“Trump’s business model, which goes something like this: Launch several businesses, many of which hemorrhage millions of dollars each year, and use the publicity from those businesses to make money on personal branding. The latter is highly profitable, earning Trump $427.4 million between 2004-2018. The losses from the former—his hotels and resorts for instance—are then used to largely offset his tax liability.
The Times’ report does erode the savvy businessman brand Trump has sought to cultivate for himself, both commercially and as a candidate for office. The president is not necessarily the astute entrepreneur he claims to be, though he may be uniquely skilled at making money by wasting money. His most high-profile business successes—his golf courses—have reportedly lost $315 million since 2000. The Trump International Hotel in Washington, D.C., just opened in 2016, has already lost $55 million, both numbers according to the Times.
Losing money for a living is certainly an unorthodox business model, but that doesn’t make it illegal.
Trump’s deductions don’t stop there, however. There’s also the $9.7 million tax credit Trump claimed to renovate the Old Post Office building in Washington, D.C., which would later become the aforementioned Trump hotel. That fell under the historic preservation tax clause, an entirely legal tax incentive meant to encourage the redevelopment of old structures.
It could be legally problematic, or just another revealing symptom of U.S. tax law, that Trump has claimed millions of dollars in unspecified consulting fees on various business projects, which typically amounted to 20 percent of his income, according to the Times. Ivanka Trump was allegedly the recipient of hundreds of thousands of dollars in such consulting fees. The president also declared $1.4 billion in business losses in 2008 and 2009. An IRS audit is ongoing.”
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“Our tax code, which Bishop-Henchman says was written in the style of a “phone book,” is replete with overly complex rules and regulations meant to influence the public’s economic behavior. Former Vice President Joe Biden is no stranger to this. “I have nothing against Amazon,” he wrote in June of 2019, “but no company pulling in billions of dollars of profits should pay a lower tax rate than firefighters and teachers. We need to reward work, not just wealth.” The tech behemoth paid no federal taxes in 2018 after making use of legal tax incentives established by Congress, of which Biden was a member for 36 years. For example, Amazon invested $22.6 billion in research and development in 2017, something the legislature hopes will spur job creation and economic growth.”
“The Times story makes clear the supposedly wealthy president often paid no income taxes while his businesses regularly lost vast sums of money, and he himself was on the hook for increasing sums in loans. All of that is politically damaging enough to Trump’s image, and likely a sufficient reason to work hard to keep the tax returns secret.
But there’s likely another reason behind Trump’s reticence — because reporters would scour his returns for legally dubious claims, and put the pieces together to how he was trying to snooker the IRS.
That’s just what ended up happening here. For example, Buettner, Craig, and McIntire sussed out that mysterious write-offs for consulting fees on certain Trump projects matched the amounts of payments to Trump’s daughter Ivanka. And there’s far more in the Times’s excellent piece.
One major theme of the Times piece is that the IRS audit of Trump is extremely serious, and that he could end up owing the US government more than $100 million. So reporters’ scrutiny of his tax returns might not just be politically problematic for Trump — they could also be financially and legally problematic.”
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“Trump did indeed pay zero in income taxes from 2011 to 2014, and a paltry $750 in 2016 and 2017. He pulled this off by claiming that his businesses lost massive amounts of money. He has $421 million in debt due in the next few years, and he could owe $100 million more to the US government if he loses his audit battle with the IRS.”
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“the specific reason Trump paid no taxes is embarrassing — because his businesses lost tons of money. (At least, that’s what he claims; keep in mind that the tax return information is his representation of his businesses to the IRS.)
To be clear, some parts of Trump’s business really do make money — for instance, The Apprentice sent cash pouring in, and Trump Tower is profitable. But Trump avoids paying taxes on these profits because he’s claimed such massive losses from other parts of his business empire.”
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“there’s clearly some legally questionable stuff in there.
For instance, the records obtained by Buettner, Craig, and McIntire show that Trump wrote off $26 million in supposed consulting fees as a business expense between 2011 and 2018. But the reporters took the added step of uncovering where some of that money was going — and they figured out that some of those write-offs matched payments to Trump’s daughter Ivanka, as revealed on her own financial disclosure forms.
Ivanka was an executive vice president of the Trump Organization, not some outside consultant. And sources told the Times that there were no outside consultants involved in certain projects for which Trump’s businesses wrote off consulting fees.
The Times story also mentions other questionable practices — Trump dubbed a Westchester, New York, mansion an “investment property” so he could write off property taxes on it, but his son Eric Trump called it “our compound.” The Trump Organization also wrote off Donald Trump Jr.’s legal fees for the lawyer who represented him in the Russia investigation.”
“An actual payroll tax holiday does mean an increase in take-home wages for some. According to recently published Internal Revenue Service (IRS) guidance on the president’s order, employers can temporarily stop withholding the employee’s 6.2 percent share of Social Security taxes for workers earning under $104,000 per year. That means more money in their paychecks for those eligible workers.
This could be significant. A little-known fact is that, for a majority of American taxpayers, the largest share of their federal tax bill is the payroll tax, not the income tax. In the way it’s designed, the payroll tax is regressive, so it hits lower-income earners harder. But a temporary reprieve is pretty much where the good news ends for the employees.
For one thing, as noted, the benefit may be short-lived. According to the IRS, unless Congress decides to go ahead and forgive the tax, it will eventually need to be collected by employers and sent to Uncle Sam. This is guaranteed to become a massive headache for employers, who will ultimately have to collect the deferred taxes from their employees. As a result, some large companies such as UPS have already announced that they will continue to collect the payroll tax from their employees and send the money to the federal government as usual.”
