Donald Trump, it seems, has never met a conflict of interest he couldn’t immediately embrace. The emolument clause? Not his problem. Hosting Richie Rich types at Mar-A-Lago? The club’s membership fee doubled shortly after Trump was elected president.
So it should come as no surprise to discover that Trump’s distaste for the alternative minimum tax (AMT), which his tax-reform package would eliminate, might well be more than a bit personal. According to a two-page excerpt from Trump’s 2005 taxes mailed anonymously to Pulitzer Prize–winning investigative reporter David Cay Johnston and published Tuesday by DCReport.org, Trump’s income that year was slightly more than $150 million. In turn, Trump paid about $38 million to the Internal Revenue Service.
Without the alternative minimum tax, Trump would have owed significantly less money to the feds—about $5 million on his earnings, and almost $2 million in self employment taxes. If you don’t count the latter sum, Trump would have been taxed at an effective rate of about 3 percent, putting him in a tax bracket that doesn’t exactly scream mildly affluent, never mind one befitting a man who claims to be worth $10 billion. As Johnston helpfully explained on MSNBC, “If we didn’t have the alternative minimum tax, he would have paid taxes at a lower rate than the poor who make less than $33,000 a year.”
Poor Donald! He was snagged by a tax designed to snag people just like him.
The alternative minimum tax originated in 1969, during the Richard Nixon administration. After a study was published showing 155 wealthy people earning more than $200,000 (about $1.3 million today when adjusted for inflation) paid no taxes at all thanks to a number of deductions and loopholes, Congress took action. The result? A minimum tax, a surcharge paid by wealthy filers. Legislation enacted in the late 1970s and early 1980s changed that to the alternative minimum tax as we now experience it.
But while the method for calculating federal tax brackets was indexed to inflation, the alternative minimum tax was not. Eventually, people who felt they were not wealthy were getting dinged by the AMT. According to the American Enterprise Institute, less than 1 percent of taxpayers got hit by the AMT in 2000, a number that tripled to 3 percent by 2008. Many other taxpayers would likely have been subjected to it, but Congress routinely passed temporary time-limited fixes, before finally indexing the AMT to inflation permanently in 2012. But that still didn’t make it popular. A lot more people than Congress originally intended pay the ATM, after all. The Tax Policy Center, a joint initiative of the Urban Institute and the Brookings Institution, estimates 4.8 million taxpayers will pay the AMT in 2017.