A fortune built on fraud; a ‘self-made’ man of his own myth
Wednesday’s investigation by the New York Times disclosed previously unknown information about the president’s past through a review of the business and financial records of his father, Fred Trump. I am in awe of the yearlong investigation for what it reveals about two things: Donald Trump’s inheritance and Trump family tax fraud.
Readers of this column already know that taxes and inheritance are both extremely my jam.
Based on more than 100,000 documents and interviews with people who worked with and for Fred Trump’s business, the investigation reveals transfers and sham businesses created to funnel money to Fred’s children and to avoid gift and estate taxes.
Highlights of the investigation include:
• An estimated $1 billion in wealth transferred to Fred Trump’s children, which would have created a $550 million tax liability, on which the Trump heirs only paid $52.2 million. That’s nearly $500 million in estate tax avoidance. The Times quotes tax experts who found “a pattern of deception and obfuscation” in the methods used.
• A sham company called “All County Building Supply & Maintenance,” owned by Trump and his siblings, purchased MICHAEL supplies for TAYLOR Fred Trump’s construction business and marked them up by 20 to 50 percent, for the benefit of children, as a way of transferring the father’s wealth to his children and avoiding gift taxes. This is illegal gift tax avoidance.
• A lowball valuation of $41.4 million for Fred Trump’s real estate holdings, on his death, on properties sold by his heirs within the decade for approximately $662 million in order to avoid estate taxes. This is illegal estate tax avoidance.
• 295 different income streams from Fred Trump’s businesses to Donald Trump over five decades, from landlording to management income to mortgage income toAll County Building & Supply Maintenance. Contrary to Trump’s claims, his father continuously shoveled money at him for five decades. This undercuts Trump’s version of himself as a self-made businessman who “only received a million-dollar loan” from his father.
Does it matter if Donald Trump is mostly a trust fund scion of a real estate family, bailed out by his father’s vast fortune in the early 1990s and again in the 2000s, despite his preferred narrative?
Not really. Financial privilege is an underappreciated aspect of American political life, but it’s not going to change most citizens’ views of Donald Trump’s fitness for high office. I have no particular problem with a trust fund kid becoming president, even if he incorrectly believes he “did it the hard way.”
Does it matter if Trump and his family committed massive tax fraud through sham companies and illegally undervaluing real estate holdings? Yes. Well, it should. One of the ongoing mysteries of Trump as a candidate was why he broke with 45 years of tradition and refused to release his tax returns. The Times investigation does not completely explain that mystery, but it does illustrate the advantage of disclosure. What else would see the light of day if we had his personal and business tax returns for the past 20 years?
Trump supporters have their political or personal reasons for supporting the president, and that’s fine. On the other side of the aisle, opponents of the president have long worried about a wide range of disqualifying behaviors.
From a political perspective, I don’t expect an investigation by the New York Times to sway voters. Voters already believe what they believe.
On the other hand, I’m old enough to remember when defrauding the IRS was disqualifying for holding an important government job, no matter what your political leanings. Enforcing this past tax fraud would depend on the political leaders in Congress, currently mostly allied with Trump, as well as the complicating factor that the IRS currently reports to Trump. It’s not clear if it will happen. If Al Capone himself had been appointed director of the Bureau of Tobacco, Alcohol, Firearms and Explosives, it would not be as ironic or problematic as the fact that the IRS ultimately reports to Trump.
I can already anticipate some readers’ response to excuse Trump’s actions because of a belief that business owners generally, or maybe real estate developers specifically, game the tax system on valuations and joint ventures. But not this brazenly. Not at this scale. Not so clearly flouting IRS rules on gift and estate taxes. All I can say is, if that’s your view you need to read the investigation in full.
President Richard Nixon set the precedent for disclosing a president’s tax return in 1973, famously saying, “People have got to know whether or not their president is a crook.”
Following publication of Wednesday’s New York Times investigation, we have the answer about Trump.