Special Trump tax provision gives $17 billion break to millionaires, gov’t report finds

Trump tax bill

WASHINGTON, DC – DECEMBER 22: U.S. President Donald Trump holds up a copy of legislation he signed before before signing the tax reform bill into law in the Oval Office December 22, 2017 in Washington, DC. Trump praised Republican leaders in Congress for all their work on the biggest tax overhaul in decades. (Photo by […]

WASHINGTON (NBC News) — The wealthiest Americans will benefit the most from President Donald Trump’s tax deduction for owners of “pass-through” businesses, according to a congressional report released Monday.

The deduction, which ranges up to 20 percent, will shower $40.2 billion in tax breaks on owners of pass-throughs — largely businesses owned by an individual or a partnership, or those “S” corporations that kick income and losses to shareholders for tax purposes — in 2018, the Joint Committee on Taxation estimated. The provision was included in the larger overhaul of tax rates enacted in December.

In 2018, the lion’s share of the benefit — $17.4 billion, or 44.3 percent of the total — will go to roughly 200,000 Americans making $1 million or more who claim the pass-through deduction, the committee said. Another $3.6 billion, or 8.9 percent, will go to a similar number of taxpayers who earn $500,000 to $1 million.

By 2024, the tax deductions will amount to $60.3 billion, and those making $1 million or more will account for $31.6 billion (52.4 percent) of that.

The numbers don’t come as a shock to those who closely follow tax debates in Washington.

“The distribution of benefits from the pass-through deduction largely reflects the distribution of income from these businesses,” said Mark Mazur, director of the nonpartisan Tax Policy Center. “Pass-through income from partnerships, S-Corps and LLCs is highly concentrated toward the top of the income distribution.”

Trump and congressional Republicans created the new deduction to try to achieve relative parity between pass-through and “C” corporations, which benefit in a reduction of the corporate tax rate from 35 percent to 21 percent.

While the dollar-value of deductions skews toward the top, it’s not only the very wealthiest pass-through owners who will be able to pay less in taxes.

About 9.2 million taxpayers who make $100,000 to $500,000 this year will account for $15.7 billion in deductions, and roughly 9.7 million filers in that income range will get $19.6 billion in 2024, the Joint Committee on Taxation reports. Their counterparts who earn less than $100,000 are in line to share about $3 billion in 2018 and a little less than $4 billion in 2024.

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