This is quite an historic day for us . . . We have a once-in-a-generation opportunity to do something really big,” Gary Cohn, the former president of Goldman Sachs, who now serves as President Trump's top economic adviser, told reporters at the White House on Wednesday. Trump's desire to reform the U.S. tax code is big—clearly—but the actual plan, which Cohn and Treasury Secretary Steven Mnuchin unveiled at the press conference, was nothing more than a sketch. And even as the details remain to be filled out, there's much reason to doubt the plan's viability in Congress. Still, Cohn and Mnuchin confirmed a couple of important things about this Administration's approach and intentions when it comes to taxes.
The first is that Trump wants to give himself a big tax break, and not just by slashing the tax rates that high earners and business owners face. Thanks to a leaked tax filing, one thing we know about Trump's tax history is that in 2005 he paid the federal government thirty-eight million dollars on income of about a hundred and fifty million dollars. But, because Trump had so many deductions, and exploited so many loopholes, his initial tax liability that year was much lower: $5.3 million. The only reason he ended up paying thirty-eight million is that he got caught by the Alternative Minimum Tax (A.M.T.)—a fallback mechanism that the Internal Revenue Service uses to prevent people like him from paying too little.
If Trump's plan goes into effect, the A.M.T. will be eliminated. Why? Mnuchin's explanation was that the tax code is too complex. “The A.M.T. is just another example of a … complicated set of rules,” he said. If Trump gets his way, he and other rich people won't have to worry about the A.M.T. With the help of their accountants, they will be able to minimize their tax exposures in the knowledge that the I.R.S. won't be able to undo their handiwork.
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