Media Shouldn’t Fall For Trump’s Spin That He Can Fix Tax Laws

Media Shouldn’t Fall For Trump’s Spin That He Can Fix Tax Laws

Trump’s Damage Control After NY Times Tax Bombshell At Odds With His Own Tax Plan That Favors His Own Businesses 

››› ››› TYLER CHERRY

Following The New York Times’ report that Republican presidential nominee Donald Trump may have been able to avoid federal income taxes for 18 years after declaring a $916 million loss in 1995 as his businesses collapsed, some pundits are adopting the Trump campaign’s spin that the story proves that Trump “knows the tax code far better than anyone … and he is the only one that knows how to fix it.” In fact, Trump’s tax plan “doesn’t just preserve those breaks, it piles on new ones for real estate developers like Mr. Trump himself,” according to The Washington Post. The proposal would deliver a massive tax cut to Trump’s own businesses while providing a multi-trillion dollar tax cut to the wealthiest Americans. 

Trump Potentially Avoided “Paying Any Federal Income Taxes For Up To 18 Years”

NY Times: After Nearly $1 Billion Loss In 1995, Trump Used “Tax Rules Especially Advantageous To Wealthy Filers” To Potentially Avoid Paying Hundreds Of Millions In Taxes. After declaring “a $916 million loss on his 1995 income tax returns,” Republican presidential nominee Donald Trump may have “legally avoid[ed] paying any federal income taxes for up to 18 years,” according to tax documents obtained by The New York Times. Utilizing “tax rules especially advantageous to wealthy filers,” writes the Times, Trump could have used the massive “financial wreckage he left behind in the early 1990s” to “cancel out an equivalent amount of taxable income over an 18-year period.”

Donald J. Trump declared a $916 million loss on his 1995 income tax returns, a tax deduction so substantial it could have allowed him to legally avoid paying any federal income taxes for up to 18 years, records obtained by The New York Times show.

The 1995 tax records, never before disclosed, reveal the extraordinary tax benefits that Mr. Trump, the Republican presidential nominee, derived from the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan.

Tax experts hired by The Times to analyze Mr. Trump’s 1995 records said that tax rules especially advantageous to wealthy filers would have allowed Mr. Trump to use his $916 million loss to cancel out an equivalent amount of taxable income over an 18-year period.

Although Mr. Trump’s taxable income in subsequent years is as yet unknown, a $916 million loss in 1995 would have been large enough to wipe out more than $50 million a year in taxable income over 18 years.

The $916 million loss certainly could have eliminated any federal income taxes Mr. Trump otherwise would have owed on the $50,000 to $100,000 he was paid for each episode of “The Apprentice,” or the roughly $45 million he was paid between 1995 and 2009 when he was chairman or chief executive of the publicly traded company he created to assume ownership of his troubled Atlantic City casinos. Ordinary investors in the new company, meanwhile, saw the value of their shares plunge to 17 cents from $35.50, while scores of contractors went unpaid for work on Mr. Trump’s casinos and casino bondholders received pennies on the dollar. [The New York Times, 10/1/16]

Trump Says His Ability To Exploit Tax Code Means He “Is The Only One Who Can To Fix” It

In Press Release, Trump Campaign Says “Trump Knows The Tax Code Far Better Than Anyone … And He Is The Only One That Knows How To Fix It.” In response to The New York Times report on Trump’s potentially avoiding paying nearly two decades’ worth of federal income taxes, the Trump campaign stated in a press release, “The incredible skills Mr. Trump has shown in building his business are the skills we need to rebuild this country.” The press release also maintained that “Mr. Trump knows the tax code far better than anyone who has ever run for President and he is the only one that knows how to fix it.” [DonaldJTrump.com, 10/1/16] 

[Twitter, 10/2/16]

 

Some Pundits Approve Of Trump’s Spin That He Can Fix Tax Laws

National Review’s Rich Lowry: Trump’s Argument That He Can Fix The Tax Code “Is More Intuitive To People Than I Would Have Thought.” National Review editor Rich Lowry said that Trump’s assertion that he knows how to fix the tax laws have “had much more traction than I would have thought,” and that the argument “is more intuitive to people than I would have thought.” From the October 2 edition of NBC’s Meet the Press:

CHUCK TODD (HOST): How did you think of Rudy [Giuliani] defending [Trump’s exploitation of tax laws] as smart?

[...]

RICH LOWRY: He did come around to the, [Trump] knows the system, therefore, he can fix it. And that argument has for Trump had much more traction than I would have thought. “Look, I exploited a rigged system, and I was inside it, therefore, I can fix it.” And that argument is more intuitive to people than I would have thought. [NBC, Meet the Press, 10/2/16]

Fox’s Chris Stirewalt: Trump’s Message Of Being Able To Fix Tax Laws “Isn’t Groundless.” After Fox & Friends Sunday co-host Abby Huntsman read Trump’s tweet about being able to fix the tax laws, Fox’s Chris Stirewalt said, “his argument isn’t groundless.” From the October 2 edition of Fox News’ Fox & Friends Sunday:

ABBY HUNSTMAN (CO-HOST): So Donald Trump is out now tweeting about it. This was his response this morning, just moments ago. He said, “I know our complex tax laws better than anyone who has ever run for president and I'm the only one who can fix them.” To your point, Tucker, “#failing @NYTimes.” Which we know he loves that paper.

