President Trump would like to do two somewhat contradictory things at the same time. He would like to argue on behalf of his party’s tax proposal, and would also like to not share the details of his own tax returns. That’s led to his regularly claiming that the tax proposal wouldn’t benefit him personally without offering any proof that what he is saying is true. Critics have chosen not to take him at his word.
So on Tuesday, Trump upped the ante. In a phone call with Democratic senators who he hoped might back the Republican bill, Trump claimed that he’d had his own accountants look at the tax bill and that they’d determined that he’d be a “big loser” if it went into effect.
“The deal is so bad for rich people, I had to throw in the estate tax just to give them something,” Trump argued, according to people who heard the call and who spoke with The Washington Post’s Mike DeBonis and Ed O’Keefe.
To answer that question, we turned to tax attorney Steven Goldburd, partner at Goldburd McCone in New York. We asked Goldburd to make the case for how Trump might actually lose out from the provisions of his tax proposal.
Recognizing that his analysis was limited by a lack of access to Trump’s actual filings, Goldburd came up with two ways in which Trump might lose out. Or at least, might not win.
Trump is in the service industry, not real estate
A viral thread on Twitter this week by the Center for American Progress’s Seth Hanlon explained all of the ways in which the tax proposal seemed specifically designed to aid people who owned real estate in New York City.
But what if that’s not really the bulk of Trump’s business?
At this point, Trump’s external income comes in the form of a trust, called the Donald J. Trump Revocable Trust. Trump himself has dissolved or stepped away from most of the business relationships of which he was once a part; the trust is his existing connection to the Trump Organization. We know that the Trump Organization works in real estate and in branding. But those two things blend together more than most people might realize.
For example, consider 40 Wall Street, a building in Lower Manhattan. Trump’s interest in the building involves at least three different corporations, including three limited-liability corporations. The structure of those corporations looks like this, according to Trump’s most recent financial disclosure.
40 Wall Development Associates owns 100 percent of 40 Wall Street Member Corp. and 40 Wall Street Commercial LLC. 40 Wall Street LLC is owned by 40 Wall Development Associates and, with a 0.1 percent stake, 40 Wall Street Member Corp. A similarly small stake of 40 Wall Development Associates is owned by Parc Consulting Inc. The rest is owned by the Trump trust.
But none of those entities owns the actual building. As Bloomberg reported last year, 40 Wall Street is just managed by Trump’s company — as are a number of other buildings around the world that bear the Trump name. Other buildings have no more relationship with Trump than the name itself.
If most of Trump’s business operates in a similar way, Goldburd said, that means that he’s not in the real estate industry — he’s in the service industry.
“If he is in the services industry, like lawyers and accountants, then just like any other service industry he will not get the tax cut,” Goldburd said, since it’s owner-operators who benefit from the proposed tax plan. Those owner-operators would see their taxes cut substantially, but a businessman whose work mirrors that of the Trump Organization might not.
“He may not be a loser per se, in that his taxes are going to go up,” Goldburd said, “but he definitely is not getting the benefits of this structure in that, if he is in the service business — managing and marketing — then his tax will stay exactly as it is now.”
If Trump does, in some way, own real estate, he may see benefits from that ownership. But if most of his business is in management of that property, he won’t.
The repeal of the estate tax means he’s wasted thousands of dollars
There’s one obvious way in which Trump doesn’t benefit from a repeal of the estate tax: It reduces the tax load on those who inherit his estate, which isn’t him since by the time that happens he will necessarily be dead.
But there’s another way it doesn’t help him.
“Billionaires don’t need the repeal of the estate tax. Billionaires are way past that,” Goldburd said. By this point, people like Trump have structured their assets in such a way that they can avoid paying estate taxes on what they hold. Those who pay it, he said, are those at the lower end of the wealth spectrum, say, those who own a building or two in Manhattan. They’re not insulated from paying the tax in the way that someone with Trump’s net worth would be.
“It probably hurts him because he’s already planned and paid so much in legal fees to make sure that his estate in the future is taken care of that the repeal of the estate tax doesn’t help him either,” Goldburd said. “He probably paid thousands upon thousands of dollars in legal fees to make sure that his estate is taken care of based on the estate tax structure that we had before.”
In that sense, then — wasted money — Trump comes out behind.
Bear in mind that Goldburd is taking something of a Devil’s Advocate position, trying to reverse-engineer ways in which Trump may not actually benefit as much from the tax plan as it would seem at the outset. Without seeing Trump’s tax returns, of course, it’s very difficult to say whether these assumptions are valid — or whether there may be other reasons that Trump would see a huge benefit from the tax proposal. (We know, for example, that in 2005, Trump paid $31 million in alternative minimum tax, which the Republican plan would eliminate. But in other years, he hasn’t paid a dime of AMT — and, Goldburd notes, Trump would no longer get to claim deductions from paying his state taxes.)
We do know that Trump, in nearly the same breath as claiming he’s a “big loser” from the tax bill, then made an untrue claim about how the benefits of the plan are distributed.
“The deal is so bad for rich people, I had to throw in the estate tax just to give them something,” Trump said, which is not true in multiple ways (as well as undercutting his recurring claim that it’s family farms that he’s hoping to protect with the estate tax elimination). If Trump’s being misleading on the overall effects of the plan for the wealthy, we’d be justified in being skeptical about his claims regarding how it affects him.