If you want to know who the big winners are in the new Republican/Trump tax plan, look no further than the White House — it’s the billionaires and ultra-wealthy like President Donald Trump, his administration and his family who will benefit the most, despite Trump’s claims to the contrary.
In announcing the GOP tax reform blueprint in Indianapolis on Wednesday, Trump wanted to make one thing clear: “It’s not good for me, believe me.”
But whether or President Trump wants to admit it, it is good for him and here’s why.
Trump tax plan cuts taxes for pass-through business
The tax overhaul would create a preferential tax rate for income generated by so-called “pass-through” businesses — of which Trump owns a lot. To be fair, most businesses in the United States today — about 95 percent — are organized as pass-through businesses because of the major tax incentives to organize as such. But cutting taxes to pass-through businesses is akin to cutting taxes to the 1 percent. About 70 percent of this type of income pads the pockets of the top 1 percent, according to Brookings Institution, a Washington-based economics and policy think tank.
Pass-through businesses avoid paying traditional corporate taxes by allowing profits to “pass through” to owners and shareholders and be taxed under the individual income tax, which maxes out at 39.6 percent.
Traditional corporations (called c-corporations) are taxed twice: at corporate income tax rates of up to 35 percent and at rates of up to 23.8 percent when paid out as dividends or when shareholders sell stock and realize capital gains.
Under Trump’s tax plan, income from pass-through businesses would be capped at 25 percent. Trump owns more than 500 pass-through businesses that he retained ownership of after becoming president — a move opponents decried as having the potential for influencing domestic policies like taxes.
As Trump is the first president since Richard Nixon to withhold his tax returns, it’s impossible to know how much a windfall this would be for Trump, though Fortune said it would likely slash the tax rate on profits from his companies by more than a third.
Trump tax plan eliminates the Alternative Minimum Tax
The GOP tax plan also wants to eliminate the Alternative Minimum Tax — also known as the only provision stopping the ultra-rich from claiming so many deductions that they end up paying no tax or virtually no tax. It’s this tax provision that forced Trump to cough up the $38 million in taxes on his $150 million in income in 2005 — the only year for which a Trump tax return has been made public. Without the AMT, Trump would have only paid about $6 million.
Trump tax plan eliminates the estate tax
Trump is vying to get rid of the estate tax that is levied on property as it passes ownership from a dead person onto their heirs on estates worth more than $5.5 million (and couples’ estates of more than $11 million). Currently, only about 500 Americans are wealthy enough for their estates to qualify for the estate tax, including 13 of the 24 members of Trump’s cabinet. Combined that spells out a $1.5 billion tax cut, according to Fortune.
Getting rid of this tax could save the Trump family as much as $1.4 billion if the Forbes estimate that Trump is worth $3.5 billion is correct. Taxed at 40 percent, the Trump children would only see about $2.1 billion of their father’s estate.