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The many ways President Trump would benefit from the GOP’s tax plan

By Drew Harwell and Jonathan O'Connell

President Trump has defended the Republican effort to overhaul taxes by calling it a bitter pill for the rich, saying its provisions will boost the middle class and make him a “big loser” if it’s approved.

But tax experts and a nonpartisan analysis suggest he’ll fare far better than others as a result of the changes. From sweeping estate and business tax cuts to specific relief targeting real estate interests, the tax overhaul would directly benefit Trump’s family and business in a way that could save him tens of millions of dollars a year.

Provisions favorable to Trump can be found in the Republican tax bills from both the House and the Senate, the latter of which debuted Thursday. They would offer terms favorable to America’s ultra-wealthy and preserve exemptions and carve-outs for golf course owners, investors and real estate entrepreneurs.

“The notion that the president wouldn’t benefit is absurd,” said Steven M. Rosenthal, a senior fellow at the nonpartisan Tax Policy Center who has reviewed the bills. “In either plan, he benefits immensely.”

Trump has refused to release his tax returns, making it hard to know precisely how much he would stand to gain from a tax code overhaul. But one change in the House plan affecting only multimillionaires, a repeal of the estate tax, could save his family $1 billion or more.

Other tweaks would be similarly lucrative: Seth Hanlon, an economic adviser to the Obama White House and a senior fellow at the left-leaning Center for American Progress, estimated that the House bill could save Trump roughly $23 million a year.

The plans contain key differences and could still change as Republican tax writers prepare a combined bill to send to Trump’s desk.

White House officials have argued that the highest earners would continue to face the highest tax rates and pay the most taxes — in both dollar and percentage terms — of any Americans. In a statement Thursday, the White House said that Trump’s “priorities have remained the same throughout this process: delivering tax cuts for middle-income families, a simplified tax code and lower rates for American businesses.”

Trump has shown an interest in how the new tax plan would affect him personally. He told senators this week that he had spoken to his accountant about the emerging tax bills and that he would be “a big loser,” adding, “The deal is so bad for rich people, I had to throw in the estate tax just to give them something,” multiple people in the room told The Washington Post.

Trump’s decision to consult with his accountant before legislation was made public could appear unseemly, said Don W. Fox, a former acting director of the Office of Government Ethics.

“I would hope that any ethics counsel at the White House would say, ‘Mr. President, don’t do it,’ ” said Fox, who is advising congressional Democrats in legal action related to Trump’s business entanglements while in office. “Technically you can, but you shouldn’t. It just looks terrible.”

Not every tax change would benefit Trump’s company. The House bill would eliminate a tax credit to preserve historic buildings, an incentive Trump’s company is seeking to cover $40 million of the cost of its conversion of a landmark Washington post office into a luxury hotel. The Senate bill would cut the credit in half.

And many of the tax bill provisions benefiting commercial real estate companies such the Trump Organization are items that industry groups have spent millions of dollars and years of lobbying to support.

Two groups that have spent a combined $6.2 million this year lobbying the federal government — the National Association of Real Estate Investment Trusts and the Real Estate Roundtable — both count tax reform among their top priorities.

Both the House’s and the Senate’s tax plans would repeal the alternative minimum tax, a decades-old backstop designed to prevent wealthy taxpayers from claiming too much in deductions. Calculated separately on tax filings, the AMT has sometimes hit upper-middle-class households that request a slew of itemized deductions or special write-downs.

But the system has also tripped up Trump. In 2005, the AMT accounted for nearly $32 million of Trump’s $37 million income tax bill, according to pages from his tax return revealed by journalist David Cay Johnston earlier this year. Without the AMT, Trump would have paid a tiny fraction of his income in taxes that year — less than 4 percent.

The House bill would also repeal the estate tax, now levied on a few thousand of America’s wealthiest people. Under today’s law, anyone with homes, stocks or assets worth more than $5.5 million, or twice that for married couples, is subject to a 40 percent tax on assets above that threshold when the estate is transferred, leading Trump and Republicans to call it a “death tax.”

Very few Americans cross that multimillion-dollar threshold, but Trump is one of them. If Trump’s estate is worth more than $10 billion, as he asserted without evidence during the presidential campaign, his family would save billions of dollars if the estate tax went away.

