Trump has a plan to change the tax code to make himself much, much richer
President Trump is planning to include a massive cut in the top tax rate on “pass-through” companies, from its current level of 39.6 percent to a mere 15 percent, the Wall Street Journal’s Michael Bender and Richard Rubin report.
This will be sold as a boost for small businesses, and it is, but it is mostly a huge giveaway to the rich — including the president himself.
More than two-thirds of income at pass-through companies (so named because their structure makes them exempt from the corporate income tax, and their profits are instead taxed upon distribution to shareholders) goes to the top 1 percent.
The plan creates a massive loophole with which ordinary people can evade taxes. Instead of just working for Vox.com, I could form DylanCorp LLC, contract with Vox to provide writing services, and pay a 15 percent rate on DylanCorp’s earnings rather than my current 25 percent rate. For rich people paying a top rate of 39.6 percent (or the top individual rate of 33 percent that Trump proposed during the campaign), the incentive to do this will be even larger. A new study finds that when Kansas exempted pass-through income, the result wasn't more investment or growth but a surge in this kind of tax avoidance. This is not good policy.
It’s also a really, really huge giveaway to Donald Trump, the Trump Organization, and the entire Trump family. The Trump Organization isn’t a “C corporation.” It doesn’t pay corporate income tax. Instead, it’s structured as a collection of pass-through enterprises, so the vast majority of income accruing to Trump and his family is taxed through this system. Trump almost certainly pays the 39.6 percent rate on his earnings, so he’s cutting his own top tax rate by more than half. It’s the most transparently self-interested policy he’s proposed since taking office, and it will likely save him tens of millions of dollars.
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