Trump’s Quiet Giveaway to His Big Business Cronies
This is partly – but only partly – explained by President Donald Trump’s 2017 tax cut, which lowered the top corporate tax rate from 35% to 21% and eliminated the Corporate Alternative Minimum Tax (or CAMT). But virtually no company had ever paid full price before. Even when the top rate was 35 percent, ITEP’s cohort of highly profitable large companies actually paid, on average, 22 percent, thanks to various tax loopholes. After the top rate fell to 21 percent, this cohort actually paid an average of 12.8 percent.
To combat such gilded tax avoidance, President Joe Biden’s Inflation Reduction Act of 2022 reinstated CAMT. Under Biden’s version, any company with an average revenue of more than $1 billion (only about 80 exceptionally wealthy companies do so) must calculate the tax liability in three steps. The first step is to calculate based on the 21 percent business rate, including any deductions, credits or other loopholes allowed by the IRS code. The second step is to calculate based on the CAMT rate of 15 percent, using the highest profit figure (“adjusted financial statement income”) that is reported to investors. The third step is to pay the greater of the two amounts. At the time of adoption of the CAMT, the Joint Committee on Taxation calculated this would increase revenues by $222 billion over ten years.
But on November 8 THE New York TimesJesse Drucker of , reported that the Trump administration is “rapidly gutting” CAMT through a series of proposed regulations and other administrative decisions from the Treasury Department. In July, for example, the Internal Revenue Service issued a directive regarding partnerships, called Notice 2528, that modified or withdrew previous regulations issued under Biden. The new guidance had the effect, accounting firm KPMG advised clients, of “reducing the likelihood or amount of a CAMT liability”. In September, to cite another example, IRS Notices 2546 and 2549 modified or withdrew another set of prior regulations issued under Biden. The new guidelines had the effect, law firm Vedder Price advised, of allowing them to “disregard unrealized gains on cryptocurrencies and other digital assets” when calculating CAMT’s liability. (You may have heard that our president moonlights as a crypto investor.)
