The evidence grows that, as suspected, multi-billionaire Donald Trump pays less in federal income taxes than do most of the people who attend his rallies. And by less, I mean he pays nothing at all, as in zero, year after year after year. Taxes are for the little people.
But that's not the worst of it. As we'll see below, the worst of it is how, on the tax issue as in so much else, Trump continues to scam his followers into believing that he's on their side, when in fact the exact opposite is true. If elected, he fully intends to cheat his supporters just as thoroughly as he has cheated almost everyone that he encounters, both in his personal and business life. Unfortunately, those supporters are too willfully blind to see what's coming.
We already knew that Trump had paid no federal taxes back in the '70s, when he was forced to file his tax returns in order to win a New Jersey casino license. We knew that in 2005, he got a $39.1 million federal tax deduction by simply pledging not to build houses on his expensive Trump National Golf Club in Westchester, N.Y., where he had no intention of building houses anyway. We also knew that over the years, he has milked his political connections for some $900 million in tax subsidies and rebates in New York City.
Now a portion of Trump's 1995 tax return has been mailed anonymously to The New York Times. That document tells us that this "hugely successful" businessman again contributed nothing that year to help pay our troops or run the government. In fact, Trump reported a loss that year of $916 million -- at least for tax purposes -- which experts say would allow him to pay no taxes to Uncle Sam for 18 consecutive years. (The true extent and source of those losses are uncertain because Trump refuses to release his tax information.)
Confronted with such evidence, Trump says what he said at the debate: "That makes me smart," a formulation that puts all of us suckers who do pay taxes to support our country into the category of stupid. The sycophantic Rudy Giuliani takes it a step further, calling Trump "a genius at how to take advantage of legal remedies" and arguing that we need that kind of genius to help run the country.
The idea, of course, is that Trump is an inside player who knows all the angles, and if we want to clean out the pay-to-play corruption and clean out the tax code, he's the perfect man to do it for us. "It takes a thief to catch a thief," as the old saying goes.
Or as The Man Himself put it this weekend:
But what does he mean by "fix"?
Fortunately, we already know what Trump intends to do with the tax code, because it's the one area in which he's given us a somewhat detailed plan. And according to every third-party analysis that I've seen, the Trump plan does nothing to ensure that he and other wealthy Americans will pay their fair share of the burden; to the contrary, the plan represents a multi-trillion-dollar giveaway to the wealthy that dwarfs the plans offered by other GOP candidates. For every loophole that the Trump plan alleges to close in the tax code, it opens a half-dozen more that will be even more lucrative.
However, I want to draw your attention to one particular part of the Trump tax plan, which deals with tax treatment for highly leveraged real-estate development of the type in which Trump specializes. Those provisions would allow developers to utilize two different tax loopholes, unlimited interest deduction and immediate expensing of investments, to create a massive new subsidy for that industry.
Combined, those two loopholes would create what tax experts call a "negative tax rate." Put another way, instead of Trump paying taxes to the government on his profits, the government would be paying taxes to Trump and his fellow developers. And if you don't want to take my word for it, fine: It is such an outrageous, unfair proposal that it has alarmed even right-wing economists and supply-siders.
-- As the Wall Street Journal put it back in August, "Donald Trump's emerging tax plan could benefit leveraged real-estate companies like the one he runs with new and substantial subsidies."
-- As Alan Viard of the right-wing American Enterprise Institute put it, with wry understatement, “there’s a certain generosity of treatment here that would seem excessive.” And when AEI says you're being too generous to the wealthy, well ...
-- In the words of Douglas Holtz-Eakin, probably the nation's most prominent conservative economist: "If you want to create a recipe for an abusive tax shelter, take those elements and bake for 15 minutes ... It's a phenomenal benefit for housing and commercial real estate interests."
-- According to a 2014 report from the Congressional Budget Office, combining those two tax breaks would create an effective tax rate of "–61 percent for C corporations and –34 percent for pass-through entities." As the CBO explains, "when tax rates are negative, after-tax income is greater than before-tax income. Thus, a tax rate of –50 percent on $1,000 income yields an after-tax income of $1,500—one-third of which constitutes the $500 negative tax liability supplied by the government." So if Trump makes $20 million on an investment, his actual after-tax income becomes $30 million, with $10 million from you and me.
-- Even House Republicans -- no pikers when it comes to handing out tax goodies to corporate America -- understand that it's wrong to pay developers out of the U.S. Treasury, creating a profit where there might not be any. "Allowing both (immediate expensing and unlimited interest deduction) together would be distortive, as it would result in a tax subsidy for debt," their plan concludes.
We've been told repeatedly that Trump is a business genius and that he knows the tax code better than anyone. So we can safely assume that in proposing such a change, Trump knows exactly what he is doing and who it will benefit (i.e., him.) When he says that he intends to "fix" our tax laws, this is what he means, because this is what he has told us he would do.
The problem, of course, is that most of Trump's supporters will have had neither the patience nor the interest to read this far. And among those who do, most will find some way to rationalize the evidence away. That's where Trump's real genius and danger lie. Like many a street hustler, he knows quite well how to dazzle a mark with baloney while calmly picking his pocket, and then make him like it.
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