CHRIS STIREWALT: We’re going to turn it around. Look, his argument isn't groundless, but the point is it's October. [Fox News, Fox & Friends Sunday, 10/2/16]

Fox’s Ed Henry: Trump’s Tweet About Fixing Tax Laws Is “On Message.” Fox co-host Ed Henry praised Trump for staying “on message” about fixing the tax laws and for not going “off onto a side issue.” From the October 2 edition of Fox News’ Fox & Friends Sunday:

MARIA BARTIROMO: What I think this is is once again, the Clinton camp and they are getting help from The New York Times, trying to take him off message. Because the fact is he has a good message when it comes to the economy. No doubt about it. Lowering corporate taxes and rolling back regulations will move the needle on economic growth. Her economic plan is not as cohesive. So she has to take him off message, whether it is the birther issue, his tax returns, his business, Miss Universe, whatever she can do to get him talking about anything other than his economic message is a win for her.

ED HENRY (CO-HOST): To your point though, this morning Donald Trump appears to be on message because he sent out a tweet reacting to this. Didn't go off onto a side issue. Instead, said “I know our complex tax laws better than anyone who has ever run for president. And I'm the only one who can fix them, #failing @NYTimes.” [Fox News, Fox & Friends Sunday, 10/2/16]

But Trump Wouldn’t “Fix” Tax Code -- His Plan Would Benefit “Debt-Laden Real Estate Firms” Like His Company

Wash. Post: “Trump’s Tax Reform Plan” Would “Deliver A Large Tax Cut To Companies” In His Own “Vast Business Empire.” The Washington Post wrote that Trump’s tax reform plan “would dramatically reduce taxes on what is known in tax circles as ‘pass-through’ entities,” which are the “cornerstone of the Trump Organization,” noting that Trump has holdings in “more than 200 limited liability corporations, which is a form of pass-through.” The Post also noted that Trump “would also benefit from his proposals to cut top income tax rates and eliminate federal taxes on inherited wealth”:

A little-noticed provision in Donald Trump’s tax reform plan has the potential to deliver a large tax cut to companies in the Republican presidential nominee’s vast business empire, experts say.

Trump’s plan would dramatically reduce taxes on what is known in tax circles as “pass-through” entities, which do not pay corporate income taxes, but whose owners are taxed at individual rates on their share of profits. Those entities are the most common structure for small businesses and increasingly popular for larger ones as well. They are also a cornerstone of the Trump Organization. On his 2015 presidential financial disclosure report, Trump listed holdings of more than 200 limited liability corporations, which is a form of pass-through.

There is no indication that Trump designed his tax plan to benefit his own companies. “It wasn’t something we took into consideration when we made this plan,” Trump economic policy adviser Stephen Moore said.

Still, the provision highlights the tensions between Trump’s policy proposals and his personal financial interests. He would also benefit from his proposals to cut top income tax rates and eliminate federal taxes on inherited wealth, which now are imposed when a couple has more than $10.9 million in assets. Other wealthy candidates advocating for tax cuts similarly benefit from those types of proposals.

"It’s a really nice deal” for Trump and pass-through owners like him, said Roberton Williams, a senior fellow at the nonpartisan Tax Policy Center. [The Washington Post, 8/10/16]

NY Times: “Hard To Imagine A Tax Code More Favorable To Real Estate Developers,” Including “Trump Himself,” Than Trump’s Own Plan. The New York Times reported that Trump’s tax proposal would preserve and “pile on new” tax breaks “for real estate developers like Mr. Trump himself — at an estimated cost of more than $1 trillion in tax revenue over a decade.” The article also said that Trump’s general tax cuts would “deliver the biggest windfall to the highest earners”:

Thanks to some major loopholes in the existing tax code that treat real estate developers as a special privileged class, it’s entirely possible (even likely) that Mr. Trump pays little or no federal income tax.

But Mr. Trump’s new tax proposal doesn’t just preserve those breaks, it piles on new ones for real estate developers like Mr. Trump himself — at an estimated cost of more than $1 trillion in tax revenue over a decade.

Moreover, this doesn’t count Mr. Trump’s more general tax cuts, which deliver the biggest windfalls to the highest earners. Many real estate developers would reap further gains from those provisions if they became law.

[...]

In what at first might seem a laudable effort to put the public interest ahead of his own financial gain, Mr. Trump called for abolishing the loophole. “We will eliminate the carried interest deduction and other special interest loopholes that have been so good for Wall Street investors, and people like me, but unfair to American workers,” Mr. Trump said in Detroit on Aug. 7.

But his fellow real estate investors and the Wall Street interests he lambastes needn’t worry. He’s offering them an even better tax break that renders carried interest irrelevant.

