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Opinion We don’t know what’s in Trump’s tax returns. But the GOP tax plan offers clues.

(Reuters/Shizuo Kambayashi)

Donald Trump has steadfastly refused to release his tax returns, leaving all of us in the dark about how much he is truly worth and how he is earning his billions.

But what if there is a clear set of clues as to what is in Trump’s returns right there in the just-released GOP tax plan?

That’s the case being made by Seth Hanlon, a senior fellow at the Center for American Progress and former special assistant to the Obama administration’s White House National Economic Council. And it turns out that his case is pretty persuasive.

Guess what: Even in a bill that favors the 1 percent in ways big and small, there is one especially favored group — commercial real estate interests. And because Trump just happens to have earned his living that way, we can make some educated guesses about what just might be in his mystery returns — and what breaks he would like to receive in the future.

Hanlon made this case in a tweetstorm that generated a lot of attention. As he put it: “The Republican tax bill looks like it was written by Donald Trump’s accountants and tax lawyers, and I’m not even joking.”

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I called up Hanlon to get him to elaborate. “They seem to have gone out of their way to make it as friendly as possible to Trump,” he told me this morning. “I would have expected more of a mixed bag for Trump.”

Many of the supposed reforms in the GOP bill, for instance, appear tough, but they exempt one industry in particular from their impact. Take the repeal of the “like-kind exchanges.” That’s a tax maneuver that allows companies to avoid paying capital gains on the sale of assets by purchasing a similar asset. It turns out that “REAL PROPERTY HELD FOR SALE” is exempt from the reform. A similar sleight of hand occurs with a provision that is intended to limit the tax breaks for interest payments. As the legislation reads:

Real estate businesses, if you are wondering, tend to rack up a lot of interest payments on borrowed money, something any owner of a home can guess. And as Hanlon reminds us, Trump proclaimed during last year’s presidential race, “I’m the king of debt. I’m great with debt. Nobody knows debt better than me.”


And, of course, the bill lowers the tax rate on pass-through businesses that don’t pay corporate taxes — such as partnerships, limited liability companies and S-corps — to 25 percent; something that will be a significant savings for billionaires, who would otherwise pay 39.6 percent on that money. It also eliminates the alternative minimum tax.

This would likely benefit Trump in a big way.  We know courtesy of a two-page excerpt from Trump’s 2005 tax return mailed by an unknown person to reporter David Cay Johnston. That year, because of deductions, Trump minus the AMT would have faced a bill of about $7 million on earnings of $150 million. But thanks to the AMT, which mandates that many filers calculate their taxes a second time, he owed about $38 million to the Internal Revenue Service. While we can’t know if he got caught in the AMT trap ever again, it’s certainly quite possible. (In fairness, there are some legitimate arguments for reforming or eliminating the AMT.)

And surely, you think, the Trump family, New Yorkers born and bred, would get hit hard by the plan’s attempt to do away with deducting state and local taxes. People who reside in higher-tax states are more likely to take advantage of this current federal tax break on this, and a lot of them tend to be in New York and California.

Ha! Ha! As it turns out, because of the way the bill is written, there is a chance that pass-through owners — like real estate developers such as Trump or, for that matter, partners at law firms – can possibly keep this tax break. There’s some ambiguous language that seems to give them the right to still deduct the taxes as a business expense, as New York University law school professor David Kamin explains:

Here’s what the Ways and Means Committee seems to be attempting: Employees wouldn’t be able to write off their state and local income taxes, while owners and investors would. Take a law firm partner or any other owner of a business (see Donald Trump) drawing a profit share from a company. If the company is a “pass through,” there is no tax directly on the company  —  only at the individual level on their profits. So, that owner pays state and local income taxes at the individual level and then, under the House plan, the owner apparently might still get to deduct the state and local income taxes. The law firm partner (and Donald Trump) would then be unscathed. By contrast, any employee paying state and local taxes on their wages wouldn’t get a deduction.

“I don’t see any reason to allow someone who is a business owner to deduct their state income tax payments, but not someone who works for that business,” Hanlon told me. “They would say state income taxes are a cost of doing business,but state income taxes are a cost of earning a living on employees.”

Make no mistake, the Trump progeny would benefit, too. One big concern to Hanlon involves the estate tax and something called the step-up in basis rate.  No one expected the Republican plan to preserve the estate tax and indeed it does not. But many thought the plan would eliminate, or at least limit, the use of something called “step-ups” in inheritance. Slate’s Jordan Weissmann recently explained what this provision is:

Let’s say your kindly aunt Karen bought some Apple stock in 1990 for a buck a share, then miraculously held onto it for a few decades. If she sold the stock last week, at $169 a share, she’d owe taxes on a $168 profit. But let’s say Karen passed away and left you the stock. You could sell it for $169, and pay no taxes. If you sold it for $171, you’d pay taxes on just a $2 profit. You aren’t held responsible for the capital gains taxes aunt Karen would have owed.
This system is somewhat tolerable today, since the estate tax captures a portion of the profits on appreciated assets. But with the estate tax gone, billionaires will be able to hold onto their stocks and bonds until they meet their maker, then pass them on entirely tax free to kids and grandkids.

Republicans might call this tax reform. But it’s really about reducing the tax burden on people just like Donald Trump. If this bill passes as is, he will face a substantially reduced tax bill next year and in the years to come. This might be the closest we come to understanding what’s in Trump’s tax returns and what they would tell us about how he makes a buck — all several billion of them.