President’s tax overhaul would bring him a windfall
Advisers contend the proposal will spur economic growth
President Trump’s WASHINGTON one-page plan to dramatically overhaul the U.S. tax code could reap big benefits for one taxpayer in particular: Donald Trump.
His push to lower the corporate tax rate could slash taxes on the hundreds of limited liability companies that make up his realestate and licensing empire. The billionaire and his family also stand to benefit from his plans to lower the income tax rate for the wealthiest Americans and to abolish the federal estate tax and the so-called alternative minimum tax.
One of the biggest potential tax windfalls: Trump’s push to lower the tax rate for so-called passthrough businesses.
Pass-throughs do not pay corporate taxes. Instead, the business’ income is reported on the owner’s tax returns and is taxed at the owner’s individual tax rate. Trump’s proposal would drop the current top tax rate of 39.6% to 15%.
Trump Organization LLC, the corporate umbrella for his farflung business empire, is a passthrough business. And Trump’s financial disclosure forms show income from more than 500 business entities, many of them limited liability companies and partnerships that also qualify as pass-throughs.
“It’s a very large tax cut for high-income people who get their income through ownership of businesses,” Eric Toder, co-director of the Tax Policy Center, said.
Toder said Trump “fits the category of someone who would benefit” but said it’s hard to tell exactly how the change would affect the president because he has not released his tax returns.
Asked Thursday about the plan’s potential benefits to the president and his family, White House spokesman Sean Spicer said taxpayers are more concerned about what the plan would mean for their own tax bills.
“I would guess that most Americans would applaud what the president is doing to spur economic growth and job creation in this country,” Spicer said.
Nearly 92% of U.S. businesses operate as pass-throughs, ranging from limited liability corporations to partnerships, such as hedge funds, medical practices and law firms, according to Scott Greenberg of the non-partisan Tax Foundation think tank.
The president’s advisers say reducing the tax rate for these business will help spur economic growth. Toder said that’s hard to know. “Will they do more? Will they work harder if their tax rate is lower? Will they invest more?” Toder said. “Maybe a little bit. On the other hand, you are substantially increasing the budget deficit and making the tax law much more complicated.”
Daniel Shaviro, a tax professor at the New York University’s School of Law, said lowering the corporate tax rate, as Trump proposes, could help create a more competitive climate for business in the United States.
But he said Trump’s plan “gives enormous windfall gains to very rich people who get an overwhelming majority of the tax reductions.”
Tax experts say Trump also could benefit personally from other aspects of his tax plan, including his push to abolish the alternative minimum tax.
The supplemental tax aims to ensure that wealthy taxpayers do not take so many deductions or claim so many losses that they end up avoiding tax payments. A leaked 2005 tax return shows the alternative minimum tax increased Trump’s taxes by $31 million that year.
Trump also wants to repeal the federal estate tax, which currently has a top rate of 40% and kicks in for individuals with estates worth $5.5 million or for a couple with an estate worth $11 million. Trump has claimed he’s worth $10 billion. Abolishing the federal estate tax would eliminate the taxes his heirs would have to pay on any inheritance.
Trump’s proposal would cut that business owner’s top rate from 39.6%, the current cap, to 15%.