“I’m doing the right thing, and it’s not good for me, believe me,” — President Donald Trump on proposed tax cuts (Sept. 27, 2017)
The president might have been better off, or least more accurate in his characterization of his proposed tax cut, by paraphrasing the poet Elizabeth Barrett Browning (1806 – 1861): Oh, tax cuts! “How do I love thee? Let me count the ways.”
Despite denying that he would personally benefit from the tax blueprint released Wednesday by his administration and congressional Republicans, it seems there are several ways in which the occupant of the Oval Office would simply love this deal.
According to Federal Election Commission filings, President Trump owns or controls more than 500 limited liability companies, or LLCs.
The new plan calls for the tax rate on so-called “pass-through” entities, such as LLCs, to be cut from the highest marginal personal rate of 39.6 percent (it’s actually more than 43 percent when taking into account the Obamacare surtax on the nation’s highest earners) to only 25 percent.
The proposal claims that only certain pass-through entities will get this break and it will exclude entities that disguise regular, recurring, wages as business income.
It appears likely the new structure will leave the president’s real estate and licensing entities qualifying for the much lower rate, while the question remains whether doctors, accountants and other such entities will continue paying the highest marginal rate.
Assuming the president has actually paid federal income taxes in the last 12 years, his new rates clearly would be lower than in the past, and his business income has innumerable large deductions, as well. He may still have to file a Schedule C personal return — that is unclear. But, again, his rate would be 25 percent, not 39.6 percent, on reported income.
His presidential salary, which would normally be taxed as ordinary income, is being donated, meaning yet another deduction.
So netted out, the taxes paid are on his business income, less expenses and deductions, at a 25 percent rate.
Salaried employees could actually see their taxes increase, not fall, and the same holds for many middle-class families, based on what we know from the current proposals.
The new plan also calls for the repeal of the alternative minimum tax. According to the only Trump tax record we have, the tax payments he made in 2005 were entirely the result of the AMT. He would have otherwise paid almost nothing in taxes that year.
Finally, the new plan calls for the total repeal of the estate tax, or “death tax,” as conservatives like to call it.
Again, if the estate tax is repealed and assuming the president has a positive net worth upon his death and an estate of more than $11 million, those assets would pass, tax-free, to his heirs.
The elimination of the estate tax could save the super-rich money setting up trusts and other vehicles now used to dodge paying both income taxes on inheritable assets, and on the estate itself, though of course there are still plenty of reasons for setting up a trust regardless of taxes, avoiding probate among them.
So-called “generation-skipping” taxes would also be repealed, again allowing for tax-free inheritances to all future descendants of an estate.
To once again quote Browning:
“I love thee with the breath,
Smiles, tears, of all my life; and, if God choose,
I shall but love thee better after death.”