Trump’s tax avoidance is a national disgrace. Don't let him blame 'the system'
Well, now we know why Do n a ld Trump didn’t want the public to see his tax returns. A New York Times investigation looking at years of previously undisclosed documents found that Trump used countless maneuvers to avoid having to pay federal income tax. He ended up paying $750 total in 2016 despite hundreds of millions of dollars in income from The Apprentice and his various companies and licensing arrangements. Many years he paid nothing at all, and even received an income tax refund of $72.9m, which included millions in interest, straight from the federal treasury to Trump’s pocket.
The New York Times paints a picture of an elaborate shell game in which losses from some of his companies are used to wipe out tax liabilities elsewhere. It is not always clear how much of his “losses” are real losses rather than creative accounting, but the Times suggests that Trump may be both living large on hundreds of millions in annual income and overseeing distressed and unprofitable businesses.
We had known some of this already. Trump had admitted publicly that he used a $916m loss reported on his 1995 tax return to avoid paying any federal income tax for years. Trump’s former attorney Michael Cohen testified last year that he remembered Trump “showing him a huge check from the US Treasury some years earlier” and commenting “that he could not believe how stupid the government was for giving someone like him that much money back”. But now we have stark confirmation of the facts: Trump is a billionaire who doesn’t pay his taxes, leaving the financial responsibility for funding the government to ordinary working people. It’s a national disgrace.
Trump will, of course, spin all of this as simply sound business practice. He has previously said that tax avoidance makes him “smart”, and that he is simply taking advantage of perfectly legal and legitimate loopholes. Indeed, some Americans might be inclined to see it the same way. Everyone gets to pay as little in tax as they can get away with under the law, if Trump has found a way to pay nothing, that’s a problem with the system rather than with him.
There are a few reasons why we shouldn’t dismiss it like this, though.
First, the New York Times not only showed that Trump didn’t pay taxes, but it also revealed that some of the methods he used may have bordered on the criminal. The usual distinction made between “tax avoidance” (legal) and “tax evasion” (illegal) is murky in Trump’s case, and the Times reports that the IRS has been looking into his questionable refund and the New York attorney general has been investigating whether he inflated land appraisals to increase his deductions. In his returns, there are allegedly questionable “consulting” fees that seem to have been paid to his children and then claimed as business expenses, thus reducing his liability. Much of Trump’s lavish lifestyle is treated as a business expense. This is easy to claim, since much of his “business” consists of “being Donald Trump”. So he wrote off $70,000 of hairstyling as a business expense. If he is selling a brand, and the brand is “hedonistic self-indulgence”, then, as the Times put it, “everything that feeds the image … can be written off.”
A particularly egregious instance of bending the law stands out. In 1996, Trump bought a 50,000 sq ft historic mansion in Westchester county, which is surrounded by nature preserves. Trump threatened to develop the property and the people in surrounding towns objected, so instead he agreed not to develop it in exchange for a “$21.1m charitable tax deduction” for land preservation. Trump then classified the mansion as an investment rather than a residence so that he could reduce his property taxes, even though it appears the Trump family did indeed live in it.
So it may not just be that Trump is a businessman with unusually shrewd accountants. He might be exactly what he looks like: a tax cheat. The New York Times reports that most similarly wealthy people pay far more than Trump in taxes. Hell, Ipay far more than Trump in taxes, and I edit a tiny print magazine. This could be more a case of fraud than cleverness, even if the law has not yet caught up with Trump.
It’s true that Trump benefited from a system that rewards those who can afford the most creative accountants. We obviously won’t fix the problem by encouraging Donald Trump to feel ashamed of himself, or even by voting him out of office. But Trump is not a mere passive beneficiary of a broken set of rules. The billionaires don’t just exploit the loopholes. They also make them through pushing for ever-expanding exemptions from the tax burden they would otherwise pay. In Trump’s case, it is true in the most literal sense that he made the rules he benefits from. Trump’s major legislative initiative was a whole new tax cut tilted toward giving wealthy people like himself even more favorable treatment. It’s one thing to pay only your legal minimum but understand that the system is unfair. It’s quite another to be actively trying to make that system more grotesquely unequal.
Americans should be disgusted that Trump paid sums ranging from $750 to nothing in federal income taxes. Both his own behavior and the system that made it possible are outrageous. After all, when billionaires don’t pay their taxes, the rest of us have to cover the gaps. When you look at your own tax bill, understand that it could be lower if super-wealthy people like Trump weren’t trying to shift the burden onto everyone else. You paid for Trump’s $73m tax refund and he’s laughing all the way to the bank.
The Times investigation shows us both a system that is corrupted and the way the president has made every sketchy maneuver possible to avoid contributing to the public good. Anyone who believes the rich should pay their fair share should realize that the situation will only grow worse so long as Trump holds power.
• Nathan Robinson is the editor of Current Affairs and a Guardian US columnist