The following article by Jesse Drucker and Audrey Carlsen was posted on the New York Times website December 22, 2017:
President Trump would save about $11 million on his taxes, if the new Republican tax overhaul were applied to his 2005 tax return, a New York Times analysis has found. The savings would be a roughly 30 percent cut. He would also save another $4.4 million on his eventual estate tax bill.
On Friday, President Trump signed the sweeping tax overhaul approved earlier this week by Congress, a package of cuts that would overwhelmingly benefit the wealthy.
The analysis is based in part on information from his 2005 federal tax return, the most recent available, publiclyreleased in March by David Cay Johnston on the website DCReport.org. Breaking with decades of tradition by previous presidents, Mr. Trump has refused to make any of his tax returns public. The analysis compares what his tax burden would be under current law with what it would be under the new legislation.
On Tuesday, White House spokeswoman Sarah Huckabee Sanders said: “In some ways, particularly on the personal side, the president will likely take a big hit.” Last month, Mr. Trump said he would be a “big loser” under the tax bill.
In fact, high-income earners like Mr. Trump are likely to benefit disproportionately from the new law. Nearly 43 percent of the tax overhaul’s total benefits will flow to the top 5 percent of taxpayers, according to the nonpartisan Tax Policy Center.
The estimated benefits for Mr. Trump, calculated with the help of Robert Willens, an accounting expert, provide a view into the basics of how much he’d save and why. To be sure, there are unknowns about Mr. Trump’s taxes, including the 2005 return: How much he paid in state and local income taxes, whether he still has deductible losses, whether he still owes alternative minimum taxes and how much income he is earning today. It also doesn’t take into account other new benefits in the tax bill, including the ability to take some faster deductions. All those could affect his income taxes under the new law.
Savings of about $11 million from taxing
certain types of business income at 29.6
percent instead of current rate of 39.6 percent
The Republican overhaul allows individuals to qualify for a significantly reduced tax rate of 29.6 percent on certain types of income received through partnerships and similar entities that pass through their tax obligations to their owners — including rent and royalties, both big sources of income for Mr. Trump. That is far lower than the top tax rate of 39.6 percent currently faced by high-income earners.
Mr. Trump could save as much as $11 million on his taxes from income likely generated through such entities, compared with his tax burden under current law. (In 2005, much of his taxable income was offset by a $103.2 million write-down in business losses.) According to Mr. Trump’s most recent government ethics filing, at least $217 million in revenue last year was generated by limited liability companies, a popular form of pass-through entity, and possibly much more. It is not clear how the revenue disclosed in that form relates to income reported on a tax return.
There is also uncertainty about precisely how much he will be able to take advantage of the provision, which contains restrictions based on the size of his company’s workforce and the value of the property he owns. According to an estimate by Bloomberg Billionaires Index in June, properties owned by Mr. Trump were worth about $3 billion.
Savings of about $280,000
from cutting the highest tax rate
The provision to reduce the highest tax rate to 37 percent from 39.6 percent would save Mr. Trump a relatively small amount compared to the new, lower rate on pass-through income.
Savings of about $4.4 million
from repealing the estate tax
Though it would not be reflected on his income tax return, the bill increases the exemption from the estate tax for a married couple from $11 million to $22 million. If his assets were transferred after his death under today’s rules, his estate would be taxed at about 40 percent. The bill’s increased exemption from the federal estate tax could save his family about $4.4 million, though it could still be subject to New York estate taxes.
Potential increase of $2 million from repealing
some deductions — or possibly no increase at all
This line item presents the most ambiguity for Mr. Trump. He listed $17 million in itemized deductions in 2005. It is unclear how much, if any, of those deductions were for state and local income taxes or property taxes. That could be important because the Republican tax overhaul eliminates all but $10,000 in deductions for such taxes.
In reality, it seems unlikely Mr. Trump would have paid more than $6 million or so in such state and local income taxes, since his adjusted gross income was just under $49 million. (He may have paid no state and local income taxes at all.) Instead, the bulk of his itemized deductions likely came from things like interest expenses related to his investments or charitable deductions, such as donating so-called conservation easements on his golf courses.
In 2005, the alternative minimum tax accounted for about 85 percent of Mr. Trump’s overall income tax payment, or about $31.3 million. The so-called AMT is meant to prevent America’s wealthiest from using deductions to pay very low or no federal income tax. (Mr. Trump originally sought to repeal the tax altogether.) The fact that most of his income tax bill was paid under the alternative minimum tax means he probably received little or no benefit from deductions for local taxes, since such deductions are not permitted under the AMT. As a result, the loss of such deductions in the tax bill might not hurt Mr. Trump at all.
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