12.09.16

Baldwin, Whitehouse, Warren Introduce Bill to Limit Tax Windfalls for Billionaires in the Trump Administration

Legislation would curb little-known tax loophole that allows ultra-wealthy appointees to delay their tax bills

WASHINGTON, D.C. – Senators Tammy Baldwin (D-WI), Sheldon Whitehouse (D-RI) and Elizabeth Warren (D-MA) introduced legislation today to prevent President-elect Donald Trump’s enormously wealthy cabinet nominees – and possibly Trump himself – from ducking millions of dollars in taxes.  A little-known provision of the tax code currently allows executive branch and judicial appointees to defer paying taxes on profits from assets they sell to comply with ethics rules. The No Windfalls for Government Service Act would limit to $1 million the amount of capital gains that can be deferred under the program, stopping billionaires from reaping outsized tax write-offs.

“When billionaires move through the revolving door from the private sector to public service they should not be rewarded with tax loopholes,” said Senator Baldwin. “President-elect Trump has every right to fill his cabinet with billionaires and he has, but these wealthy insiders should not be allowed to dodge paying their fair share of taxes.”

“As Donald Trump prepares to nominate what could be the wealthiest cabinet in history, this bill would prevent billionaires from reaping enormous tax benefits from their new jobs,” said Senator Whitehouse.  “The ultra-wealthy do not need a financial incentive to enter public service.” 

“Not only is Donald Trump giving a gang of billionaires control of our government, he’s offering them a special tax break just for signing up,” said Senator Warren. “This bill would stop billionaires from getting yet another special favor from Donald Trump.”

Allowing government appointees to delay paying taxes can be a sensible policy to help middle-class individuals transition to government service.  However, as the Washington Post reported last week, this can be a lucrative benefit for ultra-wealthy appointees who can use it to rebalance their portfolios and save millions of dollars in taxes. 

Section 1043 of the tax code, added during the George H. W. Bush administration, allowed former Goldman Sachs CEO and George W. Bush Treasury Secretary Henry Paulson to avoid paying an estimated $200 million tax bill, according to The Economist.  So far, Donald Trump has selected several billionaires to helm federal agencies, including hedge fund manager and former Goldman Sachs executive Steven Mnuchin for Treasury Secretary, billionaire investor Wilbur Ross for Commerce Secretary, and Republican mega-donor Betsy DeVos for Education Secretary.  Historians expect the cabinet to be the wealthiest ever, and the Washington Post has noted that Mr. Ross alone is ten times wealthier than the entire first cabinet under George W. Bush in 2001.

The bill has been endorsed by Americans for Tax Fairness and Citizens for Responsibility and Ethics in Washington.