Donald Trump's new Cabinet members could save millions of dollars from this tax benefit

Source: Getty Images
Source: Getty Images

Why, exactly, would Exxon Mobil Corp. CEO Rex Tillerson, along with the other executives picked for Cabinet positions, accept the offer?

After all, there are tons of downsides, as one Fortune writer pointed out, including painful and sometimes embarrassing public hearings during the confirmation process — and hard-to-fire underlings if you do get appointed.

But there are potential upsides, too. Beyond the satisfaction of serving your country, there's at least one other big benefit: a fat tax perk.

Originally designed to incentivize people from the private sector to work for the public sector, some who leave big business to work on Capitol Hill are allowed to defer 15% capital gains tax on all assets sold — necessary in order to avoid conflicts of interest — until after they return to the private sector. 

Donald Trump speaks in Grand Rapids, Michigan, during his victory tour of the country.
Source: 
Drew Angerer/Getty Images

"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," wrote Senators Sheldon Whitehouse (D-R.I.), Elizabeth Warren (D-Mass.) and Tammy Baldwin (D-Wisc.), who are trying to limit these benefits in anticipation of their exploitation, in a press release Thursday.

The provision in question can pay off enormously because you are converting high-risk assets — like stock in your company, which may or may not be in good financial shape — into low-risk assets, like government bonds. And you're getting what is effectively an interest-free loan on your tax bill, New York University tax law professor Lily Batchelder told Vice.

"The ability to defer paying tax on capital gains is a huge tax benefit," she said.

Chairman and CEO of Exxon Mobil Rex Tillerson, who has been nominated by Trump to be the next Secretary of State
Source: 
Ben Stanstall/Getty Images

"It's similar to the benefit we give contributions to 401(k)s," Batchelder added. "Like 401(k)s, it means you don't have to pay tax on income when you receive it, but only when you withdraw the funds from the new investment, potentially decades in the future. But unlike 401(k)s, there is no limit on how much capital gains can be deferred in this case."

That is why Senators Whitehouse, Warren and Baldwin seek to cap the benefit to apply to a maximum of $1 million in gains.

Even without a deferral, the 15% tax on capital gains is already low compared to the average American federal income tax rate of 21%.

As the combined wealth of Trump's Cabinet nominees overtakes $15 billion, that capital gains tax deferral benefit for appointees could amount to a pretty penny.

How likely are you to make Mic your go-to news source?

Natasha Noman

Natasha is a News Staff Writer covering global affairs. She previously reported on regional affairs from Pakistan. Natasha is based in New York and can be reached at natasha@mic.com.

MORE FROM

Here's the secret to hitting "pause" on your debt

Get rid of debt more easily by getting a 0% balance transfer credit card, trying out new financial management apps, and turning to traditional debt consolidation tactics.

These are the telltale signs your student loan "relief" company is a scam

Student debt relief or loan servicing companies may sometimes have shady business records. Here's how to tell if a firm is real — or a scam or fraud.

5 classes you've never heard of — but that can boost your pay in the future

To earn high pay, these are the best classes to take, as traditional industries face existential crises and new lucrative fields of study emerge.

Why your health care costs could rise under the Senate GOP bill

How the Senate healthcare bill affects you: It could increase out-of-pocket costs, deductibles and premiums for consumers, and cut people from Medicaid, while lowering plan quality.

Tips that pay off: These 5 bits of career advice will get you a job you actually love

It doesn't take much to go from novice to career genius. These 5 easy steps will snag you your dream job.

7 unconscious mistakes that are ruining your job hunt

Sometimes the best career advice is to get out of your own way — and pay better attention to the unconscious mistakes you're making while communicating.

Here's the secret to hitting "pause" on your debt

Get rid of debt more easily by getting a 0% balance transfer credit card, trying out new financial management apps, and turning to traditional debt consolidation tactics.

These are the telltale signs your student loan "relief" company is a scam

Student debt relief or loan servicing companies may sometimes have shady business records. Here's how to tell if a firm is real — or a scam or fraud.

5 classes you've never heard of — but that can boost your pay in the future

To earn high pay, these are the best classes to take, as traditional industries face existential crises and new lucrative fields of study emerge.

Why your health care costs could rise under the Senate GOP bill

How the Senate healthcare bill affects you: It could increase out-of-pocket costs, deductibles and premiums for consumers, and cut people from Medicaid, while lowering plan quality.

Tips that pay off: These 5 bits of career advice will get you a job you actually love

It doesn't take much to go from novice to career genius. These 5 easy steps will snag you your dream job.

7 unconscious mistakes that are ruining your job hunt

Sometimes the best career advice is to get out of your own way — and pay better attention to the unconscious mistakes you're making while communicating.