WASHINGTON, July 13, 2017 – In a new study, Americans for Tax Fairness estimates that President Trump could get a personal tax cut of between $1.4 million and $2.8 million a year if Republicans in Congress repeal a key provision of the Affordable Care Act (ACA). The range is due to the income ranges provided by Trump in his recent financial disclosure form.
The Senate is considering whether to keep or eliminate an ACA tax on the investment income of high-income individuals—the “Net Investment Income Tax” (NIIT)—as part of its ACA repeal bill. The House bill eliminates the NIIT, which helps pay for the ACA’s coverage expansions and makes health care more affordable for families.
“We’ve known all along that the Republican health care repeal plans would make massive cuts to Medicaid to pay for huge tax breaks for the wealthy, while more than 20 million Americans will lose access to health care,” said Frank Clemente, executive director of Americans for Tax Fairness. “Now we know how much President Trump stands to benefit personally if Republicans eliminate just one tax on the wealthy under the Affordable Care Act. Instead of giving himself a tax cut worth up to $2.8 million, the president should keep his campaign promises not to cut Medicaid and Medicare.”
The NIIT is a 3.8% tax levied only on individuals with net investment income above $200,000 (or couples jointly filing taxes with incomes above $250,000), and exclusively targets unearned, passive income such as rental income, interest, dividends and capital gains. The Joint Committee on Taxation estimates that the repeal of the NIIT would cost $172 billion over 10 years. Just 2.6% of taxpayers are affected by the NIIT, according to the Tax Policy Center.
ATF’s estimates, available here, and summarized in the table below, are based on Trump’s public financial disclosure form filed with the U.S. Office of Government ethics, which reports his assets and income for the period from January 2016 to April 2017.
According to the disclosure, which reports income amounts in ranges, Trump has annual income between $38 million and $74 million that would immediately be subject to the NIIT. Applying the 3.8% tax to these amounts, we estimate that Trump’s tax cut would be between $1.4 million and $2.8 million.
While Trump could save up to $2.8 million from the repeal of the NIIT in each of the next five years, assuming his income remains like that of the last 15 months he could get substantially larger annual tax cuts after then because of an unintended loophole in the NIIT. It exempts income from taxation for five years that is derived from a trade or business in which the taxpayer “materially participates.”
In addition to the tax cut Trump would get from repealing the NIIT, he would also get an additional tax cut from the repeal of the “Additional Medicare Tax” proposed in the House repeal bill. This is a 0.9% additional Medicare payroll tax on earned income above $200,000 ($250,000 for couples filing jointly) that has extended the solvency of the Medicare Hospital Insurance Trust Fund. The size of this tax cut is not able to be calculated because Trump’s financial disclosure forms do not make clear how much of his income would be subject to the tax.
Estimated Tax Cut for President Trump from Repeal of Net Investment Income Tax
|Low Estimate||High Estimate|
|Income Subject to the NIIT in the 15.5 Month Disclosure Period||$49,133,986||$95,684,400|
|Estimate of Annual NIIT Income||$38,039,215||$74,078,245|
|NIIT Tax Cut||$1,445,490||$2,814,973|
 IRS rules for “material participation” allow taxpayers who have actively participated in a trade or business for at least 5 of the 10 past tax years to exclude this business income for the purposes of the NIIT. Thus, much of Trump’s business income from golf courses, hotels, resorts, branding deals and other business activities would not be subject to the NIIT for the next 5 years.
Rental income is an exception, however—rents are classified as passive income unless the taxpayer is a “real estate professional.” Trump can no longer claim this status since he became president. For this reason, we include rental income in the calculation of his NIIT liability, along with his reported capital gains, dividends, interest and other investment income.
We have not calculated Trump’s potential tax savings for later years in which his business income is no longer exempt from the NIIT, which would be considerably larger.
Americans for Tax Fairness (ATF) is a diverse campaign of more than 425 national, state and local endorsing organizations united in support of a fair tax system that works for all Americans. It has come together based on the belief that the country needs comprehensive, progressive tax reform that results in greater revenue to meet our growing needs. This requires big corporations and the wealthy to pay their fair share in taxes, not to live by their own set of rules.