The one glimpse we’ve had of Trump’s tax returns suggests he stands to benefit massively from the repeal of the AMT. In 2005, Trump’s income exceeded $150 million, but his regular tax liability was just $5.3 million — that’s barely a 3.5 percent tax rate.
But the AMT increased Trump’s tax liability that year by over $31 million. Had Trump’s tax plan been in effect in 2005, it would’ve saved him that $31 million.
Still, that’s chump change in comparison to the tax windfall he hopes to bestow upon himself by cutting the top tax rate on the bulk of his income by more than half, from nearly 40 percent to 15.
We’re not talking about the corporate tax rate here. Trump could reap a tidy personal benefit from slashing the corporate income tax too, but the far bigger prize in his plan is its treatment of income from businesses that don’t pay corporate taxes.
Under current law, the income of those businesses is taxed to their owners at individual income tax rates. Under Trump’s plan, income from those businesses would receive preferential tax treatment, with a maximum tax rate of 15 percent.
That would be the final act in turning our nation’s tax policy on its head.
In 1980, before Ronald Reagan’s election, the maximum rate on workers’ wages — earned income — was less than the maximum rate applicable to all other types of income except long-term capital gains.
Under Trump’s tax plan, the maximum tax rate workers pay, after accounting for employment taxes, will be higher than the rate applicable to any other type of income.