The report by the New York Times based on an anonymous source who gave them three pages of the 1995 joint tax return filing by Donald and his then-wife Marla Maples is both revealing and puzzling. You can see the document there and the main item that the media has focused on is that they declare a loss of $916 million.
The reporters say that Trump would be able to off-set this massive loss against any and all future earnings for the next 18 years, thus enabling him to avoid having any taxable income even if he earned an average of $50 million each year over that period.
It turns out that people in the real estate business, thanks to their very powerful lobby, have managed to get legislation passed that gives them much greater freedom in offsetting losses in one year against income in other years than people in any other profession. NPR’s Scott Horsley explains.
MONTAGNE: So if you lose money one year, you can deduct it from your taxes in subsequent years. I mean, depending on who you are and how that money was lost.
HORSLEY: That’s right, Renee, within some limits. And the limits are especially flexible for people in the real estate business like Donald Trump. Now, if you were a doctor, for example, who happened to own a rental property on the side, and you lost money on the rental one year. You could only use that loss to offset income from the rental property. You couldn’t deduct it from the money you make practicing medicine.
But real estate professionals play by a different set of rules. So in theory, Trump could have used that massive $916 million loss to escape tax liability on all kinds of income, including the money he made starring on “The Apprentice” television program or licensing the Trump name to people who make neckties.
All of that is legal. You have to understand, the real estate lobby is a powerful force here in Washington. And so as a consequence, the tax code is quite generous to real estate professionals.
…Well, the tax code at the time allowed Trump to stretch out losses for up to 18 years. So even if he made, say, $50 million a year for almost two decades, he could have had no tax liability.
According to the tax form on the NYT website, these are personal tax returns for the state of New York, the city of New York, and one of its boroughs. But news reports keep referring to them as also for the states of New Jersey and Connecticut, and I don’t understand that. Can anyone explain?
Trump’s main defender Rudy Giuliani has been working overtime trying to spin away this tax issue. He claims that this massive loss is a sign that Trump is a tax genius and a brilliant businessman to be able to come back from such a loss. But he also made the odd claim that Trump was forced to take all the deductions that was available to him as part of his fiduciary duty to his investors and that he could have been sued by them if he failed to do so. I understand that argument for corporations. But as far as I can see, these are personal tax returns, not corporate ones. Surely no one can be sued by others if they pay more taxes than they need to? Can anyone explain?
Seth Meyers discusses Trump’s tax and other problems.
Jimmy Kimmel has produced a new ad for use by Trump with the message that all Trump’s failures will be why he will make a good president: He broke it so he can fix it
So, landowning aristocrats are still getting special perks?
Almost $1 billion dollars in losses in one year…and this guy is supposed to be the BEST business man?
As to which tax returns were involved, I would rely on what the original NY Times story says:
As to the fiduciary duty argument, you’re correct. It’s a nonsense argument when talking about his personal returns.
Real estate tax law is arranged so that you can decide when you want to realize profits or losses. So if you want to live a few years tax free you write down losses on a bunch of assets then subsequently turn them around into profitable (though it sounds like Trump sold them off and left others holding the bag) assets.
Trump is basically a ponzi scheme: take your first asset, declare it to be worth more than you paid for it, then leverage that to borrow against it, buy something else, do it again, etc. I am incredibly disappointed in the media’s horribly ignorant reporting about how Trump does this. It’s straightforward asset stripping and leveraging -- Enron-style, the only difference between Enron and Trump is that they cooked their books.
You can also, by using depreciation schedules, claim losses on buildings that are appreciating in value. In theory you would pay tax on the gain when the property is sold, but if you leave it in an estate to your heirs, the value resets to the value at death and the only tax due is the estate tax. Guess what the Republicans have in mind for the estate tax (death tax.)
Just another tax break for the wealthy.
This is a massively disingenuous thing to say. The only difference between ANYONE operating legally and Enron is that Enron operated illegally. That was rather the entire point.
A few years ago in the UK, massively successful standup comedian Jimmy Carr was “outed” as having paid something like 1% in income tax for a while, due to some entirely legal accountancy shenanigans. The Prime Minister of the time, David Cameron, astonishingly chose to make a public statement about a private citizen’s legal tax affairs, describing them as “morally wrong”. Apparently, he forgot that he was in charge, and could, if he wanted, arrange for such tax loopholes to be closed, if he wanted. Why would he not? Four years later, the Panama Papers leak showed Cameron similarly benefiting from tax loopholes after the death of his father. The press contacted Jimmy Carr for comment, but he declined, saying commenting on another individual’s private tax affairs would be “morally wrong”. Nice.
