One of the biggest beneficiaries of the massive, slapdash tax bill that President Trump and Republican lawmakers celebrated at the White House on Wednesday will be, wait for it . . . President Trump. What a coincidence!
The rest of Trump's wealthy family will benefit lavishly as well, including his son-in-law and all-purpose adviser, Jared Kushner. And, of course, it's not a coincidence at all. The chance that this president would preside over a revision of the tax code without lining his own pockets was zero. Anyone who believed Trump's claim that the tax bill would "cost me a fortune" hasn't been paying attention.
It is not possible to calculate precisely how much money the president will save, because he — unlike all other recent presidents — refuses to release his tax returns. But the figure is surely in the millions, assuming Trump is anywhere near as wealthy as he claims. His extended clan will have plenty of liquidity for Donald Jr. and Eric to jet off to Africa and kill more leopards and water buffaloes; for Jared and Ivanka to disappear on ski trips whenever they need to claim deniability regarding the latest administration outrage; and for the president himself to consume as many Big Macs, Filet-o-Fishes and chocolate shakes as his constitution can bear.
Trump says he is worth $10 billion; Forbes estimates his wealth at $3 billion, and some analysts think the true figure is lower. Any way you look at it, however, he's a wealthy man — and the tax bill, which awaits only Trump's signature to become law, is designed to make the very rich even richer.
Like all 1-percenters, Trump will benefit from the lowering of the top tax rate from 39.6 percent to 37 percent. But that's just for starters. As is always the case with the tax code, the devil is in the details.
Trump conducts his business affairs through hundreds of "pass-through" companies whose income is taxed at the personal rate, not the corporate rate. The House wanted to dramatically slash the pass-through rate across the board, but the Senate initially balked. At the last minute, however, the Senate wrote into the final bill a 20 percent deduction for pass-through income. If a taxpayer had, say, $100 million in pass-through earnings, he or she would be taxed on only $80 million; the rest would be tax-free.
At first, senators sought to limit this sweetheart deal to companies with large numbers of employees or high payrolls — unlike Trump's pass-through businesses, which are mostly paper entities. But the final legislation gives the full deduction, regardless of the number of employees, to pass-through companies that own a lot of depreciable property, such as commercial real estate. Which just so happens to be the president's livelihood.
It would be hard to craft a measure more tailor-made to enrich Trump and his family. If he wanted to avoid even the appearance of corruption, of course, Trump could decline to take this tax break or donate an equivalent amount to the treasury. Somehow I doubt either of those things will happen.
Trump also gets to continue using a frequently abused tax loophole called a "like-kind exchange." Usually, if you sell a piece of property at a profit, that profit is considered income and is taxed. Creative accountants and tax lawyers came up with ways to structure sales so that they technically qualified as trades, meaning that as far as the IRS was concerned, there was no income to tax. This practice is now ending for all types of property — except real estate. Another coincidence, I'm sure.
Oh, and most businesses will be negatively affected by a measure capping the amount of interest expenses they can deduct — except real estate investors and hotel operators, which are explicitly exempted. If this were a movie, lobbyists and lawmakers would have hammered out this last provision in a back room at the Trump International Hotel.
On the flip side, Trump's ability to deduct the state and local taxes he pays in New York would be drastically limited. But that is nothing compared to the likely upside.
Join me in a thought experiment. Imagine that the legislature of some other country — Brazil, say, or Mozambique, or Thailand — decided to rewrite the tax code, with no public hearings or expert testimony, in a way that benefited the rich overall, with maximum financial gain for businesses like that of the sitting head of government. What would you say?
I'm pretty sure you'd use the word corruption. And you would be right.
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