on an analysis by NYU Prof. Lily Batchelder of a proposal close to the current one — about one in five will pay higher income taxes under the Trump plan.

Believe me, as someone who has studied taxes my whole life, this is a tax plan you want nothing to do with unless you are already superrich and, like Donald Trump, believe the rich should have even more.