© 2024 Milwaukee Public Media is a service of UW-Milwaukee's College of Letters & Science
Play Live Radio
Next Up:
0:00 0:00
Available On Air Stations

Trump's Claim That GOP Tax Bill Would Hurt The Wealthy Continues To Be Challenged


President Trump has said over and over again that the tax overhaul now being debated by Congress would actually hurt him and other wealthy people, not help them.


PRESIDENT DONALD TRUMP: This is going to cost me a fortune, this thing. Believe me. Believe. This is not good for me. Me, it's not so - I have some very wealthy friends - not so happy with me. But that's OK.

MCEVERS: That's Trump yesterday in Missouri. But his claim is being challenged by a lot of people. They say Trump and other wealthy people actually stand to benefit from the Republican tax plan. NPR's Jim Zarroli is here to explain now. Hi, Jim.


MCEVERS: OK, so we all know President Trump has refused to release his tax returns. So how much do we really know about how this tax plan would affect him?

ZARROLI: He hasn't released his returns, but we do have other documents that tell us about the structure of his business. And we know he makes most of his money from various licensing deals. Somebody starts a business selling suits or ties or condos, and then they pay Trump for the use of his name.

Virtually all of these are run not as corporations but as something called pass-through businesses. The Trump Organization is basically a collection of about 500 pass-through businesses. It means Trump owns the business, and then he pays taxes personally on the profits he makes. It's the way a lot of small businesses are set up. But in Trump's case, he just owns a lot more of them.

MCEVERS: OK. So how are these pass-through businesses treated by the tax bills that are now being considered in Congress?

ZARROLI: Well, right now people who own pass-through businesses pay at the personal income tax rate, which can be as high as 39.6 percent. But the tax bills would bring that down a lot. Under the Senate bill, it would come down to more than 31 percent - under the House bill, to 25 percent. Trump actually talked about these reductions yesterday.


TRUMP: We'll also cut taxes for the millions of small businesses that file as individuals, and that's going to come out of the hopper.


TRUMP: It's getting there, and it's going to be better and better.

ZARROLI: So because he has pass-through businesses, he would also - Trump would also benefit from this. But Trump would benefit in another important way. Steve Rosenthal of the Tax Policy Center says the new bill would allow income made from rents, royalties and licensing fees to pay the new lower rate. And of course rents, royalties and licensing fees make up a really big part of President Trump's income. Instead of paying at that top rate, he will pay much less than that.

MCEVERS: Are there any other ways Trump would or would not benefit from the tax plan?

ZARROLI: Yes, there are. I mean, consider this. A few months ago, his 2005 tax return was leaked. Part of it was. It showed he made more than $150 million and paid $38 million in taxes. But he only paid that because of the alternative minimum tax which kicks in when people with high incomes try to take a lot of deductions. If it weren't for the alternative minimum tax, he would have paid a lot less, maybe as little as $5 million. Trump has called for eliminating the alternative minimum tax, and the bills that are now before Congress would do that.

MCEVERS: Thirty-three million dollars' difference - that's a lot of money.

ZARROLI: And in just one year.

MCEVERS: Yeah. Another change that Trump has called for is the elimination of the estate tax, which is a tax people pay on the money that they leave behind when they die. How could that affect Trump?

ZARROLI: Oh, it would absolutely benefit him, especially the House bill, which would eliminate the estate tax altogether. The Senate bill would benefit him a lot less because it keeps the tax in place, although it increases the amount of money that's exempted from the tax. So Trump would benefit. We don't really know how much because we really don't know the size of his fortune.

Trump has sometimes said, you know, he's worth as much as $10 billion. A lot of people think that's exaggerated. But you know, the federal estate tax typically amounts to about a sixth of the estate's value. So even if Trump is worth half or a quarter of what he says, I mean, we're still talking about a lot of money.

MCEVERS: NPR's Jim Zarroli, thank you so much.

ZARROLI: You're welcome.

MCEVERS: This afternoon at the White House, press secretary Sarah Huckabee Sanders was asked about how the tax bill would affect the president. Here's what she said.


SARAH HUCKABEE SANDERS: The president doesn't care whether or not he gets a tax cut or not. But his focus is on making sure that the middle class and middle-class families get those tax cuts, that we simplify the process, and that we bring companies back home so that they can invest here. Transcript provided by NPR, Copyright NPR.

Jim Zarroli is an NPR correspondent based in New York. He covers economics and business news.