For a guy that really doesn’t like policy or reading up on detailed policy papers, Donald Trump sure does have a penchant for introducing new tax plans. Today, Trump is releasing his FOURTH tax plan, in what might be an all-time record. Maybe he just keeps learning more and more about the economy as this campaign goes on?
We know Donald Trump’s chief economic advisers also happen to be his top campaign donors (and Wall Street and hedge fund investors), so it’s no surprise that the common thread through each of Trump’s tax plans has been disproportionate after-tax income boosts for top income-earners.
Another commonality: each of Trump’s tax proposals would add around $10 trillion to the national debt. And Moody’s Analytics reports that the implementation of Trump’s policies would mean that “the economy suffers a lengthy recession and is smaller at the end of his four-year term than when he took office.”
Bizarrely, despite having four tax plans, each with vague details that leave questions unanswered, Trump’s been consistent on one thing: helping out himself* and his billionaire pals and campaign donors.
*Not that we know if Trump is in the top 1% of income-earners, as his staunch refusal to release his tax returns suggests that there’s a good chance he pays absolutely nothing in taxes.
TRUMP’S FIRST THREE TAX PLANS
In August 2016, Trump issued his third revised tax proposal that called for a top individual tax rate of 33 percent, full expensing on capital investment, and a deduction for childcare costs.
The Committee for a Responsible Federal Budget estimated that Trump’s latest tax update would add $9 plus trillion in debt over the next decade. With a series of tax cuts that benefit almost exclusively the wealthy elite while ignoring the middle class, it’s clear that the big winner of Trump’s tax proposal is Trump:
✓ Trump proposed a child care tax deduction, that the New York Times noted “would provide no advantage for the 45 percent of people paying no tax and provide the biggest advantages to people in high-income tax brackets.”
✓ According to the Washington Post, Trump’s plan “would dramatically reduce taxes on what is known in tax circles as ‘pass-through’ entities, that were a “cornerstone of the Trump Organization.”
✓ The Wall Street Journal reported that Trump’s proposal to combine two proposals that tax experts in both parties advise should never be combined into one policy — letting businesses deduct interest and immediate expensing for business investments – set up leveraged real estate companies like the one he owned to benefit from “new and substantial subsidies.”
✓ Trump’s revised tax plan kept an earlier proposal to repeal the federal estate tax—a move that if enacted would net his family a $7.1 Billion tax break, according to centrist think tank Third Way.
August 2016: Trump Proposed A Revised Tax Plan
August 2016: Trump Proposed A Revised Tax Plan That Called For A Top Individual Tax Rate Of 33 Percent, Full Expensing On Capital Investment And A Deduction For Childcare Costs. According to Tax Foundation, “Earlier today, Republican presidential candidate Donald Trump announced several major changes to his tax plan, originally released in September 2015. In a speech at the Detroit Economic Club, Trump called for a top individual tax rate of 33 percent, full expensing of capital investment, and a deduction for childcare costs – three tax policy proposals that were not included in the first version of his plan.” [Tax Foundation, 8/8/16]
Trump Tax Plan Comparison: Original, Proposed Rewrite, Latest Revised Version
|Tax Rate||September 2015 Proposal||May 2016 Proposal||August 2016 Proposal|
|Top Tax Bracket||25 Percent||28 Percent||33 Percent|
|Middle Tax Bracket||20 Percent||25 Percent||25 Percent|
|Low Tax Bracket||10 Percent||15 Percent||12 Percent|
|No Income Tax Owed Thresholds||Individuals Earning Less Than $25,000 And Couples Below $50,000;||Individuals Earning Less Than $10,000 And Couples Below $20,000||Unknown|
|Corporate And Business Income Tax Rate||15 Percent||—||15 Percent|
|Federal Estate Tax||Repeal||—||Repeal|
|Pass-Through Business Tax Rate||15 Percent||—||15 Percent|
