Trump wants to repeal the tax that ensured he owed money in 2005
President Donald Trump has refused to release his tax returns. But late on Tuesday evening, reporter David Cay Johnston released a leaked copy of Trump’s income tax return in 2005 that showed he paid $38 million in taxes on more than $150 million in income.
The document throws a bit of cold water on the hypothesis that he had been able to avoid paying all income tax for two decades thanks to his ability to write down enormous business losses. But the documents also show that the only reason he paid income tax at all that year is thanks to a part of the tax code called the individual alternative minimum tax, or AMT.
And Trump wants to get rid of the AMT altogether.
The AMT dates back to 1969, when it became public that 155 people who made more than $200,000 paid no federal income tax three years prior. After public outcry, Congress enacted an additional minimum tax. That eventually transformed into the AMT.
Today, the AMT requires eligible taxpayers to calculate what they would owe in regular income tax and what they would owe under the AMT — and pay the higher amount. It’s meant to ensure that the wealthy can’t get out of owing federal income taxes by adding up deductions, such as Trump’s write-off of business losses.
In 2005, the AMT meant that Trump owed the government $31 million on an income of $150 million, paying an effective rate of 25 percent. That was already lower than the 35 percent statutory rate he faced on paper. But if the AMT weren’t in place, he would have paid an effective 5 percent rate.
In his most recent tax plan, Trump called for completely eliminating the AMT. According to the Tax Policy Center, doing so would cost the government $412.8 billion over the first decade and nearly another $700 billion over the next decade.
That would not just benefit someone like Trump, but many other wealthy Americans. More than 60 percent families who make between $500,000 and $1 million pay the AMT, compared to less than 2 percent of those making under $200,000. While it also falls heavily on families who have a large number of children and live in high-tax states — grounds for potential reform to better target it at those with the most money — getting rid of it altogether would be a costly giveaway to the rich.
Reposted from Think Progress.