The President’s Tax Returns Have Leaked Out

Tax avoidance - it’s a family affair for people who are 

not losers and suckers

The New York Times reports that it has obtained and analyzed over 20 years of the president’s tax returns. The bottom line is that he aggressively avoids taxes, but with one possible $72.9 million dollar exception has not committed felony tax evasion. Tax avoidance is legal, but tax evasion is illegal. He paid $750 in federal taxes in 2016 and 2017. He paid no income taxes at all in 10 of the last 15 years. The $72.9 million exception is in a 10 year long audit dispute with the IRS. If he loses that audit battle, he will owe the IRS up to $100 million. The returns the NYT obtained do not include his 2018 or 2019 tax documents.

The American people finally get to know that, based on this information, (1) the president is not a criminal tax cheat, (2) there really is an audit of one of his tax returns, (3) the president is under severe financial stress with $300 million in personally guaranteed loans coming due over the next four years, and (4) the president always reports losses for business operations despite taking in hundreds of millions per year. The losses are used to avoid paying taxes, which is legal tax avoidance. 

What appears to be happening now is that the president is under intense pressure to make money to pay his debts coming due. The massive conflicts of interest this poses are blatant. Such conflicts would have sunk any other politician by now. Given his record of successfully ignoring ethics norms, it is reasonable to believe that this will not have much impact on the president’s re-election or his political power or support. It is also reasonable to think that the president will intervene to make the IRS audit go away.

What we still do not know

This information does not tell the full story of the president’s financial affairs. The NYT writes:

“By their very nature, the filings will leave many questions unanswered, many questioners unfulfilled. They comprise information that Mr. Trump has disclosed to the I.R.S., not the findings of an independent financial examination. They report that Mr. Trump owns hundreds of millions of dollars in valuable assets, but they do not reveal his true wealth. Nor do they reveal any previously unreported connections to Russia.”

What se still do not know is whether the president has undisclosed offshore accounts, which is routine for some wealthy tax cheats. The Panama Papers scandal of glimpse of the size and scope of global tax evasion, which the president may or may not be a part of. We also do not know what undisclosed financial entanglements and debts the president has with Russians. Significant hidden Russian debt would make the president subject to blackmail. 

Continued stonewalling

The NYT also comments on a reaction from a Trump Organization attorney.

“In response to a letter summarizing The Times’s findings, Alan Garten, a lawyer for the Trump Organization, said that “most, if not all, of the facts appear to be inaccurate” and requested the documents on which they were based. After The Times declined to provide the records, in order to protect its sources, Mr. Garten took direct issue only with the amount of taxes Mr. Trump had paid.

“Over the past decade, President Trump has paid tens of millions of dollars in personal taxes to the federal government, including paying millions in personal taxes since announcing his candidacy in 2015,” Mr. Garten said in a statement.

With the term “personal taxes,” however, Mr. Garten appears to be conflating income taxes with other federal taxes Mr. Trump has paid — Social Security, Medicare and taxes for his household employees. Mr. Garten also asserted that some of what the president owed was “paid with tax credits,” a misleading characterization of credits, which reduce a business owner’s income-tax bill as a reward for various activities, like historic preservation.”

The NYT also comments on the reality vs. the appearance of the president as a businessman that hios tax returns show:

“They reveal the hollowness, but also the wizardry, behind the self-made-billionaire image — honed through his star turn on “The Apprentice” — that helped propel him to the White House and that still undergirds the loyalty of many in his base. Ultimately, Mr. Trump has been more successful playing a business mogul than being one in real life.”

The NYT points out that the tax records show that his program, “The Apprentice” and associated licensing and endorsement deals brought in a total of $427.4 million. He invested most of that in various businesses but mostly golf courses, that have consumed the cash over the years. This pattern is much like the money he secretly received from his father, at least $413 million. That financed spending leading to his financial collapse in the early 1990s. The president has publicly asserted that he received only a $1 million loan form his father, which he claims he repaid. The truth is that he received at least $413 million from his father and that he never repaid any of.

The NYT comments on the disconnect between the president’s false assertions of business success and actual reality: “But the returns, by his own account, undercut his claims of financial acumen, showing that he is simply pouring more money into many businesses than he is taking out.” The tax documents show that most of Mr. Trump’s core enterprises, mainly his golf courses and his hotel in Washington, report losing millions of dollars, maybe tens of millions, each year. 

The NYT article is long and loaded with details, mostly unpleasant. For example he claims paying a consultant fee of $747,622. It turns out that amount is precisely what Ivanka Trump disclosed in payments from a consulting company she co-owned. It is hard to believe that the exactly matching amounts were a coincidence. In essence the president avoids paying taxes by laundering alleged business expenses through his adult children.