Trump’s Quiet Giveaway to His Big Business Cronies
Partly—but only partly—this was the result of President Donald Trump’s 2017 tax cut, which lowered the top corporate tax rate from 35 percent to 21 percent and eliminated the corporate alternative minimum tax (or CAMT). But hardly any corporations had ever paid sticker price before. Even when the top rate was 35 percent, ITEP’s cohort of highly profitable large corporations really paid, on average, 22 percent, thanks to various tax loopholes. After the top rate dropped to 21 percent, this cohort really paid, on average, 12.8 percent.
To address such gold-plated tax evasion, President Joe Biden’s Inflation Reduction Act in 2022 reinstated CAMT. Under Biden’s version, any company whose average income exceeds $1 billion (only about 80 exceptionally rich corporations do so) must calculate tax liability in three stages. Stage One is to calculate based on the corporate rate of 21 percent, including whatever deductions or credits or other loopholes the IRS code permits. Stage Two is to calculate based on the CAMT rate of 15 percent, using the larger profit number (“adjusted financial statement income”) that gets reported to investors. Stage Three is to pay the larger of the two sums. At the time of CAMT’s passage the Joint Committee on Taxation calculated it would increase revenues by $222 billion over ten years.
But on November 8, The New York Times’s Jesse Drucker reported that the Trump administration is “rapidly gutting” CAMT through a series of proposed regulations and other administrative rulings by the Treasury department. In July, for example, the Internal Revenue Service issued a guidance regarding partnerships, called Notice 2528, that modified or withdrew previous regulations issued under Biden. The new guidance had the effect, the accounting firm KPMG advised clients, of “reducing the likelihood or amount of a CAMT liability.” In September, to cite another example, the IRS’s Notice 2546 and Notice 2549 modified or withdrew another set of previous regulations issued under Biden. The new guidances had the effect, the law firm Vedder Price advised clients, of allowing them to “disregard unrealized gains on cryptocurrency and other digital assets” when calculating CAMT liability. (You might have heard that our president moonlights as a crypto investor.)