The Senate bill, which the White House has suggested has a better chance of passing, keeps the estate tax but doubles the current threshold, to $11 million per person. The House bill would do the same for six years, then repeal it altogether.

“If you look at where the money is on the individual side, the most expensive parts are the alternative minimum tax and the estate tax,” Rep. Lloyd Doggett (D-Tex.) said during a Thursday session on the House bill. Trump “gets a big bowl of ice cream, and the American people end up getting to lick the bowl.”

The House bill would also cut rates on “pass-through” entities, which don’t pay corporate taxes but pass through the income to the owner’s income taxes, where rates top out at 39.6 percent. The bill would cap pass-through taxes for “passive” owners such as Trump, who don’t actively work for the company, at 25 percent — a 15 percentage point savings virtually overnight.

Nearly all of the more than 500 companies listed in Trump’s past financial disclosures, including the Trump Organization, are structured as pass-through entities. And the savings for Trump could be huge: His 2005 tax return showed he had more than $109 million in income from businesses, partnerships and pass-through entities.

A wide range of American companies are structured as pass-throughs, from small businesses to big law firms, hedge funds and real estate conglomerates. Most small businesses already pay a tax rate below 25 percent, depending on the owner’s individual tax rate, and a new revision to the House bill would allow them to pay a rate as low as 9 percent on some income.

Much of the pass-through change’s benefit would go to wealthy earners. The top 1 percent earn about 69 percent of individual pass-through income, a 2015 study published by the nonpartisan National Bureau of Economic Research found.

The Senate’s bill would allow pass-throughs to reduce their taxable income by about 17 percent but would then tax it at the individual rate. Service businesses would not qualify.

Treasury Secretary Steven Mnuchin said Thursday that the president’s taxes would increase under the House plan. An analysis by Congress’s Joint Committee on Taxation, however, said taxpayers earning more than $1 million a year would see their tax rate shrink on average from 32.5 percent to 29.9 percent. It’s not clear precisely how Trump would fare.

Under the House plan, the top 1 percent of households would reap 20 percent of the tax cut next year and 47 percent of the cut by 2027, Tax Policy Center estimates show. The richest 0.01 percent would save an average of $278,000 on their taxes by 2027, while the poorest would save $10.

The Senate’s plan calls for a slight drop in the top tax rate, to 38.5 percent. The House’s plan would hold the top rate to its present 39.6 percent.

Other provisions would directly benefit the real estate industry, where Trump first made his fortune. Both bills would allow businesses to deduct interest expenses for property development, construction, management and other real estate activities, while limiting that same benefit for other industries.

Another House provision would repeal a “like-kind exchange” exemption that allows businesses to avoid taxes if they reinvest profits from one venture into another, but the bill would preserve the exchanges for commercial real estate. No other types of business would receive such a break.

The Republican tax plan could also benefit Trump by protecting exemptions that help his business. The House bill would still allow golf course owners to claim deductions if they commit to never building on the land, a write-off that Sen. Jeff Flake (R-Ariz.) included in his report this year on “outlandish loopholes.”

Trump refused to divest his businesses when he joined the White House, opting instead to move his assets into a revocable trust from which he can draw money at any time, trust documents show. He left the management of the companies to his adult sons and a longtime employee.

The tax cuts would offer benefits to companies beyond Trump’s. Both plans would drop the corporate tax rate from 35 percent to 20 percent; the House’s cut would start next year, the Senate’s in 2019.

The Senate plan would also allow companies to deduct state and local taxes on their federal returns, but prevent individuals and families from doing the same. The House would offer individuals a partial deduction.

Long before he took the White House, Trump pushed for and defended lucrative tax exemptions offered to real estate developers such as himself. In 1991, he testified that a 1986 bill that streamlined tax brackets and squashed tax breaks had pushed the real estate business into an “absolute depression.”

Trump urged lawmakers to pass higher personal tax rates for the wealthy and restore exemptions for the industry. The bill as passed by Congress and President Ronald Reagan, Trump told lawmakers, “was just an absolute catastrophe for the country, for the real estate industry.”