|Re: Trump's tax plan could actually benefit wealthy people like him|
I didn't notice my taxes going down while Obama was president.
As a small business owner I get destroyed on taxes and have for years
| Reply to holland55 - Msg #6636 - 10/12/2017 09:24|
Trump's tax plan could actually benefit wealthy people like him
President Donald Trump has revealed some details about a sweeping tax reform plan. The president says he wants tax cuts for everyday working people, not the rich. USA TODAY
WASHINGTON – President Trump is making one thing clear about his plan to cut taxes: It won't be a windfall for the richest Americans, including him.
"It's not good for me, believe me," Trump said in a speech unveiling the tax reform blueprint on Wednesday.
"We're targeting relief to working families," Trump said in Indianapolis. "We will make sure benefits are focused on the middle class, the working men and women, not the highest-income earners."
A lot would have to change before that's true.
Trump's initial plan – backed by Republican leadership on Capitol Hill – would eliminate the individual Alternative Minimum Tax and estate taxes. It would also tax so-called "pass through" businesses at 25%.
Both of these changes could greatly benefit Trump and his family's business empire.
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Trump chose to maintain ownership of his businesses while president, an arrangement that government watchdogs have criticized due to the potential for conflicts of interest.
The Alternative Minimum Tax, or AMT, prevents people from avoiding tax entirely through deductions and credits – and is overwhelmingly paid by the rich. Previous analyses found repealing the AMT would have saved Trump $31 million in 2005, the year for which a partial Trump tax return is available.
Trump's initial plan also would tax so-called "pass through" businesses at 25%, instead of the income tax rate their owners would pay. Most U.S. businesses are taxed under their owners' individual income tax rate instead of the corporate rate. According to Vox, the “vast majority” of the Trump Organization is considered "pass through" as it revolves around real estate and branding deals, though it's unclear whether Trump's businesses would fall under this rate or not.
President Trump speaks about tax reform in Indianapolis
What's more, Trump wants to eliminate the estate tax, which is levied on the distribution of property as it passes from deceased persons to their heirs. This could save the Trump family as much as $1.4 billion, assuming a Forbes estimate that Trump is worth $3.5 billion. Currently, Trump's children would inherit $2.1 billion, assuming the top 40% estate tax rate.
Finally, Trump's plan collapses individual income brackets to three, lowering the top rate from 39.6% to 35%, which critics say would be a significant increase for the wealthiest Americans.
The White House pointed to language in the GOP framework that would allow the bill's negotiators to add a surcharge on high-income households to ensure it is "at least as progressive" as the current code. It also vows to eliminate "itemized deductions that primarily benefit the wealthiest families." Yet it doesn't identify those loopholes, other than a state and local deduction that is also used by many middle-class families living in coastal and blue states.
It’s impossible to determine exactly how much Trump would personally benefit since, unlike every U.S. president since Richard Nixon, he has never released his tax returns.
Trump is making clear he intends to succeed on taxes where his effort to repeal Obamacare failed – by working with Democrats.
His plan is likely to undergo significant changes in Congress if Trump wants to win their approval. For instance, he may be pressed to drop his bid to end the estate tax. Yet eliminating the estate tax has been a longtime goal of the GOP, which argues that it stifles family-owned businesses, including in the farming industry.
As he rolled out the plan in a Wednesday speech, Trump was joined by Sen. Joe Donnelly of Indiana, one of the most endangered Democrats sitting for reelection in 2018. Trump is courting moderate Democrats such as Donnelly and Heidi Heitkamp of North Dakota, who've yet to indicate what it will take to get their votes.
However, according to a Democrat familiar with their thinking, these lawmakers are unlikely to support the plan unless it brings in about the same amount of revenue from upper-income earners as the current tax code.
Progressive Democrats are already seizing the moment to renew their calls for the release of his tax returns.
Meanwhile, Trump is touting several provisions that will help lower income earners.
For instance, he said the first $12,000 in personal income for individuals and $24,000 for married couples would pay no taxes. Trump would also expand the child care tax credit and create a new $500 caregiver credit.
It's possible that, as the plan comes together, some of the substantial benefits the wealthy stand to gain will be offset by closing loopholes they currently benefit from.
Yet, until Republicans outline which loopholes are ending, the blueprint released this week promises substantial benefit for wealthier taxpayers.
The estate tax is charged only on estates worth about $5.5 million or more. It was created in part to reduce the ability of a small number of families to amass huge wealth over time. Supporters of its elimination say it can force family-owned businesses to be broken up and sold to pay taxes, affecting workers' jobs.
Yet according to the nonpartisan Tax Policy Center, only roughly 50 small business and small farm estates nationwide will face any estate tax in 2017, owing on average less than 6% of their value in tax. The provision also brings in significant revenue to the federal Treasury.
It's a similar story with the Alternative Minimum Tax. A small minority, 3% of all taxpayers, had to pay the AMT, according to IRS data of the 2014 tax year reviewed by Forbes magazine. Doing away with it would be costly, as it brought in over $28 billion in revenue the same year.
The precursor to the AMT was created in 1969 in response to outrage over a small minority of wealthy taxpayers earning over $200,000 a year who paid nothing in federal income taxes by maximizing preferences and special write-offs.
Finally, according to the Center on Budget and Policy Priorities, "pass through" income is highly concentrated among the wealthiest Americans.
Contributing: Herb Jackson
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