Trump tax bill would have been slashed by his plans
WASHINGTON (AP) — Donald Trump campaigned for the presidency by pledging no tax cuts for the wealthy, but newly leaked pages from his 2005 taxes demonstrate how the wealthiest Americans — like Trump — would benefit from some of his tax proposals.
Trump’s proposals to eliminate the alternative minimum tax, cut the capital gains tax rate and curb income tax rates would have shrunk his tax bill dramatically if they had been in place over a decade ago. The AMT alone was responsible for roughly 86 percent of his federal tax bill.
The Trump administration has said it would make up for lost revenue by closing loopholes, but the specific deductions Trump’s plan would eliminate have not been laid out in detail.
“Any reductions we have in upper-income taxes would be offset by less deductions, so there would be no absolute tax cut for the upper class,” Treasury Secretary Steven Mnuchin told CNBC in November.
Trump’s promise to not slash taxes for the rich has already been called into question by the nonpartisan Tax Policy Center and other analysts. According to the group, the top 1 percent of earners would receive a tax break averaging more than $200,000 each. Those gains would be concentrated among the wealthiest: The top 0.1 percent would receive tax breaks averaging around $1.1 million. Meanwhile, middle-income households would receive $1,010 in tax cuts, and the lowest-income earners would receive a benefit of $110.
The summary of Trump’s 2005 taxes does not provide a full picture of Trump’s finances, the deductions he claimed and the detail of his income earned. Still, the numbers in broad strokes illustrate why his tax plan would be a boon for the ultra-wealthy.
Trump made nearly $1 million in wages and another $32 million in capital gains, according to the two pages obtained by journalist David Cay Johnston. Most of his earnings came from business income, rental real estate, royalties and partnerships. Trump offset much of that income through a tax loophole in the 1990s that enabled him to deduct more than $900 million in past losses on his casinos as past business losses of his own.
Trump has maintained that the publication of the returns was illegal, although he seemed to take pride in the financial results shown in the returns during an interview for Fox News Channel’s “Tucker Carlson Tonight” to be aired Wednesday.
“It’s certainly not an embarrassing return at all,” Trump said.
The first big win for Trump would have come from his proposed elimination of the Alternative Minimum Tax, which was first enacted in 1969 to ensure that top earners could not use tax breaks and deductions to avoid paying any federal taxes.
Had the law not been in effect in 2005, Trump could have avoided almost all of the federal income tax he paid that year. Instead of paying $36.5 million, he would have paid just $5.5 million.
Another smaller benefit would come from a lower tax on the wages Trump pays himself. Under the most recent Trump plan announced during the campaign, the president would pay a lower 33 percent tax rate on his nearly $1 million in 2005 wages.
Other elements of Trump’s tax plan would be likely to benefit him as well, his 2005 filing shows. Trump would cut taxes on pass-through income, such as that earned from assets he holds through various holding companies, to 15 percent — a boon for people who have set up businesses in the same way he has, a common practice in the real estate business. As such, it would encourage other taxpayers —including regular wage earners — to set up sole proprietor companies, then declare their income as business income, according to the Tax Policy Center.
If the president’s current income is similar to his 2005 tax filings, he may also save money through the House Republican plan to repeal and replace President Barack Obama’s health care law.
The replacement would repeal a 0.9 percent Medicare surtax on high earners and a 3.8 percent net investment income tax that would apply to capital gains and rental and royalty income, among other sources. The Congressional Budget Office estimated that repealing these two taxes would amount to a nearly $275 billion tax cut over 10 years.
Those savings would largely accrue to wealthier Americans such as Trump.