|Itemized Deductions Cap||Steepened the curve of Pease Limitation on Itemized deductions.||Yes||Unknown|
|Immediate Business Expensing||No||Yes||Unknown|
|Capital Gains Top Rate||20 Percent||15 Percent||Unknown|
|Carried Interest Loophole||Eliminate||—||Eliminate|
|Child Care Expense Deduction||—||—||Make child care expenses fully tax deductible (current deductions cap out at $6,000 per year); Trump’s proposal would be added at a cost of $20 billion per year.|
|Impact On Deficit||Add $10 trillion to deficit based on dynamic scoring. [Tax Foundation 10 Year Deficit Score]||Add $3.8 trillion to deficit based on dynamic scoring; $6.7 trillion without dynamic scoring. [Tax Foundation 10 Year Deficit Score||Add $9 trillion-plus over next decade [The Committee For Responsible Federal Budget]|
Trump’s Revised Tax plan Still Favored The Wealthy 1 Percent, While Ignoring The Middle Class
Trump’s Child Care Tax Deduction Benefited Higher Income Families
The Daily Beast HEADLINE: “Trump’s Childcare Plan Would Only Help Little Rich Kids.” [The Daily Beast, 8/9/16]
Wall Street Journal: Trump’s Proposal For A Tax Deduction “Would Seem To Favor Higher-Income Families.” According to Wall Street Journal, “Mr. Trump’s proposal for a tax deduction would seem to favor higher-income families. Many low-wage workers don’t pay federal taxes, in part because they benefit from other policies aimed at helping working parents, including the child- and dependent-care tax credit and the earned-income tax credit. Already, federal tax law allows a filer to receive a credit to help offset up to $3,000 in qualified child-care costs, and up to $6,000 for joint filers. As a credit, parents would receive a tax refund if the amount of the credit exceeds the amount owed in taxes.” [Wall Street Journal, 8/8/16]
California Rep. Brad Sherman, A Former Tax Lawyer: Trump’s Child Care Tax Credit Would “Help the Upper Middle Class.” According to The Daily Beast, “Donald Trump went looking for political gold, and he may have found it in a proposal to make all childcare costs deductible from taxable income. […] ‘It will help the upper middle class,’ declared California Rep. Brad Sherman. A tax lawyer before entering Congress, Sherman, a Democrat, pointed out that three-quarters of taxpayers don’t itemize their deductions and would not benefit from a new deduction. ‘Democrats push for credits that tend to phase out once you hit $150,000 income, and Republicans tend to like deductions,’ which disproportionately benefit those at the upper end of the income scale, he said. What Trump has proposed is a far cry from underwriting universal quality childcare, which is what Ivanka Trump promised her father would do in her convention speech last month.” [Daily Beast,8/9/16]
Trump’s Childcare Tax Proposal Ignored The People Who Needed Help With Childcare The Most
New York Times: Trump’s Proposal To Make Child Care Tax Deductible Would “Provide No Advantage For The 45 Percent Of People Paying No Tax And Provide The Biggest Advantages To People In High-Income Tax Brackets.” According to New York Times, “Mr. Trump also wants to make child care tax-deductible. If the policy were implemented as a typical deduction, it would provide no advantage for the 45 percent of people paying no tax and provide the biggest advantages to people in high-income tax brackets. His campaign has indicated that the Trump administration would find ways to make its advantages shared more broadly, though staffers had no details.” [New York Times,8/12/16]
Michael Strain, Economist At American Enterprise Institute: Under Trump’s Proposal For Child Care, “The Benefits Of This Policy Will Not Accrue To The People Who Need The Most Help.” According to Washington Post, “In a speech on economic policy in DetroitMonday, Donald Trump put forward a new idea for helping American families pay for child care: Allow taxpayers to deduct child-care expenses from their incomes. Under Trump’s proposal, families with children would save money when paying their taxes, and the government would essentially pay part of the cost of looking after their kids. Experts on child care are skeptical, though. The cost of the plan for the government could be exorbitant, and it is not clear how the policy would help poor and middle-class families. More affluent families would likely save the most money under the plan. ‘I’m most concerned about a single mother who doesn’t earn a lot of money and who has a couple of kids at home,’ said Michael Strain, an economist at the conservative American Enterprise Institute. ‘The benefits of this policy will not accrue to the people who most need help.’” [Washington Post, 8/8/16]
