What tax tricks doesn’t Trump want us to see?

Cecil Whig - - OPINION - Dana Mil­bank

— A gen­er­a­tion af­ter Ron­ald Rea­gan de­nounced the “wel­fare queen,” the Grand Old Party is ev­i­dently on the verge of nom­i­nat­ing its first wel­fare king.

Four years ago last week, the party’s 2012 pres­i­den­tial nom­i­nee, Mitt Rom­ney, fa­mously wrote off the 47 per­cent of Amer­i­cans who don’t pay fed­eral in­come taxes. Rom­ney, se­cretly recorded at a fundraiser, said the 47 per­cent “who are de­pen­dent upon gov­ern­ment” won’t vote for him be­cause “I’ll never con­vince them that they should take per­sonal re­spon­si­bil­ity and care for their lives.”

Now, just one pres­i­den­tial cy­cle later, Repub­li­cans have set­tled on a pre­sump­tive nom­i­nee who is him­self among the 47 per­cent of non-tax­pay­ers. Trump has been re­fus­ing to re­lease his tax re­turns, and we have a pretty good idea why: He has been feed­ing at the pub­lic trough.

The Wash­ing­ton Post’s Drew Har­well re­ported that, for at least two years in the late 1970s (the last time Trump’s tax in­for­ma­tion was made pub­lic), Trump paid no fed­eral in­come taxes. Sev­eral tax ex­perts I spoke with said it’s en­tirely pos­si­ble that Trump has con­tin­ued to re­port neg­a­tive in­come — and there­fore not pay taxes — be­cause of loop­holes and du­bi­ous de­duc­tions that ben­e­fit pow­er­ful real es­tate in­ter­ests. They say it’s likely that what­ever taxes he does pay would be at a rate lower than the av­er­age worker pays.

That’s typ­i­cal for Trump’s line of work. Be­cause of de­pre­ci­a­tion, the de­ductibil­ity of in­ter­est and other tax breaks, the ef­fec­tive tax rate on the real es­tate sec­tor is lower than most in­dus­tries, and in some cases neg­a­tive.

There is no shame in be­ing on pub­lic as­sis­tance. The earned-in­come tax credit, which sub­si­dizes low-in­come work­ers and has helped mil­lions out of poverty, is the main rea­son for the 47 per­cent (though they still have state, pay­roll and other taxes). But the cor­po­rate wel­fare Trump re­ceives is noth­ing to be proud of — not least be­cause Trump has claimed to rep­re­sent the Amer­i­can worker and has con­demned cor­po­rate ex­ec­u­tives who “make a for­tune” but “pay no tax.”

In­vestors such as Trump can write off de­pre­ci­a­tion of in­vest­ment prop­er­ties even if those prop­er­ties ac­tu­ally in­crease in value, and be­cause most real es­tate de­vel­op­ment is fi­nanced with debt, they can deduct the in­ter­est. In­stead of sell­ing build­ings, they can in­cor­po­rate them and make “like kind” ex­changes that de­fer cap­i­tal-gains taxes in­def­i­nitely.

WASH­ING­TON

Trump, de­pend­ing on how he struc­tures his taxes, may also be avoid­ing taxes by amor­tiz­ing his name as an in­tan­gi­ble as­set. And, be­cause his brand is his main as­set and his busi­ness in­ter­ests are far flung, he could ar­gue that vir­tu­ally all of his ex­penses are busi­ness re­lated, and there­fore de­ductible.

“I’d be shocked if he isn’t pretty much writ­ing off his whole life,” says Bob McIn­tyre, head of Cit­i­zens for Tax Jus­tice. “When you can write off your in­come and write off your con­sump­tion, you’re in a Leona Helm­s­ley sit­u­a­tion.” The late Helm­s­ley, who also had a real es­tate for­tune, is re­mem­bered for ob­serv­ing that “only the lit­tle peo­ple pay taxes.”

Trump, who would be the first pres­i­den­tial nom­i­nee in 40 years not to re­lease his re­turns, says he’s re­fus­ing be­cause he’s be­ing au­dited. But an au­dit doesn’t prevent him from re­leas­ing re­turns, and he won’t re­lease re­turns from years not un­der au­dit, ei­ther. “It’s not be­cause he’s be­ing au­dited,” said Rober­ton Wil­liams of the Ur­ban-Brook­ings Tax Pol­icy Cen­ter. “My sense is he’s got some­thing in those tax re­turns that doesn’t look good.”

He may have less in­come than be­lieved, po­ten­tially un­der­min­ing his stand­ing as a good busi­ness­man. He may be avoid­ing taxes by shift­ing prof­its over­seas — a prac­tice he de­nounces. But what­ever other rea­sons he has, there’s a good chance that his re­turns would show that he pays a lower tax rate than the typ­i­cal work­ing Amer­i­can.

The mid­dle 20 per­cent of Amer­i­cans pay about 14 per­cent of their in­come in all fed­eral taxes. To them, Trump’s zero-per­cent rate could be a cause of some re­sent­ment.

The typ­i­cal wage slave can’t do­nate his golf course for a con­ser­va­tion ease­ment, or take a low salary so that his in­come is taxed at the cap­i­tal­gains rate of 15 per­cent rather than the reg­u­lar rate of 39 per­cent. The av­er­age worker can’t skirt rules on loss lim­i­ta­tion by ar­gu­ing that he’s a ma­te­rial par­tic­i­pant and not a pas­sive in­vestor, or use “flow-throughs” to con­vert or­di­nary in­come into cap­i­tal gains. “Real es­tate is no­to­ri­ous for hav­ing a lot of dif­fer­ent de­duc­tions,” said Steven Rosen­thal, a long­time tax lawyer now with Ur­ban-Brook­ings.

The only lim­i­ta­tion Trump has faced is how cre­ative and ag­gres­sive he wants to be — a likely ex­pla­na­tion for his wish to keep his re­turns hid­den.

Dana Mil­bank is a syn­di­cated colum­nist. Con­tact him at danamil­bank@ wash­post.com.

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