Trump’s
Seventy-Three-Million-Dollar Tax Refund Is the Biggest Outrage of All
By John Cassidy
After doggedly pursuing
the story of Donald Trump’s taxes (or non-taxes) for
years, the New York Times has hit the motherlode with its
latest investigation, which revealed that the self-proclaimed billionaire paid
a grand total of seven hundred and fifty dollars in federal income taxes in
2016, when he was elected President, and the same sum in 2017, his first year
in the White House. In ten of the fifteen years before 2016, he paid no federal
income taxes at all. If you haven’t yet read the lengthy Times report, I won’t spoil it
by spilling all the juicy bits. Instead, I’ll focus on one that is arguably the
most Trumpian of all.
Because
of previous reporting, including a couple of significant Times pieces
in October, 2016, and May, 2019, as well as
contributions by Trump biographers, such as David Cay Johnston, we’ve
known for a long time that the President is a serial tax avoider. Between 1984
and 2004, he used actual losses, loss write-downs from previous years, and
other accounting dodges to pay virtually nothing in federal income taxes. From
2005 to 2007, this latest Times scoop reveals, he did finally
pay about seventy million dollars to the Internal Revenue Service. But then, in
2010, he demanded a full refund for those tax payments. And the I.R.S. acceded
to his request: it paid him $72.9 million, including interest. This 2010 refund
seems to be at the center of an auditing dispute between Trump and the tax
authorities that has dragged on for almost a decade. It also appears to be the
money that Michael Cohen, Trump’s former personal lawyer, was referring to in
his 2019 testimony to Congress, when he recalled Trump showing him a huge check
from the U.S. Treasury and remarked that Trump “could not believe how stupid
the government was for giving someone like him that much money back.”
How
could a person who doesn’t pay taxes get a big refund? As always with Trump,
the details of his financial shenanigans are a bit complicated, but the basic
outline is fairly easy to grasp. He hates paying taxes. To avoid doing it, he
will resort to virtually anything—and that includes exploiting his many
business failures.
In
the late nineteen-eighties and early nineteen-nineties, Trump’s businesses,
some of which he had greatly overpaid for when he bought them, racked up more
than a billion dollars in losses, and four of them
ended up filing for bankruptcy: three casinos in Atlantic City and his Plaza
Hotel, in New York. In 1995, as he emerged from this wreckage, he declared a
tax loss of more than nine hundred million dollars, which the I.R.S. allowed
him to use in subsequent years as an offset against any profits his businesses
made. So even in years when the Trump Organization did well, his loss
carryovers reduced his tax bill to zero.
According
to the new Times investigation, this basic pattern of heavy
losses in parts of the Trump empire offsetting substantial earnings in other
parts of it has continued for the past decade and a half. Since 2000, for
example, Trump’s fifteen golf courses have together generated losses of $315.6
million, even as other Trump enterprises—including Trump Tower, overseas
licensing deals, and an investment in two office towers operated by Vornado
Realty Trust—have generated substantial revenues. In 2011, 2012, 2013, and
2014, Trump paid no federal income taxes at all. In 2016 and 2017 combined, he
contributed enough to the U.S. Treasury for it to buy a new love seat
from Pottery Barn.
The
only notable exceptions to this pattern of minimal tax payments were the years
2005, 2006, and 2007, when “The Apprentice,” which Trump co-produced with
NBC, was doing very well, and the big accounting loss that he had carried over
from the nineteen-nineties had run out. “With no prior-year losses left to
reduce his taxable income, he paid substantial federal income taxes for the first
time in his life: a total of $70.1 million,” the Times report
says. This money didn’t stay in the coffers of the U.S. government for very
long.
In
2010, Trump declared to the I.R.S. that, during 2008 and 2009, his businesses
had lost another $1.4 billion. Exploiting a little-noticed clause in a piece of
legislation that Barack Obama had signed into law as part of the efforts to
stimulate the economy after the Great Recession, Trump claimed that this huge
loss entitled him to a full refund of the income taxes he had paid in 2005,
2006, and 2007. The I.R.S. quickly paid out Trump’s claim pending an audit. The
refund “would eventually grow to $70.1 million, plus $2,733,184 in interest,”
the Times reports. “He also received $21.2 million in state
and local refunds, which often piggyback on federal filings.”
Trump
has never been short on chutzpah. At some point, though, someone in the
auditing department of the I.R.S. seems to have decided that this latest
maneuver was over the line. Under tax law, refunds of more than two million
dollars require approval from Congress’s Joint Committee on Taxation, which
also got involved. In 2014, an agreement between Trump and the I.R.S. appeared
to have been reached, “but the audit resumed and grew to include Mr. Trump’s
returns for 2010 through 2013,” the Times report says. “In the
spring of 2016, with Mr. Trump closing in on the Republican nomination, the
case was sent back to the [congressional] committee. It has remained there,
unresolved, with the statute of limitations repeatedly pushed forward.”
It
isn’t clear why the dispute has dragged on for so long, but the Times highlights
one intriguing possibility. In 2009, Trump finally gave up ownership of his
financially stricken casinos in Atlantic City, which had filed for bankruptcy
again. In the same year, his tax returns included “a declaration of more than
$700 million in business losses that he had not been allowed to use in prior
years,” the Times says. Proprietors who abandon loss-making
businesses are allowed to claim some of the losses they incurred for tax
purposes, but they have to give up the businesses entirely and not receive
anything of value in return. Trump got something. When Trump Entertainment
Resorts was restructured and placed under new ownership, he received five per
cent of the stock in the successor company. “The materials reviewed by the
Times do not make clear whether Mr. Trump’s refund application reflected his
public declaration of abandonment,” the report says. “If it did, that 5 percent
could place his entire refund in question.”
Including
the interest that has accumulated since 2010, it could cost Trump about a
hundred million dollars to repay the I.R.S., the Times calculates.
If he were a genuine billionaire, he could raise this sum without very much
trouble. But given the evidence that many of his businesses, including the
Trump International Hotel in Washington, D.C., seem to make substantial losses,
could he even afford to pay out a hundred million dollars?
Trump’s
businesses “reported cash on hand of $34.7 million in 2018, down 40 percent
from five years earlier,” the Times report says. In theory, he
could take out another bank loan to pay a big tax bill. During the past decade,
though, he’s already incurred heavy borrowings. He “is personally responsible
for loans and other debts totaling $421 million, with most of it coming due
within four years,” the Times notes. “Should he win re-election,
his lenders could be placed in the unprecedented position of weighing whether
to foreclose on a sitting president.”
Should Trump lose
the election, which opinion polls suggest is a
more likely outcome, he will have to deal with the I.R.S. and his bank
creditors as a private citizen. Could this, perhaps, be one reason that he
won’t commit to accepting the election result and leaving the White House
without protest if it goes against him?
Whatever
happens on November 3rd, the Times story confirms that Trump
has been playing the I.R.S. for decades. It also shows that, in the U.S. tax
framework, there is one set of rules for the majority and another for the very
rich. A confidence trickster from the get-go, Trump exploited this setup to
denude the U.S. Treasury, enrich himself, and make a mockery of the entire
system. If anything good comes out of the whole thing, it’s that the arguments
for meaningful reforms of the tax laws and tougher enforcement are now stronger
than ever. Of course, Trump will have to be voted out of office for change to
happen.
