Thoughts On NY Times' Story Of Trump's Tax Avoidance

The New York Times' revelation that Donald Trump had incurred nearly a billion dollars in loss carry forward by 1995 and therefore was likely to have not paid any taxes for the subsequent 15 years blows two big holes in the Trump persona. First, it supports the impression that Trump does not pay any taxes which has only been reinforced by Trump's statement during the debate and by the lack of any kind of denial by the Trump campaign after this story broke. Even his surrogates are saying that the fact that he may have used the tax code to avoid paying taxes shows that he is smart and the only one capable of fixing the current tax laws because of his familiarity with them. Of course, nothing in Trump's proposed tax plan does anything to close this type of loophole and, in fact, would probably widen it by cutting business taxes to 15%. The second blow to the Trump "brand" is that this story destroys the idea that he is this hugely successful businessman, having managed to accumulate nearly a billion dollars in losses by 1995. He may be "smart" to have used the tax code to avoid paying taxes, but he obviously wasn't very savvy to have lost the billion dollars in the first place.

These revelations raise even more questions about Trump's taxes. In the mid-1990s, Trump's hotel and casino businesses were cratering and Trump only survived by getting his creditors to take significant haircuts. Any haircuts that Trump got from those creditors should count as income for Trump. But there are apparently aggressive accounting measures that may have allowed Trump to avoid reporting that income. The Times suggests that one avenue would be to use an apparent rule that the income would not have to be reported if Trump was insolvent. Josh Marshall also floats the idea that the debt could be "parked" in a separate entity that Trump would still owe money to, but that would never make a real effort to collect on that debt. For Trump, there would be no debt forgiveness that would be treated as income as the debt would still exist. It should also be noted that that it is possible that a portion of this huge loss carry forward may not have been allowed by tax authorities and the returns were revised. But all these questions do is get into the weeds of whether Trump's tax avoidance somehow crossed the line into tax evasion. And that is a question that will only be answered by the release of his returns which is clearly not going to happen at this point. They shouldn't, however, obscure the two main points that it shows he is not a good businessman and he has likely not paid any tax for a number of years.

The real outrage is clearly that the tax code is so tilted toward giving incredible advantages to real estate development, with many deductions not available to other individuals or businesses. And it is another clear example of what Bernie Sanders called "a corrupt political system in this country". But Democrats need to be careful of what they wish for because this could lead to a big push for "tax simplification". And for Republicans, tax simplification means a flat tax or certainly reducing the number of tax brackets from what we have currently. All that does is reduce taxes on the rich even more. Rather that attacking the tax code per se, Democrats need to focus on making sure the rich pay their fair share. That is entirely different from tax simplification.

I'll just make one note about the Times' story. On Friday, I had actually written a post berating the media and especially the New York Times for the lack of any real investigative reporting on Trump. Besides David Farenthold at the Washington Post and Newsweek, there has really been very little. So when I heard about the Times' story, my first impression was they had finally broken new ground. But it appears that this story was actually handed to them by a Trump insider who leaked the documents to the paper. The only real reporting that the Times did was to track down the accountant who signed the returns. Good work, yes, but the paper itself was not the driver of the story. And I see the front page of today's Times shows the paper's incomprehensible desire to show balance, if not anti-Hillary bias, with a rehash of Hillary's reactions to Bill Clinton's affairs.

Lastly, I will leave you with one thought and perhaps it is one that Hillary could use in the next debate. Donald Trump keeps on saying that America is constantly getting ripped off. And maybe that's the way he views the country, because he has spent his entire working life ripping us off, not paying taxes, avoiding military service, and not paying his bill or his creditors.