The release of President Donald Trump's tax returns from 2005 doesn't tell us much — except maybe why he's so keen on his tax reform plan. We only have the one year to go off of here, but take a look at the numbers. He paid $38 million in tax on about $150 million in income for a tax rate of about 25 percent. That's not bad — perhaps not great either — but some $31 million of his total bill would disappear under his tax plan. Yep, Trump's tax plan is a personal tax cut worth millions.
That $31 million was owed thanks to the Alternative Minimum Tax, which is exactly what's on the cutting block in the plan he put out during the campaign. The details are no longer up on his campaign website, but covering news reports from the time shows that one big part of the plan is to repeal the AMT. The tax's purpose is prevent households from writing off all the taxes they owe with losses and other deductions — essentially what Trump is so good at doing.
On his 2005 tax returns, Trump listed $103.2 million in losses, and according to Vox, that could be either from the same tax year or prior years (like the $916 million loss he reported in 1995, that he could use over the following 18 years). If he were just paying with the normal tax rates, that would reduce his taxable income (before deductions) to just under $50 million. And ultimately his tax bill would have been just about $7 million, $2 million of which was self-employment taxes, not income tax.
Analysis of Trump's 2005 1040 tax forms shows that if he succeeds in repealing the Alternative Minimum Tax, he could pay 86% less in taxes.— Joseph Robertson (@poet_economist) March 15, 2017
That's roughly a 4.5 percent tax rate. So it seems as though Trump's goal with his tax plan is to reduce his effective rate from 25 percent to under 5 percent. That sounds like a win-win for the president. Unfortunately it's a lose-lose for the country. Repealing the Alternative Minimum Tax would cost the country about $413 billion over the next decade, according to the Tax Policy Center. They also point to the biggest reductions going to the rich.
The Trumps paid an additional $31 million in the so-called “alternative minimum tax,” or AMT https://t.co/8pjORKxtg9— The Daily Beast (@thedailybeast) March 15, 2017
In a normal time, this would be enough to kill Trump's tax reform plan (which has larger cuts than the Bush tax cuts of 2001). The AMT is actually not even the only way that Trump would benefit. Given that he owns a corporation, he could also benefit from lower corporate taxes of 15 percent (down from 35 percent today). So no matter how you dice it, Trump and his friends are the ones most likely to benefit. The leak just makes that clearer.
So should the GOP move forward on a tax plan, make sure that the Alternative Minimum Tax is here to stay. Trump's 2005 tax return proves it to be necessary — otherwise he saves about $31 million a year, or even more if his income has risen since then. The president giving himself a tax break of this magnitude is not normal.