Wealthiest Americans poised to take advantage of loophole left by GOP tax plan
By Rebekah Entralgo April 23, 2108
Credit: Photo by Chip Somodevilla/Getty Images
The non-partisan Joint Committee on Taxation released a report Monday detailing the effects of the GOP tax bill, ahead of a Tuesday Senate hearing on the same subject.
The findings indicate that nearly 44 percent of the tax cuts for so-called pass-through businesses will go to tax filers making more than $1 million in 2018, while more than 90 percent of the cuts will go to those earning more than $100,000.
Credit: Joint Committee on Taxation
As ThinkProgress previously reported, even though Republicans repeatedly claimed their tax plan would provide cuts for small business owners, pass-through businesses are not small businesses in the mom-and-pop sense, but rather are entities like partnerships, S-corporations, and limited liability companies (LLCs).
The final version of the GOP tax bill transformed the pass-through tax break into a deduction against taxable income, effectively cutting the top rate on pass-through income down from 39.6 percent to 29.6 percent.
This provides top pass-through earners — such as hedge fund owners and lawyers — with an enormous loophole, allowing them to effectively re-characterize parts of their income to pay taxes at a rate 10 points lower than what they are currently paying.
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It’s not just business owners and lawyers with crafty accountants who stand to benefit from this loophole either: several members of Congress who helped craft the tax bill will benefit as well.
According to a report from the Center For American Progress Action Fund (ThinkProgress is an editorially independent news site housed at CAPAF), there are 15 Republicans from tax writing committees in Congress that can expect to receive an average tax windfall of $314,000 from the pass-through provision.
It should come as no surprise that President Donald Trump himself, along with many of his Cabinet members, are the owners of such pass-through businesses. The Trump Organization oversees at least 500 of them. As a result, Trump could get an annual tax cut worth $23 million, while one of his closest advisers and son-in-law, Jared Kushner, could see a cut of up to $17 million.
Average American workers, meanwhile, won’t be seeing much of a tax cut.
The non-partisan Tax Policy Center found that top 1 percent will get an average cut of $1,022,120, while the middle 20 percent will get an average cut of $420.
The public has appeared to catch on to the scam. A Monday Gallup poll found that a majority of Americans, from both sides of the aisle, aren’t sure if their taxes have gone up or down.