If you want to cut to the chase and just read this article over at Jacobin, I encourage you to do so.
I’m not super knowledgeable about New York City taxes and real estate, but I’m fairly familiar with the tricks that are described in the article. They’re nothing new – it’s how the wealthy and powerful game the system (a system which is: designed to be gamed*) to make lots of money by looting the public coffers with the assistance of insider friends that are in on the take, and then avoid paying taxes on it.
George W. Bush did something similar with his purchase of a part ownership stake in the Texas Rangers, as 
well as investing in some land that – just miraculously happened to be where the Rangers’ stadium was going to be built – then, after the Rangers had appreciated considerably in value, he flipped the whole thing and pocketed a cool $15 million. It’s just … how it’s done. Hillary’s attempt (known now as “whitewater”) didn’t work out for her but she made up for it since then. Bush, like Trump, got his money through hard work: he inherited it. So did Romney. It’s just … how it’s done.
Trump inherited a small amount of money from his dad – and about $40million worth of real estate and other stuff that was arranged so that he could use it as collateral to get bigger loans (they’ll lend you a lot if you can put up a $20million hotel as collateral!) The $1million or whatever the cash amount was: that was spending money.
Trump’s just epic egregious about how he works the system, because of how real estate works in some corrupt cities. Here’s how you do it: you set up a consortium to buy a piece of property, then you tell the city you’ll develop it into something Yuge and get a tax break. The politicians usually don’t even ask the electorate; these decisions just sort of happen. So, you get Trump buying a broken down landmark hotel and getting a 40 year state tax exemption in return for renovating it – and using the profits to pay down any debt incurred on the renovation. If you own a $10million property you’d expect to pay about $250,000 in state taxes on it – so with soaring New York City real estate taxes the state’s 40-year gift to Trump is probably going to be worth about $50million. What did you want, taxpayers, education? Roads? No, you got a hotel.
This is basically the same scam that pro sports team owners play all the time: they get the city politicians (doubtlessly fragrantly greased) to give the team a huge tax-break for developing a piece of land on the premise that it’ll “bring lots of money to the community.” Mostly, it’ll bring: parking lots, traffic jams, and police overtime. Then the team owners wind up with a nice new stadium that they don’t have to pay property taxes on, and they probably own all the developable properties they could scoop up nearby. The team with the nice new stadium is worth a whole lot more, and the stadium is worth a whole lot, too, and when the team owners want to buy a private island somewhere, they flip it. Trump has done this over and over again – except not with stadia and football teams: he rolls hotels, casinos, golf courses, pretty much anything he can get the corrupt bosses of the city to give him to develop, then pay him to develop it, and he pockets any profits. What did you want, taxpayers, 
education? Roads? No, you got baseball.
These real estate deals are structured so that they are a guaranteed win for the investor because the taxpayers are the ones that subsidize it and the investors get to keep any value that they can accrue when they finally flip it. If you’re ever talking to a capitalist and they tell you about how they earned all that money by taking all that risk: ask them “what risk?” while you curbstomp them.
This is one of the perplexing things about Trump: he claims to be worth billions, but it’s hard to figure out. Unlike someone like Mitt Romney who just owns shell corporations, or Hillary Clinton who is part-owner of a foundation (which is basically: a shell corporation) Trump’s wealth is tied up in assets. Sure, he’s worth loads of millions of dollars, but that’s spending money: his main wealth is tax-sheltered in real estate. It’s all unrealized profit. Because of the US’ cleverly-designed tax structures he probably wouldn’t owe any taxes on anything unless he liquidates it and doesn’t immediately flip it over into something else.** Trump swims in a sea of red ink because that allows him to be very very rich without actually having a whole lot of money that anyone can touch. I suspect that nobody goes after his taxes because they know how he’s set up, and trying to wade through what he actually owes tax on would be like marching to Moscow on foot, in the winter … from Las Vegas.
Trump’s probably sitting around with almost no assets at all: he’s living in a really tacky penthouse apartment that his company lets him use, he flies around in an airplane some other Trump company lets him use, he runs a campaign on stuff various Trump companies let him use – and he pays his own companies out of the millions that his campaign is collecting. You know why the Koch Brothers hate Trump so much? 1) He’s going to take their money and use it to pay himself 2) He’s going to expose some of the game that they’ve been quietly playing for their whole lives 3) He’s newer money than they are, and he’s as crass as a spitball fired at the Yale Debate Association. But mostly, it’s 1).
The reason Trump’s not putting out his tax returns is because he probably hasn’t
Trump filing a tax return: Zero?
paid a thing in taxes since the 70s. By which I mean: $0. Not “some small number” Zero.***
Why should he? Yahoo! doesn’t. Boeing doesn’t. Caterpillar doesn’t. etc. One of the clever things that the capitalists have done is set the tax system up so there are all kinds of loopholes that allow you to grow your wealth indefinitely as long as you don’t “realize” profits from it. In other words, if you bought a trainload of Berkshire Hathaway ‘A’ shares back when they were $10,000 apiece, and you haven’t sold them – lets say you have 100 shares: today that’s worth $21.3 million but you don’t owe any tax on them at all, until you sell them.****
Honestly, I think one of the reasons there isn’t more outcry about Trump’s financial shenanigans is because all the big shots in Washington are doing it too. Remember when there was a sniff of scandal about Hillary’s commodity trading, but it died down pretty quick? That’s because the trick that her financial consultant was using to make sure she won all those bets was the same trick that all the big shots in Washington were doing too. It’s bad business to “burn” such a useful technique for short-term political gain. All these bloody bastards are in this mess up to their necks.
