Republican leaders in Congress may not be ready to abandon Donald Trump, but there’s little doubt about their growing discomfort with the president of the United States. Supposedly shocked by Trump’s coddling of white supremacists in the wake of the violence in Charlottesville, Virginia, Tennessee Sen. Bob Corker questioned Trump’s ability to either the “demonstrate the stability” or “competence” required of presidents. A sheepish House Speaker Paul Ryan told a CNN town hall that Trump “messed up” in his handling of the neo-Nazi thuggery in Virginia and proclaimed, “This bigotry is counter to all this country stands for.” Senate Majority Leader Mitch McConnell, under assault from Trump after the GOP failure to repeal Obamacare, hasn’t spoken to the president in weeks and, according to the New York Times, “privately expressed uncertainty that Mr. Trump will be able to salvage his administration after a series of summer crises.”
With the summer Congressional recess about to end, the GOP’s best and brightest are planning a post-Labor Day payback for the president. His punishment? A massive tax cut windfall for the wealthy that will redirect billions of dollars from the United States Treasury to Donald Trump and his children.
As it turns out, that outcome would represent another broken promise for Donald Trump. Two years ago, candidate Trump unveiled the first of three versions of what would become his tax reform program. (According to analysts, that budget-busting blueprint would generate up to $12 trillion in new national debt in the ensuing decade.) On Sept. 28, 2015, he made this pledge to the American people:
“It reduces or eliminates most of the deductions and loopholes available to special interests and to the very rich. In other words, it’s going to cost me a fortune — which is actually true — while preserving charitable giving and mortgage interest deductions, very importantly.” [Emphasis mine.]
Now even without access to Donald Trump’s tax returns, then as now it was impossible for his guarantee to be true. As we’ll see below, Trump’s is a Four-Pinocchio Lie both because of the way he makes his money and the changes he’s proposing to the tax code.
Despite the differences in their plans, Congressional Republicans and the Trump White House are on the same page when it comes to using the tax code to manufacture a gigantic upward redistribution of income. Both the Trump administration’s one-page July outline and Speaker Ryan’s “Better Way” blueprint condense the seven income tax brackets to just three, with the top marginal rate dropping from 39.6 to 35 percent. Each would do away with the Alternative Minimum Tax (AMT). Both eliminate the 3.8 percent capitals gains tax surcharge on incomes over $250,000 which currently helps fund Obamacare. Ryan and Trump agree that the estate tax—a source of $250 billion in revenue over the next decade—should be put to death. GOP leaders are in lockstep in looking to slash the statutory corporate tax rate from its current level of 35 percent. Given the loss of projected tax revenue, House Republicans are eyeing 22 to 25 percent rate for businesses while the president is seeking to go lower still to just 15 percent. Even more important to Donald Trump (as we’ll see below), the White House wants to extend that 15 percent rate to partnerships and so-called “S-corporations.” (It was precisely that kind of change in the tax code that produced a revenue death spiral in Kansas, a fiscal calamity so horrendous that the GOP-controlled legislature voted in June to repeal Gov. Sam Brownback’s signature tax cut plan.) That change alone could drain $1.95 trillion from Uncle Sam’s coffers over 10 years, with three-quarters of those dollars flowing into the bank account of the richest 1 percent of income earners.
Among them are Donald J. Trump and his spawn.
Now, none of this is to suggest that Trump currently pays a lot of taxes, if any at all. All available evidence suggests the reverse is true.
While his leaked 2005 return revealed that he paid $38 million to Uncle Sam on $150 million in income, almost all of that assessment was the result of his paying the Alternative Minimum Tax (AMT), a provision he has promised to eliminate. And as the New York Times discovered in October, thanks to tax code advantages for real estate investors like himself Trump may have owed no federal taxes for almost two decades:
The 1995 tax records, never before disclosed, reveal the extraordinary tax benefits that Mr. Trump, the Republican presidential nominee, derived from the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan.
Tax experts hired by The Times to analyze Mr. Trump’s 1995 records said that tax rules especially advantageous to wealthy filers would have allowed Mr. Trump to use his $916 million loss to cancel out an equivalent amount of taxable income over an 18-year period.
As Matthew Yglesias explained in Vox, “You don’t need ‘genius’ to pull off Trump’s tax avoidance—you just need to be rich.” Rich, that is, and in the real estate business. The key, as tax expert David Cay Johnston documented, is the manipulation of “net operating losses” (NOLs) on top of the “already liberal tax breaks Congress gives big real-estate owners.”