Trump Was A “Big Winner” From His Tax Proposals
Trump’s Tax Plan Included New Tax Loophole For “Pass-Through” Income Used By Trump Organization
Trump Proposed Dramatically Reducing Taxes On Pass-Through Income, Which Was A “Cornerstone Of The Trump Organization”
Washington Post HEADLINE: “Donald Trump’s New Tax Plan Could Have Big Winner: Donald Trump Companies.” [Washington Post,8/10/16]
Washington Post: Trump’s Plan Would Dramatically Reduce Taxes On What Is Known In Tax Circles As “Pass-Through” Entities, That Were A “Cornerstone Of The Trump Organization.” According to Washington Post, “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.” [Washington Post, 8/10/16]
Trump Proposed Taxing Pass-Through Income At A Low Rate Of 15 Percent, Instead Of Higher Ordinary Wage Income Rates
August 2016: Trump Proposed Taxing Pass Through Income At 15 Percent, “Compared To The 40 Percent Personal Income Tax Rate A Wealthy Business Owner Would Pay Today.” According to Washington Post, “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.” [Washington Post, 8/10/16]
September 2015: Trump Proposed Taxing Pass-Through Income At 15 Percent Instead Of As Ordinary Wage Income. According to New York Times, “Another large, though less-noticed, tax cut in Mr. Trump’s plan is a reduction in the maximum tax rate on ‘pass-through income’ to 15 percent; currently, this income is taxed at the same rates as wage income, up to 39.6 percent.” [New York Times, 9/29/15]
New Tax Loophole For “Pass-Through” Income From Businesses That Would Benefit Wealthy, Hedge Funds
Pass Through Income Allowed Small Business Partnerships—Often Used By Hedge Funds—To Pay Tax Income At Lower Rates
New York Times: Pass-Through Income Comes From Ownership Structure For Businesses Of Any Size That Allow Personal Income From Businesses To Avoid Business Taxes. According to New York Times, “Pass-through income is often described as ‘small-business income,’ but that term can be misleading. Small-business owners can use corporate structures, like limited liability companies, that are not taxed. Instead, the income from these companies is passed through to their individual owners, who then pay tax on their individual income tax returns. Those small-business owners would enjoy this tax reduction from Mr. Trump, but so would the owners of large businesses that may also choose to use these same ownership structures. The tax break would also go to independent contractors like me: The New York Times pays me a salary, but when I do work for other organizations, I treat the payments as small-business income, and I’d get to use the 15 percent rate proposed by Mr. Trump.” [New York Times, 9/29/15]
CNN Money, 2015: “Hedge Funds Can Be Organized As Small Business Partnerships. So They Could Benefit From A Separate Proposal In Trump’s Tax Plan To Lower The Tax Rate On Small Business Partners To 15%.” According to CNN Money, “Hedge funds can be organized as small business partnerships. So they could benefit from a separate proposal in Trump’s tax plan to lower the tax rate on small business partners to 15%. Conceivably a hedge fund could raise the management-fee portion of fund managers’ compensation, and lower or eliminate the carried interest, so more of their income would be taxed at 15%, Rosenthal said.” [CNN Money, 9/28/15]
Trump’s New Tax Plan Could Provide Leveraged Real-Estate Businesses Like His With “Substantial” Subsidies
Trump’s Tax Plan Appeared To Propose Combining Two Proposals: Allowing Immediate Business Expensing And Allowing Businesses To Deduct Interest.
