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Between the Lines: Interpreting Trump's Taxes
​Urmi Shukla, ​10/19/2020

President Donald Trump was the first president in nearly a half a century who refused to release his tax returns, a tradition established after The Providence Journal revealed that then-President Nixon had paid only $792.81 on an income of $200,000 in 1973. Most presidents release their returns to demonstrate transparency, and in Trump’s case, as an influential businessman, many Americans also wanted to make sure he wouldn’t abuse his office for his own financial gain. Trump maintains that he can not release them because he is being audited, although his Internal Revenue Service (I.R.S.) commissioner has personally refuted this claim However, in late September, the New York Times published a series of reports on Trump’s tax returns which revealed that he had paid a total of $750 in federal income tax for the years 2016 and 2017 – drawing an eerie parallel to his predecessor. The New York Times’ report, analyzing tax returns legally provided to them by an anonymous source, shows that the president paid nothing in federal income tax in 11 out of the 18 years that they received information on.

Although he takes in hundreds of millions of dollars each year and has an estimated net worth of about $2.8 billion, Trump managed to almost eliminate the income tax he would normally pay by taking advantage of existing tax laws. Trump’s signature properties (for example, his golf courses) are largely unprofitable. They do serve a purpose though. The president’s largest source of income is his personal brand; by selling the narrative of a vastly wealthy and successful businessman, first popularized by his role on The Apprentice. Trump made a combined $427.4 million (despite the fact that his actual businesses were incurring huge losses at the time). The losses from his unprofitable companies ended up cancelling out the profits made from Trump’s personal brand, thus reducing his tax bill. Just like in the early
1990’s, as some of his major businesses were collapsing, Trump ended up generating enough money in losses to substantially reduce his taxes for years to come.

By employing other strategies including billing what most would consider personal expenses to his companies, and by paying millions in consultancy fees to his own family members, he was able to write off millions of dollars each year as business expenses, which aren’t taken into account when calculating one’s federal income tax. His tax returns also revealed new information about the current audit he is under from the I.R.S. Turns out, he might have to return the $79.8 million he received in tax refunds after all. After legally abandoning his casino business in 2009, he was able to declare losses, resulting in a massive payout. After the casino bankruptcy ended, Trump received a 5% share in the new company. Abandonment, however, stipulates that unless the individual receives nothing of value, they’re only allowed to report $3,000 in losses each year. Although it’s not clear from the returns whether this 5% is enough to invalidate his refund, if it is, Trump could be forced to pay the government over $100 million, accounting for interest and punitive fees. Additionally, Trump attempted to revive some of his businesses while in office. He’s taken out a $100 million mortgage on the commercial space in the Trump Tower, and has sold over $220 million worth of stocks between 2014 and 2016  in attempts to alleviate some of his losses, but his recent financial records show that he only has $873,000 left to sell. He’s also personally responsible for loans totaling to $421 million, according to his tax records, most of which are due within 4 years. If Trump loses his dispute with the I.R.S., he could be liable to pay more than $621 million.

Again, similarly to the public reaction following Nixon’s tax returns, the leak of the president’s tax returns led to a lot of anger amongst lower and middle class voters. Citizens working at a minimum wage pay more income tax than he does, and this anger could potentially alienate him from this band of voters. Despite the fact that Trump is now facing very serious debt that could jeopardize his financial security, he’s still claiming he is a billionaire who managed to avoid taxes by being smart. It is unclear whether his tax reductions are a result of clever business maneuvers, or if he’s just not as good a businessman as he claims to be.
International Youth Politics Forum, Est. 2019

All arguments made and viewpoints expressed within this website and/or its nominal entities do not necessarily reflect the views of the writers or the Forum as a whole.

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