Trump dumped the real costs of all this on investors who saw gold in his brand name, but who lost everything even as he was paid tens of millions of tax-free dollars…
NOLs are incredibly valuable. These tax losses can be used to offset salaries, business profits, and income from, say, a television show or making neckties in China. Thanks to his $916 million of NOLs, Trump could earn much over 18 years in salaries, profits, and interest, but pay no income taxes.
Without Donald Trump’s tax returns, there is still much we do not know about the shell game that enabled the reality TV star to stiff Uncle Sam. Still, the most grotesque aspect of Trump’s schemes may be that most of them are probably perfectly legal. (Most, but not all. Trump’s use of the unlicensed charitable Trump Foundation to pay off legal costs generated by his for-profit businesses almost certainly violate laws on “self-dealing.” And Trump apparently used his Foundation to skirt taxes on his appearance and speaker fees by having payments made directly to his “charity.”)
But that “blue-collar billionaire” supposedly devoted to “the forgotten Americans” isn’t content to rest with the gains—ill-gotten and otherwise—he has withheld from the IRS. Donald Trump has promised that as president, he would implement a new set of windfalls for himself and his children.
That windfall starts with the reduction in business taxes, especially for those “pass-through” businesses. During his final debate with Hillary Clinton last fall, Trump neglected to include himself among the winners when he said this:
“Under my plan, I’ll be reducing taxes tremendously, from 35 percent to 15 percent for companies, small and big businesses.”
That pass-through payday for plutocrats would also redirect millions of dollars from Uncle Sam to Donald J. Trump and family—every year. As Trump’s tax attorneys explained in his campaign’s March 2016 required financial disclosure:
“You hold interests as the sole or principal owner in approximately 500 separate entities. These entities are referred to and do business as The Trump Organization. … Because you operate these businesses almost exclusively through sole proprietorships and/or closely held partnerships, your personal federal income tax returns are inordinately large and complex for an individual.”
And that would mean really YUGE savings for President Donald Trump.
As the Center on Budget and Policy Priorities (CBPP) explained, “Pass-through income is claimed by business entities that aren’t subject to the corporate income tax, which currently has a top statutory rate of 35 percent (though most corporations pay an effective tax rate considerably lower than 35 percent). Pass-through income is business income that “passes through” the business and is instead reported on the individual tax returns of the business owners and taxed at the owners’ tax rates.”
But as CBPP also documented, “‘pass-throughs’ are not synonymous with ‘small businesses’ and “pass-through income is highly concentrated at the top:”
Mr. Trump, who has proposed a 15 percent corporate tax rate, proposes a pass-through rate of 15 percent as well. The Trump pass-through proposal would be an expensive tax cut that would flow primarily to the wealthiest Americans. That’s because more than two-thirds of pass-through business income flows to the highest-income 1 percent of tax filers.
Many businesses, such as law firms, and groups of wealthy investors choose to be taxed as pass-through entities instead of as corporations and often do so to lower the overall taxes they owe. In recent decades, many businesses and their owners have reaped sizable tax savings by doing so. A special 15 percent tax rate on pass-through income such as the Trump tax plan proposes would offer them another large tax cut.
As the Washington Post reported, “Trump would tax pass-through income at a rate of 15 percent, compared to the 40 percent personal income tax rate a wealthy business owner would pay today.” And as the Post‘s Jim Tankersley explained, one of those wealthy business owners is Donald Trump himself:
A little-noticed provision in Donald Trump’s tax reform plan has the potential to deliver a large tax cut to companies in the Republican presidential nominee’s vast business empire, experts say.
Trump’s plan would dramatically reduce taxes on what is known in tax circles as “pass-through” entities, which do not pay corporate income taxes, but whose owners are taxed at individual rates on their share of profits. Those entities are the most common structure for small businesses and increasingly popular for larger ones as well. They are also a cornerstone of the Trump Organization. On his 2015 presidential financial disclosure report, Trump listed holdings of more than 200 limited liability corporations, which is a form of pass-through.
It’s no wonder Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center, said “It’s a really nice deal” for Trump and pass-through owners like him. It was with good reason Hillary Clinton called it “the Trump Loophole.”
But it’s not the only one The Donald is proposing for himself, Ivanka, Eric, Donald Jr., and his other offspring.
