Donald Trump declared a loss of $916 million on his income tax returns for 1995, and — because of tax rules that favor wealthy real estate investors — he could have used that loss to avoid paying any federal income taxes for up to 18 years, according to a report in the New York Times.
The Times’ report said that the enormous loss Trump reported in 1995 — $916 million — seemed to be a holdover from the early 1990s, when his real estate and casino empire tottered and almost fell.
By 1995, Trump’s businesses were actually in better shape. But he was able to use byzantine tax laws to use those prior losses to cancel out income taxes. By the Times’ calculations, Trump might have been able to earn $50 million a year for 18 years and still pay no federal income taxes — thanks to this one giant loss, and the resulting deductions.
[Trump’s bad bet: How too much debt drove his biggest casino aground]
Howard Abrams, the director of tax programs at the University of San Diego School of Law, confirmed that tax law allows losses of this size to be applied to returns three years prior to the loss and then for next 15 years. As a result, Trump would have potentially paid no taxes for an 18-year period.
Watch Trump’s surrogates defend his handling of tax laws
Following a New York Times report alleging that Donald Trump could have avoided paying federal income taxes for 18 years, former New York mayor Rudolph W. Giuliani and New Jersey Gov. Chris Christie on Oct. 2 said Trump’s handling of tax laws was “genius.” (The Washington Post)
Abrams said Trump could likely have claimed losses so massive by taking advantage of tax loopholes available only to those in the real estate industry.
“The real estate industry has been very effective in lobbying Congress,” he said. “You can have a huge tax loss in a year when your actual loss is very little or nonexistent.”
The documents obtained by the Times did not reveal his charitable giving for 1995. Other sources have indicated that Trump gave at least $260,000 to charities that year: $60,000 to the Donald J. Trump Foundation, and at least $200,000 to a Veterans Day parade in New York City. At the worst of his personal financial crisis, in 1991, he gave no money to the Trump Foundation.
After the Times report was published, the Trump campaign issued a statement that did not dispute the accuracy of the documents cited by the Times. In fact, it complained that the documents had been published without Trump’s permission: “The only news here is that the more than 20 year-old alleged tax document was illegally obtained,” the statement said.
The Trump campaign statement went on to defend Trump’s approach to taxes.
“Mr. Trump is a highly-skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required. That being said, Mr. Trump has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes, along with very substantial charitable contributions,” the statement said.
It went on to say, “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.”
Clinton: If Trump is smart not to pay taxes, ‘what does that make the rest of us?’
Speaking at a Des Moines rally Sept. 29, Democratic presidential candidate Hillary Clinton slammed opponent Donald Trump for what he has said about his tax payments. (The Washington Post)
The information comes from three pages that appeared to be from tax returns Trump filed in New York, New Jersey and Connecticut that the Times posted online.
The pages had been sent anonymously by mail to reporter Susanne Craig, the paper said. Trump’s accountant from that time, Jack Mitnick, had seen the documents and believed them to be authentic, the newspaper said.
Trump is the only major-party nominee in 40 years who has not released his federal income-tax returns. His reasons for doing so have been varied, including assertions that the taxes are under audit. Internal Revenue Service officials have said there is no reason a taxpayer cannot choose to make their returns public, even if they are undergoing an audit.
Trump has also suggested that the tax returns would not provide that much insight into his dealings. His son, Donald J. Trump Jr., has seemed to argue the opposite, saying that Trump’s tax returns would contain so much information that they would confuse the public and give rise to incorrect armchair analysis.
Trump has proposed reducing the number of federal tax brackets from seven to three, and setting rates at 12 percent, 25 percent and 33 percent, which would be a boost to wealthy Americans. The top tax rate is currently 39.6 percent.
The Republican nominee has often bragged about paying a low effective tax rate himself, saying that he is justified because the government misspends taxpayer dollars.
“I fight very hard to pay as little tax as possible,” Trump said in May on ABC’s “This Week.”
Trump then responded curtly when George Stephanopoulos asked about his tax rate. “It’s none of your business. You’ll see it when I release,” he said.
Previously, the only best hard information available about Trump’s federal income taxes had come from the late 1970s, because Trump had submitted his 1978 and 1979 returns to casino regulators in New Jersey, In May, The Washington Post reported that those returns showed that — at least in 1978 and 1979 — Trump paid no federal income taxes, in part because of heavy reported losses. Trump’s 1984 return also became public in a court case and showed he reported no income for the year.
During Monday’s presidential debate, Democrat Hillary Clinton asserted that Trump may have, in fact, paid no federal income taxes at all in recent years.
“That makes me smart,” Trump retorted at one point.
After the debate, Trump claimed he had never said that.