The president’s leaked taxes are an explosion of many different scandals, like a huge fireworks display on the Fourth of July.
President Donald Trump’s taxes, revealed at last by the New York Times on Sunday, are not a scandal.
Instead, they are an explosion of many scandals, like a huge fireworks display on the Fourth of July. Gigantic scandals, teeny scandals, medium-sized scandals — so many scandals that it’s hard to keep track of every individual act of malfeasance.
Let’s give it a shot, though. Here’s a list of the various appalling aspects of Trump’s taxes, and how they rate in comparison with each other.
According to the Times, Trump paid $750 in federal income taxes in 2016 and 2017. The total of $1,500 is enough to purchase a 1996 Ford Aerostar van with 70,000 miles.
In addition, says the Times, when all was said and done, Trump “paid no income taxes at all in 10 of the previous 15 years.”
There are two possibilities here. Maybe the various write-offs Trump used to slash his tax liability are all legitimate and represent real losses, and he’s made almost no money in the past decade and a half. In that case, he’s far poorer than he claims. Or his write-offs are largely bogus, and in fact he is a billionaire — even if his net worth is less than he constantly brags it is.
Everyone can understand that Trump’s tax avoidance is morally wrong.
While it’s fun to ridicule Trump for being a spectacular business failure — and, indeed, in a sense he is (see below) — the answer is almost certainly the latter. Forbes reporter Dan Alexander, who’s written an entire book about Trump’s tacky empire, estimates that Trump has $3.66 billion in assets and $1.13 billion in debt, leaving him $2.5 billion in the black.
Everyone can therefore understand that Trump’s tax avoidance is morally wrong. It doesn’t matter whether he followed whatever the “rules” are, because people like Trump make the rules. A society that allows anyone who’s ultra-wealthy to get away with this is not functioning.
Moreover, we should not fall into the faux-sophistication of believing that all the super-wealthy get away with this. They do not. According to IRS data, the highest 400 earners in the U.S. pay an average of over 20 percent in federal income taxes. That’s not as much as it should be, but it’s not nothing. As the Times points out, if Trump paid taxes like a normal 1 percenter during this period, he’d have sent at least $100 million more to the U.S. Treasury.
The super-rich generally engage in tax avoidance, in which their teams of lawyers keep them on the right side of the law. The Trump family has a history of engaging in what appears to be tax evasion, in which they violate the few clear rules that do exist in the financial stratosphere.
During Trump’s childhood, his father Fred transferred huge sums of money to Trump and his siblings, in ways that an expert believes could constitute criminal tax fraud. The IRS limits the amount of money that anyone can receive as a gift without having to pay taxes on it. But Fred Trump set up a company legally owned by Donald Trump, his siblings, and a cousin. Fred Trump then had his own company buy all its supplies from his children’s company at inflated prices.
The new Times story identifies what appears to be a similar present-day set up, in which Trump both employed his daughter Ivanka and appears to have paid a company she co-owns $747,622 in “consulting fees.” (Though the Times didn’t make that connection, their story revealed a consulting fee in that amount and, in her own financial disclosure for her government job, Ivanka Trump declared having been paid exactly that sum as a consultant.) The IRS forbids consulting payments to staff employees, in order to avoid tax dodging.
The Times story also identifies many other aspects of Trump’s taxes that cry out for a criminal investigation. Trump wrote off millions in property taxes on what seems to be a Trump residence as business expenses. He’s claimed legal fees paid to lawyers representing him in political matters as business expenses. Even the hush money he paid to Stormy Daniels may be concealed as a business expense.
It’s no secret that the U.S. has what amounts to two separate tax systems, one for the ultra-wealthy and one for everyone else. Regular wage-earners have their taxes garnished directly from their paychecks. For billionaires, the question of what they owe the government is more the start of a friendly discussion.
Decades of Republican-led attacks on and defunding of the IRS had led to a preposterous situation in which people who claim the earned income tax credit, making an average of $20,000 per year, are more likely to be audited than those who make far more. Meanwhile, according to one estimate, $7.5 trillion in taxes will go uncollected in the next decade because the IRS simply doesn’t have the means or motive to enforce the law on powerful people.
In such an environment, Trump and his lawyers had every incentive to push the rules as far as they could, and no incentives not to.
As the Times story notes, Trump’s taxes show he owes hundreds of millions of dollars to creditors. Many people on Twitter were surprised by this information and expressed suspicion that Trump is being controlled by shadowy forces to whom he’s in hock.
Who does Donald Trump owe $300,000,000?— The Lincoln Project (@ProjectLincoln) September 27, 2020
In fact, Trump’s outstanding loans have always appeared in the public financial disclosure report that executive branch personnel are required to file. His 2019 form is here; the loans are on page 41. It doesn’t make his finances completely transparent, but it does provide a great deal of detail, including who he owes money to (mostly Deutsche Bank and an American company called Ladder Capital) and the loan terms.
In other words, he’s not beholden to the Central Bank of Russia, just regular financial corporations. This does inevitably create conflicts of interest, especially since some of the loans are coming due soon. But they are regular, grubby conflicts of interest, not the exciting international espionage kind.
Everyone who’s been alive the past few years understands how Trump’s gone bankrupt six times. He is completely incompetent at everything except tweeting and being on TV — though that turned out to be enough to be elected president.
Trump is especially bad at business, as his taxes demonstrate. What’s remarkable about his fortune is not how big it is but how small. He received over $400 million from his father throughout his lifetime. It’s difficult to calculate precisely, but if Trump had simply put that money into a low-cost stock market index fund, he’d have something like $10 billion today. Instead, thanks to a lifetime of frenzied, catastrophic activity, he only has the estimated $2.5 billion.
The most dangerous and most subtle scandal about Trump’s taxes isn’t about Trump, but about us.
In a late September 2016 debate with Trump, Hillary Clinton asked why he hadn’t followed tradition and released his tax returns. “Maybe,” she said, “he doesn’t want the American people, all of you watching tonight, to know that he’s paid nothing in federal taxes.” Trump didn’t deny that he had paid no taxes. Instead, he just responded: “That makes me smart.”
“We now know that Trump wasn’t kidding about his contempt for America and everyone in it.”
In a working democracy, filled with people who considered themselves citizens who are part of something larger than themselves, that would have immediately ended Trump’s campaign. Everyone would have naturally recoiled from a candidate announcing that you’re a sucker if you don’t spend your life trying to screw everyone else. Instead, tens of millions of voters had so little respect for themselves and the place they live that they affirmatively chose Trump.
Exactly four years later, we now know that Trump wasn’t kidding about his contempt for America and everyone in it. We also know this confirmation won’t stop tens of millions of us from voting for him again.
We can dream of passing laws requiring everyone running for president to disclose their taxes, or prosecuting Trump for tax evasion, or reforming the entire tax code. But none of that will matter if we can’t solve the largest problem, which is that large swaths of America hate the basic idea that we’re one country that’s all in it together.