So, Trump gets a pass. Meanwhile, he’s got a bunch of advisors that are all experienced players in the same game that he’s been playing. If he wins, Trump’s going to move from fleecing New York City and state to fleecing the entire country. It’ll be Yuge.
(* Designed by: the wealthy and powerful! It’s called “capitalism”!)
(** He’s already dodging capital gains taxes, and if he realizes any profit he’s doing it all at the long-term preferred rate. With the portfolio of assets Trump’s got, if he wants to buy a new island or a congressperson, he can sell something he’s had for a long time, which locks in the tax rate at a low fixed 15% percentage)
(*** Do you have any idea how bad the scam is? In 2012, Warren Buffet, who’s worth $64billion paid $7million on $40million in taxable income. The trick is “taxable income” – capitalists have arranged it so that pretty much nothing they have is taxable.)
(**** Traditionally, you pass that wealth on to your kids tax-free by establishing something like a Gates Foundation, a Clinton Foundation, a Kennedy Foundation – and endowing it with a bunch of those shares – they still haven’t been sold yet so the profit hasn’t been realized – then if the foundation is a non-profit, it can sell them and … keep it all. Then you make your frogspawn the managing director of the foundation and the foundation can pay them up to 10% of the total value of the f0undation, annually, as salary. Do the math!)
Jesus Fucke. Okay, I share your tiredness, and I feel queasy.
More reasons that the rich keep getting richer and the rest of us, if we are lucky, just get our bills paid. We are so screwed.
Sometimes it is so dispiriting to be an American…
Yeah. I am not proud of that, that’s for sure.
Look on the bright side, Americans are not alone with this problem. In Australia, the conservatives in charge love flogging off the electricity assets that properly belong to the people, to the highest bidder. Currently in the forefront is a shady billionaire from Hong Kong with a name like a cash register bell. Sensible profits aren’t what the billionaires crave, an ever increasing share of the total wealth of the nation is what they passionately desire. Paying reasonable amounts of tax does not figure in their plans.
Lofty@#4:
Sensible profits aren’t what the billionaires crave, an ever increasing share of the total wealth of the nation is what they passionately desire.
That’s what I was trying to get at in my Sunday Sermon about wealth (Epicurus) — the answer to the question, “is there ANY amount of wealth that is enough for you?” is “no.”
Are you proposing that taxes be levied on net worth rather than on income? That sounds like a sure way to make it impossible to save money (for retirement, buying a house, or whatever): any money saved would be guaranteed to shrink year after year, even without counting inflation. If you instead mean that unrealized capital gains should be taxed, then you end up with situations where someone buys a stock, pays a pile of income taxes as its value appreciates, then a market crash forces the owner to tell at a loss: the owner ends up paying a lot of taxes on money that s/he never had. There would be a lot of pressure across the entire economy for assets to hold constant values for long periods of time (so that people don’t risk losses after paying tax on unrealized capital gains) then jump suddenly (so that people can make real profits [which would then be taxed] when they sell). Any significant change (rise or fall) in an asset’s price would risk a massive sale frenzy. To balance this, capital loss would need to become a refundable tax credit. Taken together, this would just make the tax system even more complicated and prone to abuse.
Personally, I think that paying taxes only on the realized profits from the sale of assets is fine; the problem is that the tax rate on capital gains is so low. If there is to be an imbalance, dividends and capital gains should be taxed at a *higher* rate than earned income, though it would be simpler and largely equivalent to tax everything together at a rate that increases with total income. Without question, the various tax breaks available only to the extremely wealthy are also a major problem. I’m not sure how the rules currently work on inherited and transferred assets; my view is that any capital gains should be deemed to be realized and taxed appropriately on the part of the donor and then the whole value should be taxed as income on the part of the recipient.
WhereIsTheLoginButton@#6:
Are you proposing that taxes be levied on net worth rather than on income?
I don’t see anything in my posting that can be remotely considered to be prescriptive.
As you imply, this is complicated. It’d be kind of absurd to expect someone to whip out a blog post that neatly solves this difficult problem; I’m sure flattered that you’re looking to me.
