What Does Trump Mean When He Says He Will Take No Salary?
Despite Donald Trump’s campaign promise that he “won’t take even one dollar” of salary as President, the White House now says that the President is receiving his monthly paychecks and that he will donate his salary to charity at the end of the year. This raises a number of questions:
— The President is paid $400,000 in monthly installments. $400,000 divided by 12 months equals $33,333.33 per month. The President apparently receives his paycheck on the 20th day of the month, with his first paycheck on February 20. So by December 31, Trump will have received 11 paychecks totaling $366,666.63, not the full $400,000. Will he donate $400,000 nonetheless?
— Assuming that the answer is “no” and that the President’s charitable contribution is limited to the amount received by end of year, what about interest? If Trump immediately deposits each paycheck into an Ally savings account with a 1.00% annual percentage yield (compounded daily), then he will have approximately $368,294.45 on December 31, of which $1,627.82 represents interest income. Will he donate the interest to charity as well?
— How will taxes factor into the President’s charity calculus? The 3% haircut on itemized deductions (26 U.S.C. § 68, a.k.a. “the Pease provision”) means that Trump will still bear an income tax cost if he earns $366,666.63 and gives it away to charity, even if he can claim a charitable contribution deduction. Depending on how you stack Trump’s income from various sources, and assuming he is in the 39.6% tax bracket, the Pease provision means that including the $366,666.63 in income and then claiming a charitable contribution deduction for that amount will generate an additional $4,356 in income tax liability (i.e., $366,666.63 x 3% x 39.6%), as compared to a scenario in which Trump did not earn that income in the first place. If Trump wanted to minimize the cost of his “won’t take even one dollar” pledge, then perhaps he might say that he should at least be able to adjust the size of his charitable contribution so as to offset the effect of Pease. (This assumes that Trump’s adjusted gross income is high enough so that he doesn’t bump into the 50%-of-AGI limitation on charitable contribution deductions. Of course, since the President refuses to release his returns, we still don’t know what Trump’s AGI is or whether he is paying any income tax at all, and we don’t know what other charitable contributions he might be making.)
— The President might point out that he’ll pay $9,730.80 in Social Security taxes and $5,316.67 in Medicare taxes on his $366,666.63 of 2017 wages. So perhaps that’s a reason for him to donate less than $366,666.63. Plus, the Treasury is presumably withholding Social Security and Medicare taxes as well as some income taxes from Trump’s monthly paycheck, which should factor into the interest calculus above.
— Speaking of Medicare taxes: We still don’t know what will happen to the additional taxes imposed by the Affordable Care Act on high earners (the 0.9% surtax on wages, which sets in for joint filers at $250,000, and the 3.8% tax on net investment income, which hits joint filers with modified adjusted gross income over $250,000). The current House Republican plan leaves those taxes in place for 2017, with repeal taking effect in 2018. So maybe Trump should get some credit for the taxes he pays under the ACA?
— I should note that I’m using the joint filer figures in the previous paragraph on the assumption that Melania and Donald file jointly. It’s of course possible that she chooses to file separately so as to avoid being implicated in any tax fraud. I’m not accusing the President of tax fraud; I’m just noting that we don’t know anything about his income tax situation.
All of which is to say: It’s going to be very hard to assess whether Trump is living up to his campaign pledge unless we can see his returns. Sean Spicer’s say-so isn’t going to cut it. Figuring out whether Trump is or isn’t “tak[ing] even one dollar” requires a more comprehensive view of his financials than the press secretary is able to give us and than the President is willing to give us.
It’s also worth noting that in their first seven years in the White House, Barack and Michelle Obama donated an average of $155,767 to charity. That’s extraordinary generosity from a couple not nearly as wealthy as the White House’s current occupant, and their generosity didn’t require self-congratulations.
Finally, Trump’s press secretary suggested today that the President would “love . . . help” in figuring out where to donate the as-yet-undisclosed amount that the President will donate. The President might want to check out GiveWell’s list of top charities, including the Against Malaria Foundation and Evidence Action’s Deworm the World Initiative. Perhaps the President can use some of his personal largesse to offset the consequences of the foreign aid cuts he has promised, which are likely to hit global health initiatives especially hard.
Or perhaps he will buy another Tim Tebow helmet.
