Donald Trump owns a lot of things.
In fact, The Trump Organization is the 48th
largest private corporation in the US.
but Trump doesn’t pay taxes like a big corporation.
He uses a special part of the tax code
that lets him bypass corporate taxes
that lets him pay only individual tax rates to his benefit.
And if he has his way with tax reform,
he could make himself even richer.
To understand what Trump wants to do,
let’s imagine you worked at a sandwich shop.
Since you’re just an employee, when you get paid
you have to pay the individual tax rate.
But if you’re the owner,
you would first pay corporate taxes
and then pay individual taxes.
These add up to about 32%
for the average business owner,
but there might be a way to pay even less.
Instead of being a traditional corporation
you could make your business a pass-through entity.
They’re special because instead of having to go through
two layers of taxation like a normal corporation,
They can go through just one, like an individual
and those businesses pay on average
19% in Federal taxes.
This was originally designed for small businesses,
but huge companies with less than 100 shareholders
structure themselves as pass-through businesses
like The Trump Organization.
Trump isn’t alone though.
Over the past 40 years, more and more corporate income
has been earned through pass-through businesses.
And even though pass-throughs were created
to help small businesses,
nearly 16% have more than 500 employees.
But Trump and House Republicans want to help
these businesses even more.
Trump’s proposal is to make the pass-through businesses
go through the corporate lane,
but then he want to lower the top corporate tax rate
from 35% to 15%.
Meanwhile, House Speaker Paul Ryan wants to make
a whole different lane for pass-through businesses
and tax them at the special low rate of 25%.
For the largest pass-throughs like The Trump Organization
this would mean a huge tax cut.
An analysis from the Tax Policy Center found
that the top one percent,
people who earn $700,000 a year or more,
would get 90% of the tax cuts under Ryan’s plan.
He and Trump believe that cutting taxes on these businesses
will raise wages for all workers.
But right now most pass-through income goes top 1%
and most mainstream economists don’t believe
there’s a strong link between corporate taxes and worker wages.
But what we do know is that if Republicans give
pass-through business a tax cut,
Trump will get a lot richer.