They Will Pay Much Less While Your Family Could Pay Much More
Donald Trump would have paid only a pittance in taxes had the new Republican tax plan been in effect in 2005, the year for which DCReport readers got the first look at his federal income taxes back in March.
Trump would have paid just $5.3 million on $152.7 million of income under the GOP plan, instead of the $36.6 million he actually paid that year.
The reason he would pay so much less is that Capitol Hill Republicans, and their major campaign donors, want to repeal a backup levy called the Alternative Minimum Tax or AMT. About 85% of Trump’s 2005 tax bill was AMT.
Without the AMT, Trump would have paid slightly less than 3.5 cents on the dollar of income in taxes. The poorest half of Americans paid slightly more than 3.5 cents on average. The difference is that Trump took in almost $3 million a week while the bottom half averaged just $300 a week.
The AMT mostly hits married couples and heads of household with more than two children who own their home and live in high tax states, which is to say the states that tend to have the better-paying jobs. These families lose their standard deduction, their personal exemptions and the ability to deduct state and local taxes along with some other tax breaks that other middle-class families enjoy.
But the AMT also hits real estate deductions like the ones Trump and his lenders took. Trump deducted $918 million in losses on loans from the 1980s he never repaid. You read that right—the banks took a deduction and Trump took the same deduction.
Trump may have gotten a huge tax refund, by the way, in 2006 for subsequent years because of the way the AMT provisions affecting real estate investors work. Funny that Congress is not holding hearings on that or any of the rest of the bill, which they hope to ram through quickly with little public understanding of the plan.
Much of the news on the GOP plan is focused on those middle-class and upper-middle-class families who would benefit from AMT repeal. That’s because most journalists just accurately quote what their sources say and lack any independent knowledge of how government works. The result is that spin, more than substance, flows from Washington.
One big question to ask is how much would Trump benefit from the tax bill that, if passed, he would sign into law?
Another question to ask is whether it matters more that families on the AMT pay a higher tax, but at a lower marginal rate. Some families subject to a 39.6% regular federal income tax under current law would be taxed at just 28%, the higher of two AMT rates. The other AMT rate is 26%.
Republicans for decades have said that it is the marginal tax rate paid on the last dollar that influences economic behavior. That is why they have traditionally cared more, or so they said, about the top rate than the lowest and intermediary rates. They asserted that those low and intermediary rates had little to no effect on deciding to earn an extra buck, while the top rate had significant influence.
When we get a full analysis of the GOP plan, we will likely see that about one in five families will end up paying higher taxes. Those same analyses will also certainly show that the Trumps and other rich families will all pay much less. We’ll report on these analyses as they are issued.
Meanwhile, demand that Congress first enact a law making the tax returns of U.S. presidents public. And tell then you’re happy to get a tax rate cut provided that it is fully paid for by tightening up loopholes and other tax breaks so the federal debt does not grow even more.
And, more importantly, tell them no tax breaks until we know how much Trump benefits. That is easy to do by just passing a law making the complete tax returns of presidents public, in Trump’s case preferably back to at least 1990.