What I don’t understand here is why the ire is directed at Trump. So he’s avoiding paying tax -- legally. Is he President yet? Did he set up the laws the benefit him in this way? No. He didn’t make the rules. Who’s in charge? Let me google it… apparenly right now it’s some dude named “Obama”, and he’s been in charge now for nearly EIGHT YEARS. Surely the rules allowing this are his fault?
Oh no, you say, nasty old Trump set up this scheme way back, in 1995. OK, so back when he was President then? No. Who was in charge then? Let me google it… SHOCK! It says here that when he made this write off that has benefited him so powerfully, the President was someone called “Clinton”. Which, by a massive coincidence, is also the name of one of the candidates this year. Plus ça change, eh?
The proper target for anger if you’re annoyed about people legally avoiding tax is not the people avoiding the tax -- it’s the crooks who set the rules. And at BOTH ends of Trump’s scheme here there are eight years of a Democrat president. And people pretend that the USA has a two party system. I don’t buy it.
Democratic President, yes, but it’s Congress who makes the rules.
And unfortunately, the Republican Party has had a substantial majority in both houses of Congress continuously and without interruption since 1980, so you can’t blame the Democrats for anything.
(Warning: Post contains elevated levels of sarcasm.)
sonofrojblake:
If you’re concerned about the letter (rather than the spirit) of the law, I suppose so.
You don’t buy it? Which presidents hitherto have been neither Democrats nor Republicans, since 1900?
(I note you put all blame on those who allow the system to be gamed, and none on those who do game the system. But I basically said that already 😉 )
When it comes to taxes (and much else), the letter is all there is. You haven’t bothered to explain what this supposed “spirit” of the law says. “Pay your fair share”, perhaps? How are we supposed to know? How are we supposed to agree? Here’s a radical idea… we could write it down.
The entire body of tax law is there to spell out, in tiresome detail, what your fair share is. And if the answer, having applied those rules, is “zero”, blaming someone other than the rule setters is precisely what the rule setters would like you to do. I imagine it’s terribly satisfying in a virtue-signalling way for you to do so, and it accomplishes absolutely nothing. It’s like blaming soldiers for war.
And you seem to have comedically failed to understand what you’ve quoted there. When I said I don’t buy the idea that the US has a two party system, I thought it was obvious that I didn’t mean there were more than two. Rather, based on the evidence, I don’t buy that there are as many as two.
>>he’s avoiding paying tax – legally.
>I do not take that as a given.
Careful now. You’re skirting accusing him of tax fraud, and on what evidence? Whatever else you think of his history, one of the things he has a history of is slapping expensive lawsuits on people who do stuff like that.
>When he releases his complete tax returns for multiple years we can investigate that.
Isn’t that what the IRS is for? They are, after all, the experts. And they have his tax returns. That is in fact precisely the (spurious) excuse he’s using for not releasing them so that every Tom, Dick and Reginald can have a poke through them . Also, that’s an optimistic use of the word “when”.
sonofrojblake@#6:
This is a massively disingenuous thing to say. The only difference between ANYONE operating legally and Enron is that Enron operated illegally. That was rather the entire point.
Disingenuous? At worst you’ve accused me of a tautology. What’s illegal is illegal, well, duh.
Silliness aside, Enron was inflating the apparent value of its assets and leveraging them, which is basically Trump’s entire strategy. Since Enron was under certain reporting requirements and audit requirements that Trump isn’t, they had to get their auditor to accept their falsified data -- something Trump hasn’t had to do. Perhaps that will help clarify my comment.
What I don’t understand here is why the ire is directed at Trump. So he’s avoiding paying tax – legally.
What ire? Are you referring to my observation that the media have done a terrible job of reporting Trump’s finances? That’s what I said. Saying Trump is a ponzi scheme isn’t “ire” -- I was trying to explain that he’s inflating his worth by leveraging it, then ratcheting it forward and leveraging it again, etc. I’m not foaming at the mouth (i.e.: “ire”) and I am not even making a judgement about whether what Trump is doing is particularly illegal. If I’m offering legislative recommendations, that’s news to me.
Oh no, you say, nasty old Trump set up this scheme way back, in 1995. OK, so back when he was President then? No
Wait, are you putting words into my mouth, in the same comment where you accuse me of being disengenous? Show me where I said anything like what you’re claiming I said, and maybe we can talk about it.
And people pretend that the USA has a two party system. I don’t buy it.
I hope you’re not trying to imply that I’m one of those people. Because I’m quite critical of the fake two party system.
You sound like a reflexively defensive partisan hack, sonofrojblake -- is that your intent? If not, maybe you should be a bit more careful not to over-read things into what other people say, and then avoid accusing them of dishonesty.