Trump’s Tax Plan Seemed Poised To Include Two Proposals That “Tax Analysts From Both Parties” Say Should Not Be Paired: Letting Businesses Deduct Interest, And Allowing Immediate Expensing For Investments In Equipment And Buildings. According to The Wall Street Journal, “Donald Trump’s emerging tax plan could benefit leveraged real-estate companies like the one he runs with new and substantial subsidies. The Republican presidential nominee appears poised to combine two policies that House Republicans—and tax analysts from both parties—say shouldn’t be paired: letting businesses deduct interest, and allowing expensing, or immediate write-offs, for investments in equipment and buildings. Current law requires businesses to spread those deductions over multiple years. The result would provide negative tax rates for investments financed with debt, creating incentives for companies to pursue projects that wouldn’t make sense economically without the tax benefits.” [Wall Street Journal, 8/18/16]
WSJ: “Mr. Trump Said He Supported Full Expensing—Which Is Normally Combined With Sharp Limits On Interest Deductibility—Aligning Himself With House Republicans And The Plans Of Several Of His Defeated Republican Rivals.” According to The Wall Street Journal, “Mr. Trump hasn’t officially announced the proposal yet as he revamps his tax plan to limit the projected revenue losses from the version he released in 2015. In a speech last week in Detroit, Mr. Trump said he supported full expensing—which is normally combined with sharp limits on interest deductibility—aligning himself with House Republicans and the plans of several of his defeated Republican rivals.” [Wall Street Journal, 8/18/16]
Allowing Both Proposals Under Trump’s Tax Plan Would Provide Companies Like Trump’s With “New And Substantial Subsidies.”
WSJ: “Donald Trump’s Emerging Tax Plan Could Benefit Leveraged Real-Estate Companies Like The One He Runs With New And Substantial Subsidies.” According to The Wall Street Journal, “Donald Trump’s emerging tax plan could benefit leveraged real-estate companies like the one he runs with new and substantial subsidies. The Republican presidential nominee appears poised to combine two policies that House Republicans—and tax analysts from both parties—say shouldn’t be paired: letting businesses deduct interest, and allowing expensing, or immediate write-offs, for investments in equipment and buildings. Current law requires businesses to spread those deductions over multiple years. The result would provide negative tax rates for investments financed with debt, creating incentives for companies to pursue projects that wouldn’t make sense economically without the tax benefits.” [Wall Street Journal, 8/18/16]
According to The Wall Street Journal, “Mr. Trump hasn’t released his tax returns, so it isn’t clear exactly how he would be affected. He has proclaimed himself the ‘king of debt’ and his financial disclosure forms show that he owes more than $315 million. But that kind of policy might be particularly beneficial to someone such as Mr. Trump, who could generate investment and interest deductions from real-estate investments and then use those losses to offset taxable income from licensing deals, book royalties and speeches. ‘It’s clear he’s in commercial real estate and he uses a lot of debt,’ Ms. Batchelder said. ‘And the people that would benefit most from this are people that would use a lot of debt and are in real estate.’” [Wall Street Journal, 8/18/16]
Trump’s Repeal Of The Federal Estate Tax Would Net His Family $7.1 Billion Tax Cut.
Third Way: Trump’s Proposal To Repeal The Federal Estate Tax Would Net His Family An $7.1 Billion Tax Cut. According to The Hill, “Donald Trump’s family would get a $7.1 billion tax cut under the Republican presidential nominee’s proposal to eliminate the federal estate tax, a centrist think tank estimated. ‘The staggeringly high value of the tax cut for the Trump dynasty alone carries the same price tag as multiple high-value national priorities,’ Third Way said in an analysis Wednesday. Trump proposed repealing the estate tax in a tax plan he released last year.” [The Hill, 7/21/16]
Report: Trump’s Tax Proposal Would Add $9 Trillion-Plus In Debt
The Committee For Responsible Federal Budget: Trump’s Tax Proposals Alone Would Add $9 Trillion-Plus To Cumulative Deficits Over A Decade. According to CBS News, “The Committee for a Responsible Federal Budget says Democrat Hillary Clinton’s agenda — which relies on tax increases to pay for proposals such as making the Affordable Care Act more generous — would increase the debt by about $250 billion over 10 years. […] Trump’s tax plans, which include lowering the top income tax bracket from 39.6 percent to 25 percent and the top corporate rate from 35 percent to 15 percent, would add $9 trillion-plus to cumulative deficits over a decade.” [CBS News, 6/27/16]