Mr. Trump has proposed a new rate — 15 percent on all corporate and business income — that is lower than the current capital gains rate of 20 percent on profits from the sale of assets, which is already well below the top tax rate on ordinary income of around 40 percent. The new lower rate would apply to “pass-through entities,” according to Mr. Trump’s plan, “Tax Reform That Will Make America Great Again.”

Pass-through entities pay no tax at the business level; as the name suggests, income is taxed at individual rates when it is distributed to the owners. Such entities include limited liability companies, or L.L.C.s, and sole proprietorships, S Corporations, and many partnerships. The conservative-leaning Tax Foundation estimates that they account for 60 percent of all business income in the United States.

While they can be found in all sectors of the economy (including private equity and hedge funds), they are especially prevalent in real estate. Mr. Trump identified 564 separate business entities in his financial disclosure forms, most of them L.L.C.s and partnerships. [The New York Times, 9/1/16]

WSJ: Trump’s Tax Plan “Could Benefit Leveraged Real-Estate Companies Like The One He Runs.” The Wall Street Journal wrote that Trump’s proposed tax plan “might be particularly beneficial to someone such as Mr. Trump, who could generate investment and interest deductions from real-estate investments and then use those losses to offset taxable income from licensing deals, book royalties and speeches.” The Journal also noted that Trump’s “tax plan could benefit leveraged real-estate companies like the one he runs with new and substantial subsidies.” [The Wall Street Journal, 8/18/16]

Economists And Media Have Noted That Trump’s Economic Plan Is “A Multitrillion-Dollar Gift To The Rich” And “Screws The Middle Class”

Tax Foundation: Trump’s Tax Plan Benefits The Wealthiest At The Expense Of “Low- And Middle-Income Earners.” The right-leaning Tax Foundation released its analysis of Trump’s latest revised tax plan on September 19, concluding that the largest beneficiaries of his proposed tax cuts are at the top of the income distribution, and much of the savings in Trump’s latest plan were achieved by reducing the size of tax cuts for low- and middle-income earners. [Tax Foundation, 9/29/15, 9/19/16, 1/26/16]

Wash. Post: Trump’s New Plan “Now Skew[s] Even More To Helping The Highest-Earning Americans.” Washington Post economic policy correspondent Jim Tankersley blasted Trump’s “revamped tax plan” for further reducing tax cuts for middle-class Americans and “now skew[ing] even more to helping the highest-earning Americans.” Tankersley noted that the Tax Foundation scores of Trump’s tax benefits and job creation prospects “either contradict or call into question” the nominee’s claim in his September 15 remarks that his new plan would create millions of new jobs and “deliver large benefits for middle-income taxpayers.” [The Washington Post, 9/19/16]

Slate: Trump’s Tax Cuts Are “A Multitrillion-Dollar Gift To The Rich” And “Utterly Worthless To The Middle Class.” Slate economics correspondent Jordan Weissman referred to the tax cuts and child care benefits Trump would direct to middle-income earners as “basically worthless,” adding that under Trump’s economic plan middle-income earners “get very little, while upper-income Americans reap a windfall.” Weissman also warned that the Tax Foundation’s “dynamic scoring” methodology was “extremely hypothetical” and suggested that the group’s static analysis offered a more realistic estimate of how much debt could accumulate under Trump’s plan. [Slate, 9/19/16]

ThinkProgress: “Trump’s New Tax Plan Screws The Middle Class.” ThinkProgress economic policy editor Bryce Covert blasted Trump’s tax plan for giving substantial tax breaks to top-income earners while doing little to help middle-income Americans, as he claimed it would. Covert explained that, contrary to Trump’s repeated public statements that his plan would focus on helping middle-income earners the most, “one thing is clear: the middle class will get less than Trump had originally planned, while the rich will get more.” [ThinkProgress, 9/19/16]

CNBC: Trump’s New Plan “Would Help The 1% Most.” CNBC reporter Robert Frank reported that the Tax Foundation analysis illustrated that Trump’s revised tax plan would offer a greater tax break to the top 1 percent of earners than to middle-class earners. Frank explained that the estimated disproportionate benefits from Trump’s tax plan result in an “average cut of at least $122,400” for the top 1 percent of income earners, “while the middle class could get a break of less than $500.” [CNBC.com, 9/19/16]

WSJ: Top 1 Percent Of Earners See Five Times More Tax Savings Than Bottom 80 Percent Of Households. The Wall Street Journal noted that “after-tax income” for the highest-income households would “increase by at least 10.2 [percent]” under Trump’s tax plan, whereas the bottom 80 percent of households would receive a less than 2 percent cut in taxes:

The analysis from the conservative-leaning Tax Foundation shows that Mr. Trump’s plan would lower federal revenue collections by at least 10.9% and deliver the biggest benefits to the highest-income households. Without accounting for economic growth, the top 1% of households would see their after-tax income increase by at least 10.2%, while the bottom 80% of households would get less than a 2% boost. [The Wall Street Journal, 9/19/16]

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