What We Learned From Just Two Pages of Trump’s Tax Returns

In a speech delivered in Gettysburg, Pennsylvania on a Saturday morning in October 2016, then-candidate Donald Trump mapped out an ambitious agenda for his Presidency. The ‘Middle-Class Tax Relief and Simplification Act’ featured prominently among the bills he pledged to pass in his first 100 days. In his campaign speeches, he promised tax relief for middle-class families that would raise the after-tax income of workers and help them achieve the American dream.

The mysterious release of just the first two pages of now President Trump’s 2005 tax return may have raised more questions than it answered, but it provided deep insights into his proposals to reform the personal income tax. It revealed in stark terms just how much the President himself – and other wealthy business people like him – stands to gain from the main tax changes he proposes. It throws cold water on his campaign promise that his tax reforms are designed to benefit working families.

The alternative minimum tax – the AMT – is a backstop that is intended to assure that wealthy individuals who hire tax accountants to aggressively pursue loopholes in the tax code (not available to the average taxpayer) do not end up paying little or no income tax. The AMT can certainly be improved – it now inadvertently hits some families with many children who live in high-tax states. But President Trump has called for its outright repeal. Now we know why. The first two pages of his 2005 tax return reveal that he was able to write off $103 million of his nearly $153 million income, reducing his tax bill to just $5.3 million – a mere 3.5 percent of his income. This is precisely the situation that the AMT was meant to address – to require millionaires to pay their fair share of taxes. Once the AMT kicked in, Mr. and Mrs. Trump paid a little more than $36 million in income taxes – an effective tax rate of 24 percent. Repeal of the AMT, as he proposes, would have saved the President $31.3 million in taxes.

And where did the $103 million in tax write-offs come from? The first two pages of the President’s IRS 1040 form do not provide any detail, but they illustrate the general principle at work here. The Trump organization consists of a myriad of partnerships and other so-called ‘pass-through’ entities. Pass-through income is income from a business such as a partnership that is not a corporation and not subject to the corporate income tax. The business income ‘passes through’ to owners of the business, who then pay individual income taxes on it. Losses from these businesses also pass through to the business owners, allowing them to use these losses to reduce their taxable income, as Trump did in 2005. A key tenet of President Trump’s tax reform proposal would reduce the tax on pass-through income to, at most, 15 percent. This is far below the top tax rate of 39.6 percent that currently applies to both wage and salary income and to pass-through income. This change to the tax code does nothing for the vast majority of Americans whose main source of income is the wage and salary income reported to the IRS on a W-2. But for the President and his cohort of millionaire real estate moguls, hedge fund partners, and private equity firm owners whose businesses are organized as partnerships, it will be a windfall that will substantially reduce their taxes.

Finally, President Trump promises to use tax simplification to reduce everyone’s taxes. By tax simplification he means a reduction in the number of tax brackets from seven to four. But there is nothing that makes it any simpler for taxpayers to look up what they owe in a tax table with four brackets instead of seven. Reducing the number of tax brackets has nothing to do with making it easier for ordinary families to pay their taxes and everything to do with reducing the taxes paid by the richest Americans. Some middle class families will see their taxes reduced. But the big time winners are the wealthiest taxpayers who reap huge gains in their after-tax income from Trump’s proposed reduction of the top marginal tax rate from 39.6 percent to 25 percent.

Trump’s 2005 tax return shows that the reforms to the personal income tax that he proposes benefit the wealthy, not middle class families. Tax reform on the ‘Friends and Family Plan,’ will benefit him personally, his family, and his wealthy friends and partners. But it will provide little to nothing in tax relief to the working families he claims to champion.

This article originally on Huffington Post.

More articles by:

December 18, 2018
Charles Pierson
Where No Corn Has Grown Before: Better Living Through Climate Change?
Evaggelos Vallianatos
The Waters of American Democracy
Patrick Cockburn
Will Anger in Washington Over the Murder of Khashoggi End the War in Yemen?
George Ochenski
Trump is on the Ropes, But the Pillage of Natural Resources Continues
Farzana Versey
Tribals, Missionaries and Hindutva
Robert Hunziker
Is COP24 One More Big Bust?
David Macaray
The Truth About Nursing Homes
Nino Pagliccia
Have the Russian Military Aircrafts in Venezuela Breached the Door to “America’s Backyard”?
Paul Edwards
Make America Grate Again
David Rosnick
The Impact of OPEC on Climate Change
Binoy Kampmark
The Kosovo Blunder: Moving Towards a Standing Army
Andrew Stewart
Shine a Light for Immigration Rights in Providence
December 17, 2018
Susan Abulhawa
Marc Lamont Hill’s Detractors are the True Anti-Semites
Jake Palmer
Viktor Orban, Trump and the Populist Battle Over Public Space
Martha Rosenberg
Big Pharma Fights Proposal to Keep It From Looting Medicare
David Rosen
December 17th: International Day to End Violence against Sex Workers
Binoy Kampmark
The Case that Dare Not Speak Its Name: the Conviction of Cardinal Pell
Dave Lindorff
Making Trump and Other Climate Criminals Pay
Bill Martin
Seeing Yellow
Julian Vigo
The World Google Controls and Surveillance Capitalism
What is Neoliberalism?
James Haught
Evangelicals Vote, “Nones” Falter
Vacy Vlanza
The Australian Prime Minister’s Rapture for Jerusalem
Martin Billheimer
Late Year’s Hits for the Hanging Sock
Weekend Edition
December 14, 2018
Friday - Sunday
Andrew Levine
A Tale of Two Cities
Peter Linebaugh
The Significance of The Common Wind
Bruce E. Levine
The Ketamine Chorus: NYT Trumpets New Anti-Suicide Drug
Jeffrey St. Clair
Roaming Charges: Fathers and Sons, Bushes and Bin Ladens
Kathy Deacon
Coffee, Social Stratification and the Retail Sector in a Small Maritime Village
Nick Pemberton
Praise For America’s Second Leading Intellectual
Robert Hunziker
The Yellow Vest Insurgency – What’s Next?
Patrick Cockburn
The Yemeni Dead: Six Times Higher Than Previously Reported
Nick Alexandrov
George H. W. Bush: Another Eulogy
Brian Cloughley
Principles and Morality Versus Cash and Profit? No Contest
Michael F. Duggan
Climate Change and the Limits of Reason
Victor Grossman
Sighs of Relief in Germany
Ron Jacobs
A Propagandist of Privatization
Robert Fantina
What Does Beto Have Against the Palestinians?
Richard Falk – Daniel Falcone
Sartre, Said, Chomsky and the Meaning of the Public Intellectual
Andrew Glikson
Crimes Against the Earth
Robert Fisk
The Parasitic Relationship Between Power and the American Media
Stephen Cooper
When Will Journalism Grapple With the Ethics of Interviewing Mentally Ill Arrestees?
Jill Richardson
A War on Science, Morals and Law
Ron Jacobs
A Propagandist of Privatization
Evaggelos Vallianatos
It’s Not Easy Being Greek