As you might recall, his campaign finance disclosures claim he has a net worth of $10 billion and earned $557 million between January 2015 and May 2016. (His 2017 disclosure put his haul at up to $650 million for the previous year.) While his income sources are no doubt diverse, President Trump would surely reap millions from candidate Trump’s income tax and capital gains tax rate reductions alone. And if he is telling the truth about his net worth, The Donald’s heirs could pocket more than $7 billion from his promise to do away with the estate tax now paid by only the richest 0.2 percent of family fortunes.
Now, the Trumps aren’t the only members of the gilded-class who will reap a preposterous payday courtesy of Republicans in Congress. (Among the other winners are America’s newest tragically rich couple, Treasury Secretary Steve Mnuchin and his wife Louise Linton.) As the Center on Budget and Policy Priorities pointed out in May, the Trump tax plan would deliver an average annual tax cut of $15 million to the 400 highest-income Americans. In April, CBPP forecast that the bottom 80 percent of households will barely see their incomes move. In contrast, the top one-fifth would pocket a 7.3 percent income boost, while the top 1 percent would see their incomes jump by 14 percent.
But these numbers underestimate the dramatic widening in income inequality the various GOP tax plans would necessarily produce. These windfalls for the wealthy will cause the Treasury to hemorrhage red ink. Last September, the Tax Policy Center put the cost of the House GOP tax plan at $3 trillion over its first decade and $6.6 trillion over the second. To help offset that revenue loss, the Republican tax code manipulators propose capping or eliminating some of the tax breaks, loopholes, and deductions that now cost Uncle Sam more than $1.5 trillion a year. As Politico reported on Tuesday:
The options include capping the mortgage interest deduction for homeowners; scrapping people’s ability to deduct state and local taxes; and eliminating businesses’ ability to deduct interest, while also phasing in so-called full expensing for small businesses that allows them to immediately deduct investments like new equipment or facilities.
Of course, killing tax breaks takes political courage. (For Republicans, ending the deductibility of state and local taxes is easy, targeting as it does high-tax/high-service states governed by Democrats in a form of “blue state payback.”) That’s why Paul Ryan has avoided spelling them out for years. But there are also not enough tax expenditures for Treasury Secretary Mnuchin to keep his confirmation promise:
“Any tax cuts for the upper class will be offset by less deductions that pay for it.”
Making matters worse, the GOP isn’t closing enough tax expenditures to offset the revenue lost from its tax cuts. So, to help fund its payday for plutocrats, Republicans are calling for trillions in spending cuts. Between 2018 and 2027, the House GOP budget cuts a staggering $2.9 trillion in programs for low to moderate income Americans. Not only would non-defense discretionary spending (that is, everything outside of Social Security, Medicare, Medicare, mandated health care spending, and interest on the national debt) fall to its lowest percentage of the U.S. economy since the 1950s. The hidden impact of those reductions would punish most Americans’ bottom lines even after their supposed “tax relief.” As CBPP pointed on August 17:
If President Trump’s proposed tax cuts are paid for through the types of spending cuts in his budget proposal, the vast majority of Americans — including more than 90 percent of households in the middle fifth of the income spectrum — would be net losers, a new Tax Policy Center (TPC) analysis indicates. The spending cuts and tax increases needed to offset the cost of the tax cuts would cause their incomes to fall much more than they would gain from the tax cuts themselves.
For their part, frustrated Republicans are eager to get past Donald Trump’s Charlottesville disaster so they can get on with the business of giving him and his children those massive tax cuts. “I view [Charlottesville] as a low point,” Texas GOP Rep. Carlos Curbelo lamented, “lowest point yet.” House Ways and Means Committee Chairman Rep. Kevin Brady, who is working with House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell, Senate Finance Chairman Orrin Hatch, Treasury Secretary Steven Mnuchin, and Trump economic adviser Gary Cohn on the tax package, said, “I wish every segment and every discussion was about tax reform. I would love that conversation to dominate the news.” As Speaker Ryan recently described his version of the “fierce urgency of now”:
“We cannot miss this once-in-a-lifetime opportunity. This is a once-in-a-generation moment.”
Once in Donald Trump’s lifetime—and for the generation of Trump heirs that will follow him. As for the vast majority of the American people … well, not so much.
This is a Creative Commons article. The original version of this article appeared here.