President Donald Trump claimed on Wednesday that the Senate Republican tax plan will cost him and his family “a fortune.”
Trump turned to his oft-used “believe me” line during a speech in St. Charles, Missouri, telling the friendly audience that the tax plan will cost him.
“America’s tax code is a total dysfunctional mess. … It is riddled with loopholes that let some special interests, including myself, in all fairness — it is going to cost me a fortune, this thing,” Trump said. “Believe me, believe me, this is not good for me.”
On Thursday, White House press secretary Sarah Sanders said the President was referring to “deductions that may no longer exist” that he and his family use.
“A lot of the deductions that he would probably normally receive may not be part of the package that would affect … what he pays in taxes,” Sanders said. “Again, until there is a final piece of legislation, I can’t go into much more detail. But I know that some versions of it take out a lot of those deductions that currently benefit the President and his family.”
It’s impossible to say specifically how Trump would be affected, since the President has never released his tax returns. But at least three key provisions in the Senate plan suggest he and his family likely wouldn’t be hit hard at all.
Lower taxes on their businesses: Like the GOP bill that passed in the House, the Senate bill would lower taxes on so-called pass-through businesses, which is how most, if not all, of Trump’s hundreds of businesses are structured.
Pass-throughs — LLCs, partnerships, S corporations and sole proprietorships — are not taxed under the corporate code. Instead, their profits flow through to the owners, partners and shareholders, who pay taxes on them through their individual tax returns.
An even gentler estate tax: As it is today, the estate tax affects only 0.2% of estates.
The Senate bill would further reduce who’s affected and lessen the burden on those who still are by doubling the amount of money that would be automatically exempt from taxation — to roughly $11 million for individuals, up from $5.49 million today, and to $22 million for married couples, up from $10.98 million currently.
The House-passed bill does the same thing, but then goes one step farther and calls for a full repeal of the estate tax by 2024.
Both bills also would preserve what’s called a step-up in cost 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.
Repeal the AMT: Tax filers are supposed to pay whichever is higher: their tax bills under the rules of the regular tax code or under the rules of the Alternative Minimum Tax, which disallows various tax breaks.
The super-rich are not typically hit by the AMT, because they end up owing more under the regular income tax code.
Trump may be an exception.
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.