A New York Times report that said President Donald Trump paid only $ 750 in income tax the year he entered the White House – and thanks to whopping losses in 11 of the 18 years the Times reviewed, no income tax at all – casts doubt on President Trump’s self-image as a smart and successful businessman.
Sunday’s report came just weeks before Mr. Trump’s re-election bid was used to put the spotlight on Mr. Trump, the businessman – an identity he had cultivated for decades and which helped him in his first political campaign four years ago has to conquer the presidency office. The Times report deepens uncertainty surrounding a tumultuous presidential campaign amid a viral pandemic, racist unrest in American cities and a fierce Supreme Court battle vacated by the death of Justice Ruth Bader Ginsburg.
Mr. Trump on Sunday
“First, I paid a lot and also paid a lot of state income taxes.” Mr Trump said at a press conference on Sunday. “New York State is asking a lot, and I’ve paid a lot of money in the state. It’s all being revealed.”
The New York Times report focused on federal tax returns, not state returns. Mr Trump did not reveal how much he paid in federal or state income taxes.
Since joining the White House, Mr Trump has broken with the tradition of his predecessors by not only refusing to publish his tax returns, but also fighting a lawsuit to keep them hidden. The Times report suggests why this might have been so. Many of Mr. Trump’s top companies have been reported to be losing money, losses that have helped him cut his federal tax to practically nothing.
Eugene Steuerle, a tax expert at the Urban Institute, said he wasn’t surprised to learn that Mr Trump paid almost no federal income tax. Most commercial real estate developers deduct high interest payments on their debts from taxable income, thereby lowering their tax burdens. Typically, they also often avoid capital gains taxes by putting profits from the sale of one building into the purchase of another.
“Most tax experts expected that President Trump would make little tax payments,” said Steuerle, who served as Treasury Department official under President Ronald Reagan.
The Times noted that Alan Garten, an attorney for the Trump Organization, said of the Times report that “most, if not all, of the facts appear to be inaccurate,” and asked about the documents on which the reporting was based the Times declined to provide to protect its sources. The Times said Garten then directly denied only the amount of taxes Mr Trump paid.
Here are seven key takeaways from the Times’ coverage:
1. Trump paid $ 750 in taxes in both 2016 and 2017
The newspaper said Mr Trump initially paid $ 95 million in taxes over the 18 years he studied. But he managed to win most of the money back by filing and receiving an impressive $ 72.9 million tax refund. According to the Times, Mr Trump also pocketed $ 21.2 million in state and local refunds, usually based on federal filings.
Mr. Trump’s oversized refund has been the subject of a longstanding audit of his finances by the Internal Revenue Service. The test was well known. Trump has claimed that is exactly why he cannot clear his return. However, the Times report is the first to identify the problem, which has been largely controversial.
As a result of the refund, Mr Trump paid an average of $ 1.4 million in federal taxes annually from 2000 to 2017, the Times reported. In contrast, the average U.S. taxpayer in the top 0.001% of the workforce paid about $ 25 million annually over the same period.
His tax returns also indicate that he has not returned $ 287 million to his lenders since 2010, which, according to the Times, is far more than previously known. While the IRS treats debt forgiven as income, Mr. Trump avoided paying taxes on much of that money through tax maneuvers.
2. A lavish lifestyle due to business expenses
From home, from his plane – and $ 70,000 in hairstyling on his television show “The Apprentice” – Trump has used the cost of his businesses to finance a luxurious lifestyle.
The Times noted that Mr. Trump’s homes, planes, and golf courses are part of the Trump family business, and Trump therefore also classified them as business expenses. Since companies can write off business expenses as deductions, all of those expenses have helped reduce Trump’s tax liability.
Mr. Trump’s estate in Seven Springs, Westchester County, New York, is a 50,000 square foot mansion on more than 200 acres. However, since he classifies it as investment property, Mr. Trump can write off property taxes on the estate of $ 2.2 million as a business expense. Eric Trump, one of Mr. Trump’s sons, has described the property as a “home base for us for a long, long time” while the Trump Organization describes the property as a “retreat” for the Trump family.
At the same time, the tax overhaul that went into effect by Mr. Trump in 2017 limits taxpayers to a $ 10,000 deduction for state and local taxes, including property taxes.
3. Some of its famous companies are losing millions
The President has often referred to his remote hotels, golf courses and resorts as evidence of his success as a developer and businessman. Yet these properties caused bleeding.
The Times reported that Mr. Trump has claimed $ 315 million in losses on his golf courses since 2000, including the Trump National Doral near Miami, which Mr. Trump has depicted as the crown jewel in his business empire. Likewise, its Trump International Hotel in Washington lost $ 55 million, the Times reported.
4. Foreign visitors support Trump real estate
Since Mr. Trump began his presidential candidacy, lobbyists, overseas governments and politicians have spent considerable sums of money on his real estate, a buying frenzy that raises questions about its appropriateness and legality.
The Times report shows how high those expenses were: Since 2015, his Mar-a-Lago resort in Florida has raised an additional $ 5 million annually through an increase in membership. The Billy Graham Evangelistic Association spent at least $ 397,602 at Trump’s Washington hotel in 2017. Overseas projects have earned Mr. Trump millions more – $ 3 million from the Philippines, $ 2.3 million from India, and $ 1 million from Turkey.
5. He may have paid family members in “counseling fees”.
Mr Trump wrote off inexplicable $ 26 million “consulting fees” as business expenses for many of his projects, the New York Times reported.
While the “advisers” are not listed on tax returns, in some cases the advisory fees that are claimed as tax deductions are exactly the same as those that Ivanka Trump claimed as income on her financial statements. For example, Ivanka Trump reported receiving payments of $ 747,622 from a consulting firm she jointly owned. This is equivalent to the amount that Mr. Trump claimed as a tax deduction for two hotel projects.
At the same time, Ivanka Trump was a senior executive at the Trump companies, benefiting from both the hotels and consulting fees, the Times story said. The IRS has fined some companies in the past for trying to avoid taxes by paying advisory fees to people who, in fact, were not independent contractors, the report said.
The maneuver helps companies avoid wage taxes, the Institute for Taxes and Economic Policy found.
6. Trump’s lucrative license revenues have shrunk
Mr. Trump made $ 427.4 million from 2010 to 2018 on his reality show “The Apprentice” and licensing deals from clothing to mattress companies. But those revenues began to run dry when he ran for president and made derogatory comments about immigrants who cost him two of his most lucrative businesses, along with tens of millions of dollars in revenue from the Miss Universe pageant that NBC announced it would not broadcast.
In fact, Mr Trump’s brand appears to be the most successful part of his business. During the same period, “The Apprentice” was on the air and the business Mr. Trump ran lost nearly $ 175 million, the Times reported.
7. Trump’s debt burden comes due
Mr Trump certainly seems to be under severe financial pressure from the enormous mountain of debt that he has taken on. The Times said the president is apparently responsible for $ 421 million in loans, most of which mature within four years. In addition, a $ 100 million mortgage on Trump Tower in New York will fall due in 2022.