Everyone’s been wondering how they would do under the House Republicans’ tax bill, should it ever become law.
But there’s good reason to think at least one tax filer and his family could make bank.
President Trump has frequently asserted that he and his wealthy peers would not see much of a tax cut if Republicans pass tax legislation.
But that seems unlikely under several provisions in the House bill released this week. In fact, a new study by the Tax Foundation showed the top 1% would do much better than everyone else in most scenarios.
Here are just three ways Trump and his kids could benefit:
1. A lower rate on business income
The House GOP’s “Tax Cuts and Jobs Act” would lower the top tax rate on the profits of so-called pass-through businesses to 25%, from 39.6% today.
Pass-throughs include everything from Main Street shops to big accounting firms, medical practices, and private investment partnerships.
They also happen to include many of the Trump family’s vast financial portfolio — from golf clubs to hotels to real estate developments to Trump-branded products and ventures.
Pass-throughs are not taxed under the corporate code. Instead, their profits flow through to the owners, partners and shareholders, who pay tax on them through their individual tax returns.
2. Repeal of the estate tax
The estate tax affects very, very few Americans. The Tax Policy Center estimates that this year only 11,310 estates will have to file a return, and just 5,460 of them will end up owing any federal tax after accounting for deductions and credits.
Why? Because only those estates worth more than $ 5.49 million this year ($ 10.98 million for married couples) even have to file estate tax returns. Then only about half of those end up being taxable after factoring in deductions and credits.
The House tax bill does two things with respect to the estate tax: It doubles the exemption amounts, and then repeals the estate tax entirely by 2024.
Given how wealthy the Trump family is, they would certainly benefit from both provisions.
And there’s more: the House bill does not eliminate, as some suspected it might, a verysweet break for heirs, called a “step up in basis.”
The step-up rule basically lets people inherit, tax free, any asset with untaxed capital gains. Here’s how: Say you bought shares in a company eons ago for $ 50 a pop. You never sold them and bequeath them to your children.
When you die, the shares are trading at $ 150, for a gain of $ 100 per share. That gain will be tax-free forever because when your kids inherit them, they get a “step up” in their capital gains basis to $ 150, meaning the only tax they’ll owe is on the appreciation in price over $ 150 should they ever choose to sell the shares.
3. Repeal of the Alternative Minimum Tax
Tax filers are supposed to pay whichever is higher: their tax bill under the rules of the regular tax code or under the rules of the AMT, which disallows various tax breaks.
The AMT would be repealed under the House bill.
Normally very wealthy people like Trump aren’t subject to the AMT because their tax liability ends up being higher under the regular code.
But in Trump’s case, based on what little is known of his taxes, he had to pay an additional $ 31 million on his 2005 return because of the AMT. That’s most likely due to the outsized net operating loss ($ 916 million) that he reported in 1995 and was allowed to carry over from year to year. The AMT disallows some net operating losses.
It’s not known if Trump is still carrying such large losses. But if he is, a repeal of the AMT could further reduce his tax burden, said tax lawyer Steven Rosenthal, a senior fellow at the Tax Policy Center.
In 2005, for instance, he would have had to pay only $ 5.3 million if it weren’t for the AMT.