What has he hidden?
We’re finally starting to find out, now that the House Ways and Means Committee has released six years of Donald Trump’s personal and business tax returns. Trump’s filings are complex, and it could take experts weeks to know if Trump cheated or used overly aggressive techniques to lower his tax bill. The commission has not released tax documents for some of Trump’s business entities, so mysteries may remain.
But a few things quickly become apparent when reviewing the top numbers in Trump’s returns. When Trump ran for president in 2015, he characterized himself as a builder and businessman who could go to Washington and fix what politicians had destroyed. Trump’s self-proclaimed status as a political outsider and corporate titan were crucial elements of his appeal to voters.
But Trump’s tax returns suggest his companies are perpetual money losers, while raising questions about how he manages to fund a gilded lifestyle. During each of the six years from 2015 through 2020, one of Trump’s major corporate entities, DJT Holdings, lost millions of dollars. The smallest loss was $34 million in 2015. The largest was $64 million in 2016. Combined, those losses amount to $314 million from 2015 through 2020.
This is not an entirely new revelation. A glimpse into Trump’s finances has long revealed that Trump is profiting lavishly from losses in one part of his business portfolio, offsetting gains elsewhere and slashing his tax bill. Documents leaked to the New York Times in 2016 revealed a $916 million loss Trump declared in 1995 lowered his tax bills for nearly two decades. When Trump began making millions on the TV show The Apprentice in the 2000s, losses from floundering real estate ventures, such as his Atlantic City casinos, helped keep his income tax payments low. These practices are generally legal, although some tax experts believe Trump could have pushed the legal boundaries.
When Trump became president in 2016, he said he would release his tax returns once the IRS finished reviewing them. Of course, Trump never released any tax returns, and an IRS audit wouldn’t have stopped him from doing so in the first place. The House Ways and Means Committee finally have Trump’s win from the IRS on Dec. 20, after Trump lost a four-year legal battle to keep them private. Found judges all the way to the Supreme Court Congress had a right to see the resultsas it could contribute to legislative activity.
Had Trump released his 2015 comeback while running for president in 2016, journalists and political opponents would have dug into seemingly massive business and personal losses. His return for DJT Holdings shows gross income of $25.1 million, but a net loss of $34.1 million. A company is likely to have losses greater than revenues because tax law allows carry-forward losses from prior years. But it looks awfully bad telling voters you’re a businessman while reporting significant losses to the IRS.
The individual return of Trump and his wife Melania in 2015 further undermines his business reputation. Trump’s 2015 adjusted gross income was -$31.8 million. In other words, he would have lost $31.8 million because he is allowed to claim losses from his businesses against his personal income. His taxable income was $0 and he owed $0 in federal income tax. It is difficult for ordinary workers who earn most of their income from employment to declare negative income unless they have capital losses or other types of losses that exceed what they earn from their employer.
Trump’s Democratic opponent, Hillary Clinton, has released its 2015 tax returns on August 12, 2016. It revealed that she and husband Bill Clinton had an adjusted gross income of $10.6 million and paid $3.6 million in federal income tax, for an effective tax rate of 34%. While the filing revealed that the Clintons are wealthy, they claimed no arcane tax breaks other than a miniscule capital loss of $3,000. Trump was the candidate to go after the meat and potatoes voters in 2016, but Clinton’s taxes were much more recognizable.
DJT Holdings declared business losses for each of the next five years, through 2020. In terms of Trump’s personal returns, his adjusted gross income was negative for three years and positive for two years. Over the six years combined, those business losses accounted for Trump’s adjusted gross income — $53.2 million, or a loss of $53.2 million. His taxable income was $0 for four of the six years.
Trump did face a problem with federal income tax payment: the alternative minimum tax, which increases the tax liability for some filers, mostly high net worth, who use deductions to significantly shave their taxable income. For four of those six years, the AMT kicked in and increased Trump’s federal tax bill. Including regular income tax payments and the AMT, Trump appears to have paid approximately $4.1 million in federal income taxes between 2015 and 2020.
If voters had been able to see several years of Trump’s tax returns during the 2020 presidential election, it would have emerged that Trump’s businesses lose money every year and that Trump as an individual loses more money on balance than he earns. That’s not how it really works. Trump has a few very large sources of regular income, such as millions of dollars in interest each year, and capital gains that can result from numerous deals to license the Trump name. Those earnings appear to be consistent and recurring, while losses may occur in a given year or two but may be spread over many years for tax purposes.
Trumps sometimes bragged about the low taxes he paid, saying he was aggressively cutting his tax bill makes him smart.” Maybe. It would be interesting to know if it makes him more or less eligible.