Tax

Here are the Tax Cuts Donald Trump Wants to Give Himself and his Millionaire Friends


Republicans will attempt to sell their tax plan in the vaguest possible terms: “tax cuts,” “relief for small business,” “tax reform.” They know most people don’t know the ins and outs of the tax code and they think using vague terms like “tax cuts” will make people support their plan. Or—just as bad—that people won’t fight back against it. We can’t let that happen.

This plan isn’t “tax reform.” It’s tax cuts for the wealthy. This document explains each of the planned tax cuts for individuals, what it is, and whom it helps.

Lower the rate for people with the highest incomes

What this tax does:

The top tax rate of 39.6% ensures that the wealthy pay their fair share of taxes. This rate only applies to income above $418,000 ($470,000 for a married couple).

What Republicans want to do:

Republicans want to lower the top rate nearly 5 percentage points to 35%, giving the wealthiest people in our country a tax break that won’t benefit anyone else.

What this costs:

For the top 0.1 percent, the average tax reduction per return would be about $1m per year.

Who benefits from reducing the top rate:

Since the top rate only applies to income above $418,000,($470,000 for a couple) only Americans with incomes above these levels will benefit from this “tax cut.”

Lower the rate on “pass through” income

What is pass through income:

Many owner-operated businesses are organized such that their income is taxed through the owners’ individual income taxes, and not through the corporate tax code. These businesses—which Republicans consistently characterize as “small businesses”—can range from local shops to private law firms and hedge funds. In fact, nearly 70% of all pass-through income is accrued by the top 1%, counter to the Republican charade that pass-throughs are all struggling small businesses.

What Republicans want to do:

Currently, pass-through income is taxed at rates on the individual side of the tax code—meaning the wealthiest tax filers with pass-through income pay as much as 39.6%. Republicans want to limit the tax rate on pass-through income to  25%.

What this costs:

$770 billion over 10 years.

Whom it benefits:

Lowering rates on pass-through income would not benefit “small businesses.” The Tax Policy Center sums it up well:

First, nearly two-thirds of those with pass-through income are already in the 15 percent bracket or below. Thus, they wouldn’t benefit at all from cutting the pass-through rate to 15 percent. They are already there.”

Beyond that, 90% of the benefits of lowering the rate on pass-through income goes to the top 20% of households—and half the benefits go to the top 1%. By definition, the benefit flows only to those with a tax rate higher than 25%.  In addition, the lower rate would create a huge loophole in the tax code that wealthy people like hedge fund managers could exploit by converting their salary income into business income and thus be subject to the lower rate.

One of the biggest beneficiaries of this change? Donald Trump himself. Nearly the entire Trump Organization is structured as a series of pass-through entities— meaning that if Trump and his pals in Congress lower the pass-through tax rate from the top rate of 39.6% to 25%, Donald Trump would see his tax bill cut substantially. This underscores the need for Trump to release his tax returns, so the American people can know the serious extent to which he stands to benefit from his own tax policies.

Repeal the Alternative Minimum Tax (AMT)

What is the AMT:

The AMT is a parallel part of the tax code that was put in place to ensure that even the wealthiest individuals cannot exploit tax loopholes to get out of paying taxes altogether. Wealthy individuals must first calculate their tax obligation under the regular tax code, and then calculate it again under the AMT. If the AMT is greater, they must pay the difference.

What Republicans want to do:

Republicans want to eliminate the AMT, so the wealthy can once again exploit the tax code to get away with paying little or no taxes at all. This is one of the changes where Trump himself stands to gain the most, and his example illustrates why the AMT is so important. According to his 2005 tax return, Trump paid $38 million in taxes on $153 million in income; $31 million—or four-fifths—of his tax payment was due to the alternative minimum tax. Had it not been in place, his effective tax rate for that year would have been just 3.5 percent. That’s far below what most middle-class families pay.

What repealing the AMT costs:

$440 billion over 10 years.

Who benefits from AMT repeal:

Rich people. In 2012, Congress passed a permanent fix that limited the AMT’s effect on the middle class. According to the latest IRS data, 93% percent of the AMT is now paid by individuals making over $200,000.

Repeal the estate tax

What is the estate tax:

This is a tax that only affects individuals with estates worth more than $5.5 million. Repeat: the estate tax only affects individuals with estates worth more than $5.5 million. That means only 0.2% of all deaths involve the estate tax.

The estate tax is one of the only features of our tax code that forestalls even greater wealth inequality. A recent study shows the richest 400 billionaires have more wealth than the bottom 62% of Americans combined. That kind of wealth inequality is fueled by the persistent concentration of wealth, which the estate tax is intended to correct.

What Republicans want to do:

After years of undermining the estate tax by lowering the tax rate and raising the threshold, now Republicans want to repeal it all together.

What repealing the estate tax costs:

$239 billion over 10 years.

Who benefits from estate tax repeal:

99.8% of estates would be entirely unaffected since the estate tax already applies exclusively to the wealthiest estates. Of those wealthy estates that it does apply, the Joint Committee on Taxation estimates that the vast majority of benefits from repealing the estate tax would go to families with estates worth $20 million or more.