Trump re­turn shows sys­temic dis­par­ity

Daily Local News (West Chester, PA) - - FRONT PAGE - By Nicholas Ric­cardi and Anne D’In­no­cen­zio

DEN­VER >> The leak of some of Don­ald Trump’s tax re­turns high­lights enor­mous dis­par­i­ties in the tax code be­tween high-in­come busi­nesses and in­di­vid­u­als and every­one else that may have al­lowed the Repub­li­can pres­i­den­tial nom­i­nee to avoid pay­ing fed­eral in­come taxes for nearly 20 years.

Trump claimed more than $900 mil­lion in losses in 1995, enough to legally re­duce his tax bill to zero for as many as 18 years, the New York Times re­ported on Sun­day af­ter re­ceiv­ing three pages of what ap­peared to be Trump’s tax re­turns filed in three states that year. Trump has bro­ken with prece­dent and re­fused to re­lease his tax re­turns dur­ing his pres­i­den­tial cam­paign, mak­ing it im­pos­si­ble to fully as­sess his fi­nances and his­tory of tax pay­ments. But the 1995 loss likely low­ered his fu­ture pay­ments sig­nif­i­cantly or elim­i­nated them al­to­gether, be­cause pro­vi­sions in the tax code let busi­nesses deduct losses from fu­ture in­come, de­creas­ing the amount they

and their owners will owe to the fed­eral govern­ment in com­ing years.

Ver­mont Sen. Bernie San­ders told CNN on Sun­day that Trump’s taxes “are ex­actly why so many mil­lions of Amer­i­cans are frustrated, they are an­gry, they are dis­gusted at what they see is a cor­rupt po­lit­i­cal sys­tem in this coun­try.” Tax experts said the self-pro­claimed demo­cratic so­cial­ist may be onto some­thing.

“The tax code treats very rich peo­ple who own busi­nesses dif­fer­ently from the way it treats every­one else,” said Neil H. Buchanan, an econ­o­mist and tax law pro­fes­sor at George Wash­ing­ton Univer­sity, not­ing that peo­ple can’t deduct losses on their homes even when they sell them for less than the pur­chase price.

Dur­ing last week’s de­bate, Trump said he was “smart” for not pay­ing taxes dur­ing a cou­ple of years in the early 1990s. Buchanan and oth­ers said it’s more about Trump’s in­come than his in­tel­li­gence. “You can be mid­dle class and be ten times smarter and not be able to do the things he did,” Buchanan said.

The tax code al­lows this dif­fer­en­tial treat­ment — and other loop­holes — to spur in­vest­ment and job cre­ation, said Howard Gleck­man of the non­par­ti­san Tax Pol­icy Cen­ter. The prob­lem, he added, is that some of these loop­holes are non­pro­duc­tive tax shel­ters and the real es­tate in­dus­try is no­to­ri­ously full of them.

With­out ac­cess to Trump’s com­plete tax re­turns and those of his busi­nesses, it’s im­pos­si­ble to know how he counted his losses in 1995. He had just fin­ished a rough patch of busi­ness deals, in­clud­ing a failed air­line and ma­jor losses at three At­lantic City casi­nos. But real es­tate com­pa­nies can also count in­ter­est pay­ments and de­pre­ci­a­tion of their hold­ings as short­falls even if they have not ac­tu­ally lost cash on a prop­erty, a pro­vi­sion

that tax experts ar­gue lets them use pa­per losses to avoid pay­ing their fair share of fed­eral taxes.

“The real es­tate in­dus­try is built on tax sub­si­dies,” Gleck­man said.

Trump has ar­gued that given his his­tory, he’s best equipped to clean up the tax sys­tem. “I know our com­plex tax laws bet­ter than any­one who has ever run for pres­i­dent and am the only one who can fix them,” he tweeted early Sun­day. He’s vowed to sim­plify the tax code, though some experts say Trump’s tax plan may cre­ate even more loop­holes for busi­nesses.

Bob McIn­tyre of the lib­eral Cit­i­zens for Tax Jus­tice ar­gued that the tax code needs to re­main com­pli­cated be­cause peo­ple like Trump keep try­ing to find ways to avoid the sim­ple re­quire­ment to pay their fair share. “The com­plex­ity comes from try­ing to stop peo­ple who have found ways around the sim­plic­ity,” McIn­tyre said.

One ex­am­ple comes from the real es­tate in­dus­try rules that Trump may have used to lower his tax bur­den. The 1986 tax re­form wiped out many loop­holes

but pre­served the ones for real es­tate in­vestors af­ter the in­dus­try lob­bied fu­ri­ously, he re­called.

“These are loop­holes not be­cause Congress fig­ured them out, but be­cause the com­pa­nies lob­bied for them,” McIn­tyre said. Mod­ern-day ex­am­ples are pro­vi­sions that al­low Ap­ple, Google and other com­pa­nies to avoid pay­ing fed­eral taxes by stash­ing prof­its in off-shore sub­sidiaries.

Alan Cole, an econ­o­mist at the con­ser­va­tive Tax Foun­da­tion, ar­gued that it’s in­cor­rect to see the tax code as rigged against reg­u­lar tax­pay­ers. He noted that wealthy in­di­vid­u­als still pay a huge share of fed­eral in­come taxes — the top 1 per­cent of earn­ers pay 38 per­cent of the na­tion’s to­tal fed­eral in­come taxes. And he ar­gued that it’s dan­ger­ous to ex­trap­o­late from the tax re­turns of a man who called him­self “the king of debt.”

“Turn­ing this spe­cific (and re­mark­able!) tax re­turn into a gen­eral com­ment on the state of the tax sys­tem would be crazy,” Cole wrote in an email. “How many peo­ple do you know who lost a bil­lion dol­lars? Show of hands?”

AS­SO­CI­ATED PRESS FILE PHOTO

Real es­tate mag­nate Don­ald Trump poses for pho­tos above the floor of the New York Stock Ex­change af­ter tak­ing his flag­ship Trump Plaza Casino pub­lic on June 7, 1995, in New York City. Trump’s busi­ness losses in 1995 were so large that they could have al­lowed him to avoid pay­ing fed­eral in­come taxes for as many as 18 years, ac­cord­ing to records ob­tained by The New York Times.

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