The Treasury Department has issued a set of proposed regulations clarifying who can and can’t take advantage of the “pass-through” loophole that Republicans included in the tax cut they passed last year, which, in ordinary circumstances, would be a story of interest only to a relatively small number of tax nerds.
But in this case, it is of special interest to President Trump, which is why it is yet another reminder that the American public absolutely, positively needs to see his tax returns.
These new regulations make it clear once again that the Republican tax bill is going to shower millions of dollars on the president. The problem is that we don’t know exactly how much.
In a way, you have to give some credit to Trump for outside-the-box thinking. Every presidential nominee for half a century made their tax returns public, because to avoid having a corrupt president, at a minimum we’d need to know how much income they had and where it was coming from. But Trump simply refused, offering up transparently phony excuses about how he was being audited by the Internal Revenue Service. No one else would have had the unmitigated gall, but Trump correctly surmised that whatever criticism he’d get for stonewalling, it wouldn’t be as bad for him as what would happen if the public actually got to see his returns.
Eventually, everyone stopped asking, despite the fact that there has never in U.S. history been a president for whom it was more important that we know the details of his finances. That’s not only because Trump was a spectacularly corrupt businessman. And it’s not only because, unlike presidents before him, he refused to divest himself of his holdings, offering a plethora of opportunities for people to shove money into his pockets while he serves in the Oval Office. It’s also because, unlike previous presidents, Trump’s income comes from an incredibly complex web of companies that are impossible for outside observers to completely understand.
You surely know the president heads something called the Trump Organization, which you probably think owns hotels, apartment buildings, and golf courses — in addition to licensing its name to any crappy product that will pay fees for a while before going out of business, whether it’s steaks or vodka or ties. But what you may not know is that the Trump Organization is actually not one company but an assemblage of pass-through companies. As the president’s tax lawyers wrote in a 2016 letter, the Trump Organization is made up of “approximately 500 separate entities.”
Before the 2017 tax cut, pass-through income was treated largely like regular income, taxed at a top rate of 39.6 percent. The Republican bill not only brought down that top rate, it inserted a loophole allowing certain owners of pass-throughs to deduct 20 percent of their income from their taxes. It was almost as though Republicans wrote the pass-through loophole into their bill specifically to give a windfall to Trump.
Like many provisions in Republican tax bills, this one will benefit some people of modest means, but the real winners are the wealthy. According to the Joint Committee on Taxation, more than 75 percent of the benefit goes to people making more than $200,000 a year, and nearly half goes to those making more than $1 million a year. Those with million-dollar incomes get a $17.8 billion benefit in 2018; by 2024, that number will rise to more than $30 billion.
Not everyone who is wealthy benefits, and that’s what the new regulations are meant to clarify. It will be difficult, for instance, for doctors to use loophole to save huge amounts of money on their taxes. But as far as anyone can tell, nothing will prevent the president from taking the deduction.
But we don’t know exactly how big Trump’s take is (Dan Alexander of Forbes estimated it at $11 million per year, but that’s only an estimate). And we have to keep repeating: The idea that the president would sign an enormous overhaul of the tax system but we would not be allowed to know exactly how much he personally benefited from it is utterly mad.
That’s hardly the only reason we need to see Trump’s tax returns. Since he became president, if anything, he has been revealed to be more corrupt than we initially understood. He continues to bring in money from deals involving questionable characters and foreign governments looking to influence him. We have no idea who his partners in those hundreds of pass-through companies are, and whether they might have compromising information on him. How on earth have we allowed him to get away with keeping his returns secret?
The answer to that question is the same answer we could give to a lot of equally urgent questions over the last year and a half: Republicans abandoned any shred of principle and backed him 100 percent; the news media lost interest; and Democrats had too many other things to worry about.
But if Democrats do take back the House in November, they can acquire and release Trump’s returns. The law allows for the tax-writing committee of either chamber to request the returns of any American from the IRS, and once they have it, they could distribute it to all the members of the chamber, after which it would almost certainly be released to the public. Democrats on the House Ways and Means Committee have introduced measures to do so, but the committee’s Republicans have voted them down each time.
So if this year’s election goes the way it looks like it will, we’ll finally get to see those returns. And then we’ll know what President Trump has been so desperate to hide.