The new tax plan will make Trump’s family richer, experts say. Here’s how.
Daniel Hemel, a tax law professor at the University of Chicago, wants to make a deal with President Trump: If the GOP’s new tax plan indeed costs him “a fortune,” as Trump claimed, Hemel will pay Trump back the difference.
But if the president becomes richer off the plan, that money would go to Hemel. “Of course,” Hemel said, “he'd have to release his tax returns for us to judge who wins.”
Trump’s decision to keep Americans in the dark on his taxes — the first president since Nixon to do so — makes it nearly impossible to know exactly how the bill benefits him, though tax policy experts say it almost certainly will.
They describe a plan tilted toward the wealthiest Americans with specific protections for real estate developers like Trump, his adult children and his son-in-law, Jared Kushner.
Here’s how experts say the plan stands to benefit Trump's empire.
How does the plan carve out privileges for real estate developers like, say, the Trumps?
“Usually when people sell property at a profit, that profit is considered income and taxed,” said Steve Wamhoff, senior fellow for federal tax policy at the nonpartisan Institute on Taxation and Economic Policy. “But some investors are able to set up deals so that technically they are just ‘trading’ one property for another, and they tell the IRS that it was just a trade, not a sale, so there is no income to tax. (This is called a like-kind exchange.)
“The new law eliminates this break — except for real estate. It's as if lawmakers made sure that their half-hearted attempts to close loopholes and special breaks did not touch wealthy real estate investors like the Trumps and the Kushners.”
Hemel adds: “Many firms will be affected by a provision that caps the interest deduction of 30% of earnings before interest and taxes. But the GOP plan explicitly exempts real estate investors from this, so Trump doesn't have to worry.”
A lot's been made about how this plan helps “pass-through businesses." What might that mean for Trump?
“A last-minute provision that was dropped into the final bill allows (a special pass-through) break to go to businesses that have depreciable property, like buildings that wear out over time, even if they have very few employees,” said Wamhoff. “Guess what kind of business has that type of property and few employees? Real estate firms, which largely operate as pass-through businesses.”
“He’ll get a 20% deduction form the amount of his ‘business income,’” said Daniel N. Shaviro, a tax professor at New York University. “Suppose that income is $10 million: That’s a $2 million deduction right off the top.”
The new plan also lets larger inheritances out of the estate tax. Does that change the inheritance Trump leaves?
“Instead of leaving behind $11 million tax free, Donald and Melania Trump could leave behind $22 million tax free,” Wamhoff said. “If Trump is being truthful about how rich he is, that might be a drop in the bucket in his fortune.”
Is there anything in this new plan that doesn’t leave Trump wealthier?
“One provision that does seem to affect Trump negatively is the repeal of the deduction for state and local taxes over $10,000,” said Hemel, who mused that Trump could relocate his residency to his Florida estate, Mar-a-Lago. “Florida has no state income tax, so this provision would affect Trump much less if he's in Florida than if he's in New York.”
Still, Wamhoff said, “It is inconceivable that any tax hike from that provision for Trump would not be offset by the break for the billions of dollars worth of pass-through businesses that he owns — at least by his own account.”
Follow Josh Hafner on Twitter: @joshhafner
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