A little wider context:
http://digbysblog.blogspot.com/2016/10/a-shocking-statistic.html
Trump has applied the advantages of The Big Lie to exploitative capitalism and created The Big Grift.
Another perspective:
“You know, in 1976, when Trump was just starting his career, he said he was worth about $200 million,” I said. “Most of that was from his father.”
“That just proves my point,” said the Trump supporter. “He turned that $200 million into four and a half billion. Brilliant man.“
“But if he had just put that $200 million into an index fund and reinvested the dividends, he’d be worth twelve billion today,” I said.
The Trump supporter went silent.
“And he got about $850 million in tax subsidies, just in New York alone,” I said.
More silence.
“He’s not a businessman,” I said. “He’s a con man. “Hope you enjoy your coffee.”
From: http://robertreich.org/post/150669464055
That does clarify your comment considerably, thanks. I hope it clarifies mine that hardly any of it was directed at you personally. For example, after a lengthy digression, I said “the ire”, rather than “your ire”, because I meant the general ire of the media and other commentators. I trust we can agree there’s ire out there. That and the rest was directed at any hypothetical reader, rather than specifically at you. Sorry if that was what you inferred, it wasn’t my intent.
You may note that I did not (and do not) take any issue whatever with your characterisation of Trump as a ponzi scheme. Spot on there.
sonofrojblake: @9:
I’m pretty sure the spirit ain’t that millionaires get to pay no tax.
Heh. Gotta blame one or the other, but can’t blame both. Gotcha.
But of course: “virtue-signalling” (!) is my schtick.
(And soldiers who take advantage of the fog of war to indulge their baser instincts are not at all to blame for so doing, nosiree!)
Fine. You want to believe the US has a one-party system (based on the evidence!), go right ahead.
And I’m very glad that countries are not run on the basis of what a few people are “pretty sure” the law is NOT. That would just be stupid.
Classic bit of dishonesty with the soldiers line, well done. I said “blaming soldiers for war”, and you responded as though I’d said “war crimes“. Are you trying to give the impression that you’re so dense that you don’t know the difference? Or are you relying on anyone who reads your answer being too dense to spot the dishonesty? Either way, it reflects rather poorly on you.
sonofrojblake:
I am a “few people”? Cool!
(Also, your dismissive attitude towards inclusiveness and democracy is duly noted no less than your tacit claim that you dispute that the spirit (aka intent) of the law is not to allow millionaires to pay no tax)
Well, yeah. Because without tax laws, there could be no legal tax avoidance.
(Is allegory beyond you?)
<snicker>
Yeah, those are the only two possibilities; either I’m dense, or I think everyone who reads me is dense.
(Because it could not be that your deontological attitude is flawed, could it? It’s all about the rules, not about their intent)
sonofrojblake, to be clear: if (say) the law allowed one to rape someone if they got home before midnight that day, you would not place any blame on such a rapist, but would only blame the lawmakers, right?
(After all, the rapist would have behaved lawfully!)
FIFY.
I don’t presume to guess the “spirit” of tax law. The intent is, or should be, to collect as much for the exchequer as possible. How that maximal take is achieved is the subject of judgement on the part of those who make the rules, and excessive taxing of the rich (especially in a world of globally mobile capital) will tend, beyond a certain level, to reduce the take, as rich people simply relocate their money to more favourable environments. Therefore certain “breaks” are necessary, and writing off losses against tax is one such break which, properly administrated, makes sense. And, under certain circumstances, that might mean that for a period, millionaires might “pay no tax” -- i.e. might not make any income in a particular year that attracts income tax. Note they can only do this by becoming poorer.
I’m not going to attempt a response to this. I’m just going to note it’s astounding obtuseness.
Halt. Comparing tax avoidance to rape? Really? Avoiding tax is not like violently assaulting someone. (Do I really need to spell this out?)
Avoiding tax is more like selling cigarettes. The law used to say I could sell cigs to 16 year olds. Would you blame me for doing so? The law now says I can only sell cigs to people over 18. Would you blame me for doing so? It’s a legal business transaction.
sonofrojblake:
So, your first sentence claims you presume (!) not to guess, but your second qualifies that assertion by indicating you are guessing.
(nice!)
Um, you just claimed that either it is or it should be; therefore you’re now engaging in speculation, given your ambivalence as to whether it the case.
Heh. So, you assert that it is obtuse to claim that without tax laws, there could be no legal tax.
I perfectly understand why you care not to even attempt a response disputing a tautology, since that would entail that legal tax avoidance is possible without tax laws.
There is no such comparison — what there is is an analogy to illustrate your principles.
But fine, let me rephrase — when the law allowed men to indulge in sexual congress with their wifes regardless of their wife’s consent*, do you hold those men entirely blameless, on the basis that it was only the lawmakers entirely to blame?
