After five years of political drama over President Donald Trump’s taxes, The New York Times reported this past weekend, based on information purported to cover much of the past two decades, that “billionaire” Trump paid far less in taxes than many of those now reading this.
It noted he paid a paltry $750 in federal income taxes in 2016 and 2017, and no income tax at all in several previous years. For someone spending lavishly throughout that period, it seems quite at odds with what the rest of us experience.
One of the takeaways from The Times’ report is that Trump, who began his career as a real estate tycoon with hundreds of millions of dollars in seed money from his father, is not the business wizard he claims to be. The lack of taxes is largely attributable to business losses that offset his earnings in those years. The documents also show that even the $427 million Trump made from the TV show “The Apprentice” was spent mainly buying golf courses and resorts that have lost money in recent years — other than the millions spent by the U.S. government on his trips there since becoming president.
Of course, Trump claims the report is fake news, while at the same time noting he’s paid “a lot” in taxes over the years: “tens of millions of dollars” according to a Trump lawyer. But paying a lot in taxes is not the same as paying a lot in income taxes, as Granite Staters well know. Chances are pretty good the president paid quite a bit in property taxes on the many buildings, resorts and other properties he owns.
But then, it’s a lot harder to hide property values than it is to find ways of offsetting income for tax purposes. And that’s the real takeaway from The Times’ story: Donald Trump — however rich he actually is — has paid little or no income taxes quite often (the report also notes he received a $72.9 million refund in 2010, now the subject of an IRS audit). This has been no secret. He boasted of it during his presidential campaign four years ago, making it a selling point that he’s smart enough to beat the system.
But for everyone who beats the system, especially on a scale of tax obligations in the millions, everyone else pays more. And the only reason such creative accounting is viable is because the federal tax code is so rife with exemptions, exceptions, exclusions and write-offs. Especially corporate tax law, which through the years has taken a simple concept — add your revenues, subtract your expenses, and pay a percentage of the difference — and made it something requiring armies of accountants to process.
While it appears absurd that a supposed billionaire businessman would pay little or no income tax in a given year, while average citizens are paying more, this “beating the system” isn’t necessarily illegal. It may be perfectly allowable under the tax code. Remember Warren Buffett, far richer than Trump, once said he pays less in tax than his secretary. It’s all a matter of accounting.
Buffett noted the absurdity of the situation, even while adding that he’ll continue to pay as little as he can as long as the tax code allows it. Most of us would likely do the same.
And that ought to be the biggest takeaway from the revelations regarding Trump’s taxes. The Times didn’t report any secret ties to Russia, nor any illegalities in Trump’s charitable claims in this story. And although it may not be a favorable account of his business acumen, it didn’t reach a conclusion as to his actual net worth.
But it did remind us that if the amount of taxes we pay is directly related to the amount we can spend on accountants and lawyers, then our tax system is very broken.