The current system is so thoroughly undermined, I’d say it’s beyond repair. If I were to try to offer a proposal for fixing it, it’d almost certainly be in the context of a radical restructuring of wealth in our society – i.e.: something “wildly impractical” because the rulers of society would never allow it since it would eradicate their treasured concept of how “much they are worth.” That is a topic I’ve put some thought into; I’m not sure it’s interesting enough but I suppose if it was it’d be best as a separate posting so there’d be lots of room in the comment section for people to rip at it.
any money saved would be guaranteed to shrink year after year, even without counting inflation
That might not be a bad thing. It would force money into circulation, and it would require people to to continue contributing value to society, instead of just sitting back and enjoying the bentleys, champagne, and blow.
you end up with situations where someone buys a stock, pays a pile of income taxes as its value appreciates, then a market crash forces the owner to tell at a loss: the owner ends up paying a lot of taxes on money that s/he never had
The stock market is a gambler’s den; I’m not sure why society should guarantee people entirely positive outcomes. People seem comfortable with unlimited upside, why not balance that with unlimited downside?
I think that paying taxes only on the realized profits from the sale of assets is fine; the problem is that the tax rate on capital gains is so low
I absolutely agree there – to both. Paying taxes only on realized profits is OK, but the capital gains tax has been set extremely low in order to service the capitalists – who have tremendous influence on the laws. Most people don’t get all bent out of shape when the moneyed class give themselves a raise by jiggering the capital gains tax rates because most people don’t have enough investments to realize how much impact it has, when there’s a lot of money involved. Worse, most people don’t have enough money to invest, ride out a period where taxes are high, get a George Bush in office to lower the taxes, then re-balance their investments (i.e.: take chips off the table) The whole system is corrupt, we can talk about patching it until we’re purple in the face but it’s not plausible to un-corrupt it.
I’m not sure how the rules currently work on inherited and transferred assets; my view is that any capital gains should be deemed to be realized and taxed appropriately on the part of the donor and then the whole value should be taxed as income on the part of the recipient.
Well, that’s the art-form of the remainder trust, charitable trust, foundation, etc – as I described, you can game the system by not realizing your profits, and gifting the asset to a tax-sheltered organization, which then realizes the profits and pays you back.
Do some math with me: suppose I have a frogspawn I want to make rich upon my demise, without major tax consequences. So, I create the Ranum Foundation and give it my 100 shares of Berkshire Hathaway that I bought for $10,000/share back in the day. Now, they are worth $21 million. The foundation is a charity (natch!) so it doesn’t have to pay income taxes. So I give it the $1m worth of shares (I paid: $1m for them) that they turn around and sell for $21m. Then the foundation hires my frogspawn ex utero and makes them Managing Director and the foundation can pay frogspawn up to 10% of the endowment, annually, as a management fee. So frogspawn has a nice “job” that pays $210,000/year (and can probably live in the foundation’s real estate and drive the foundation’s car) – of course they pay taxes on that income, but in 5 years, frogspawn has gotten $1m in salary or they can let the endowment grow in which case they may be making 10% of an even larger number in a couple years. Either way, frogspawn never has to work a day in its life, having “earned” a cushy “retirement” by virtue of springing from my loins. Is that fair?
If profits were realized on transfer, then that would obliterate the whole scammy edifice of “estate planning” and charitable foundations. It’d probably also blow a hole through a lot of churches. I support those messages!
Ah yes, charities. There needs to be more oversight of organizations that claim tax-free status. For instance, a salary cap and a requirement that at least 75% of their annual expenditures go towards something recognizably charitable. A ban on donors or their close family receiving income from charities to which they contributed large sums of money would also be good.
WhereIsTheLoginButton@#8:
That’d be a good patch, but I think the whole system needs to be demolished and rebuilt with some corruption-proofing in its foundational principles.
Of course, we’d have to guillotine the rich, because it’d be “us or them”
Then you make your frogspawn the managing director of the foundation and the foundation can pay them up to 10% of the total value of the f0undation, annually, as salary. Do the math!)
The Clintons, last I checked the Clinton Foundation filings, are each paid $1 a year for their positions on the Clinton Foundation board. Yes, it could be worked for huge profits, many foundations and charities are run that way, they just chose not to.
lorn@#10:
Yeah, the Clintons appear to be being cool about the foundation. Although a trivial amount of googling indicates that Chelsea is one of the founders/directors, so when mom and dad die off she’ll tax-free assume control over a vast pile of money, and can change the rules as she sees fit. Apparently the Clinton Foundation employs nearly 2000 people, which is … a pretty sizeable group of consigliere. I wonder if her server guy is on the payroll.
The Clinton Foundation also (apparently) sometimes pays out money to some Delaware shell companies. It’s pretty easy to bury that in a big budget like theirs.
Hillary and Bill (particularly Bill) control Delaware shell companies. Bill gets a lot of his speaking and consulting payments to those; so he’s able to get around state taxes (at least) and is probably offshoring wealth as well. Bill collects his occasional $15m consulting gig money through the shell companies not the foundation
http://www.bloomberg.com/news/articles/2010-03-04/the-other-ron-burkle
It’s not like either of the Clintons, who left the White House “dead broke” need money. What they need is time and power; Hillary’s gonna get her gobble at that trough, but the great leveller will even all scores for them eventually.
This has some pretty good analysis of the Clintons’ financial dodges. I’m sure that what they are doing is scrupulously legal; but it’s cheating on taxes.
https://www.thenation.com/article/when-it-comes-to-taxes-donald-trump-and-hillary-clinton-have-one-thing-in-common/