(*This is not hypothetical, but rather historical fact)
Really? Who is it that buys the tax you avoid?
(Your mastery of analogy is akin to your nouse about obtuseness)
That depends on whether I thought selling cigs to people over 18 was a bad thing to do.
(Do you imagine I have heretofore claimed that tax avoidance is a bad thing to do? If so, you are mistaken: what I claimed is that if any blame is to be attached to such activity, it is no less warranted towards those who do it than to those who made it lawful)
Avoiding tax is like selling cigarettes in that they both are, today, legal activities which are arguably morally questionable but equally arguably defensible on grounds of freedom of choice of individuals. It’s legal to buy and smoke cigs so it’s legal to sell them and the choice to sell, or buy, should be available to consenting adults. But it’s morally questionable to make money selling something to someone when you know for a fact it’s going to harm them/morally questionable to avoid tax knowing you’re taking money out of the budgets for schools/hospitals etc.
Avoiding tax is like committing rape in that… a certain specific limited definition of rape was legal once years ago? Is that your point? Beyond that, it seems a needlessly over-dramatic comparison and, just for bonus points, trivialises rape. Bravo.
Yes, legal yet morally questionable activities -- the state won’t hold you responsible for them, but individuals can and will do so. And if one is running for president people who do question the morality of said actions will point them out, point the moral or character implications of people who make that particular choice. For instance they would ask -- how do you expect the candidate to handle the finances of the country given the candidate’s record? Or they might ask -- what kind of priorities the candidate will apply in their decision making process as president? Who will benefit from their decisions?
Early in his campaign Trump said he wanted to ‘win’ for the country. If he makes such an effort to avoid paying the country and keep money in his own pockets why should I believe he will change these priorities?
And then the other question is that he only ever had those losses to declare because he *lost* at business. How will he be able to ‘win’ for the country if he doesn’t know how to ‘win’ at business?
anat: Again, it’s not a bug, it’s a feature. Here’s how I imagine a Trump voter might rationalise it (if they even think about it that deeply): Trump essentially makes money by borrowing a bucketload then not paying it back. It’s a little more complicated than that, but that’s it in a nutshell. When he’s got the nation’s purse-strings, one must assume that his strategy will be the same -- borrow bucketloads from China or the World Bank or whatever, then tell them they can whistle for it.
The average Trump voter probably likes the sound of that -- that’ll show ’em, eh? Those [insert Chinese racial stereotype] and those pencil-neck bureaucrats at the World Bank, ha ha!
It won’t end well. And the people it will end worst for will be the kind of people who are most likely to vote Trump.
sonofrojblake:
So much to unpack, but I’ll just note a couple of things.
1. No, I am not comparing avoiding tax with raping; what I’m doing is directly addressing your universal contention that, if something is not illegal, someone doing that something deserves no personal blame for doing it regardless of its moral implication. I deliberately chose an extreme example to highlight the implications of your stated position.
2. You both claim that it seems (to you) “a needlessly over-dramatic comparison” involving “a certain specific limited definition of rape”, whilst simultaneously claiming I am (not
“seems”, in this case) trivialising rape. Your hypocrisy is quite remarkable.
In passing, it’s still legal in many countries — it is not a historical footnote. Which means you are claiming to place no blame on anyone currently doing that within a jurisdiction which does not lawfully proscribe that activity.
Great. All your talk of rape is therefore irrelevant. Good to know.
sonofrojblake, you’ve now descended to quotemining. It avails you nothing.
The second clause of my sentence and its following sentence unambiguously and explicitly explains the relevance (you know, what you elided in order to persist in evading my actual point).
In the follow-up thematic post to this one, you wrote (where “the rules” was a mutually understood reference to tax laws):
Do you stand by that claim when the rules relate to marital rape, rather than to taxes?
(I predict you will evade the question, yet again, with the usual amount of prevarication and bluster)
No.
Because taxes and rape aren’t comparable things.
So you have two people who have used the same loopholes to avoid taxes. One of them avoided more taxes, the other one had the power to close those loopholes and refused. I think that when it comes to tax evasion, both candidates would be in a technical tie.
He exploited the system more, she helped create and maintain those exploits.
sonofrojblake:
But rules and rules are comparable things, and you were generalising about rules; specifically, you claimed following rules makes leaves one morally blameless, not just legally.
(Rules about taxes are in a special category, then? 🙂 )
[Like drawing blood from a stone, this is]
So, sonofrojblake: Do you dispute that your entire justification for holding Trump blameless for his tax avoidance (in contrast to tax evasion) is that he followed the rules?
(Morally blameless on that basis!)