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“as some point out, those tax deferrals will eventually become due, and employers may then have to withhold twice the amount of payroll taxes from employees’ paychecks starting in January.
This will create quite a bit of pressure on Congress to waive the deferred taxes next year. But even if that happens, somebody somewhere at some point will have to pay. There’s no such thing as a free tax holiday.”
Policy Basics: Federal Tax Expenditures 11 18 2019. Center on Budget and Policy Priorities. https://www.cbpp.org/research/federal-tax/policy-basics-federal-tax-expenditures The biggest U.S. tax breaks Drew Desilver. 4 6 2016. Pew Research Center Estimates of Federal Tax Expenditures for Fiscal Years 2019-2023. 12 18 2019. The Joint
“In the February issue of the American Economic Review, researchers Kamila Sommer and Paul Sullivan consider the implications for the US housing market if this $90 billion subsidy to homeowners were to be scrapped. They find that getting rid of it would actually improve overall welfare by lowering home prices and expanding opportunities for home ownership among younger and lower-income households.
“The people who are the primary beneficiaries of the deduction are the high-income households,” Sommer said in an interview with the AEA. “When you take it away, house prices fall, they consume less housing, live in smaller houses…but the decline in house prices reduces the entry cost for the marginal households that are previously renting. It’s almost like this reallocation of housing from high-income households to low-income households.”
Critics say the mortgage interest deduction is a regressive tax policy that inflates prices and encourages buyers to choose more expensive houses and take on debt rather than sinking money into other investments. It also robs the Treasury of tax revenue that could be used to close the deficit. But real estate lobbyists say its repeal would depress homeownership and negatively impact social welfare.”
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“More than half of all existing homeowners — 58 percent — would see their consumption improve after the reform, with most of the benefits going to young, low-income households. Rich homeowners with big properties suffer the most, since they have outsized amounts of mortgage interest that can be deducted from their income tax burden. When that benefit goes away they end up bearing the brunt of the impact.
It’s less certain whether there would be any meaningful impact on tax revenue for the government, the authors say. Getting rid of the deduction leads to a 2.6 percent increase in income tax revenue, but the falling home prices translate to a 7.8 percent drop in property tax revenue. Overall, it’s essentially a wash, with a total revenue gain of just one-half of a percentage point.”
“At the end of 2019, Congress repealed three significant tax components of the Affordable Care Act, a.k.a. Obamacare. Each of them had been included in the initial legislation to raise the revenue required to pay for the new spending the law called for.”
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“What’s the problem with the repeal of a bunch of taxes no one ever really liked? That’s probably what the lawmakers who voted to end the taxes were thinking too. The main effect will be to increase the deficit by a little more than $373 billion over the next decade—and, in the process, to further weaken a central argument made by supporters of the legislation.
Obamacare was passed on a promise that it would be deficit-neutral or even reduce the deficit slightly. The Congressional Budget Office estimated that the law would reduce the deficit during its first decade, provided that all of its provisions were enacted as the statute called for. As The New York Times noted last summer, the Cadillac tax “was expected to be a key cost-containment provision in President Barack Obama’s signature health law and one of the main ways it was supposed to pay for itself.”
There are obvious lessons here about what we might expect from various plans to “pay for” Medicare for All now being touted by various Democratic presidential hopefuls. If nothing else, this episode is a reminder of how Washington works: First, Congress passes a law setting up an expensive new program along with (if we’re lucky) a system to pay for it. Years later, amid a bipartisan spending binge, those taxes are repealed while the rest of the program remains on the books. The public barely notices, and the lawmakers involved shrug and move on.”
“On a global scale, inequality is declining. While it has increased within the United States, it has not grown nearly as much as people often claim. The American poor and middle class have been gaining ground, and the much-touted disappearance of the middle class has happened mainly because the ranks of the people above the middle class have swollen. And while substantially raising tax rates on higher-income people is often touted as a fix for inequality, it would probably hurt lower-income people as well as the wealthy. The same goes for a tax on wealth.
Most important: Not all income inequality is bad. Inequality emerges in more than one way, some of it justifiable, some of it not. Most of what is framed as a problem of inequality is better conceived as either a problem of poverty or a problem of unjustly acquired wealth.”
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“The Congressional Budget Office (CBO) produced a report in November 2018 on the growth of household income in each of five quintiles. Between 1979 and 2015, average real income for people in the top fifth of the population rose by 101 percent, while it rose for people in the bottom quintile by “only” 32 percent. For the middle three quintiles, average real income increased by 32 percent as well.
Or at least those are the numbers if you ignore the effects of taxes and direct government transfers. But you really shouldn’t leave those out: If you’re debating whether to increase taxes on the rich and transfers to the poor, it seems important to take into account the taxation and safety net already in place. Once the CBO researchers subtracted taxes and added welfare, Social Security, and so on, the picture changed dramatically for the lowest quintile: Income rose by 79 percent. (For the middle three quintiles, it increased by 46 percent. For the highest quintile, it went up by 103 percent—slightly more than before, probably thanks to Ronald Reagan’s and George W. Bush’s tax cuts.)”
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“That’s still an increase in income inequality, of course. But it’s not an inequality increase in which the poor and near-poor are worse off. They’re much better off. Everyone is.”