Yesterday morning, the New York Times released a damning report on President Trump’s tax returns, detailing how the President has avoided millions of dollars on his tax bill for the past decade, despite continuing to wrack up millions every year.
Much of the attention garnered by the report has focused on the fact that the meager $750 Trump paid in taxes in each 2016 and 2017 is less than what some minimum wage workers pay. This anger is certainly justified, but it’s important to remember that this kind of large-scale tax avoidance is far from uncommon and that this is a case of the tax system actually working as intended: to serve the interests of the wealthy and powerful.
While it’s possible that Trump might have employed less-than-honest tactics to lower his tax obligation, most of what he did is perfectly legal. And that’s precisely the problem. As President Trump did in 11 of the 18 years covered by the report, a dizzying number of high earners and corporations pay zero – yes, zero – dollars in federal income taxes.
Trump and others like him often heavily exploit one loophole in particular: write-offs. Trump got away with paying a scant $750 dollars in taxes in part through a liberal use of the “business expense” label. These deductions relied on Trump’s ludicrous definition of “ordinary and necessary” business costs accepted by the IRS. Under this tax-deductible category, Trump listed $70,000 worth of hairstyling, his private jet, golf courses, a 200-acre family mansion, and other personal residences as necessary to his crumbling business empire.
Writing off these purchases as business expenses allowed Trump to enjoy a luxurious lifestyle even while claiming massive losses. This abuse of this write-off is one of the many reasons why billionaires and high-net worth millionaires now get away with paying a lower tax rate than the working class for the first time in our history. In 2017, the scales were tipped even further with the passage of the GOP tax overhaul which showered tax benefits upon the wealthy while ignoring the lower and middle class.
The report also revealed that the hundreds of millions in business losses themselves have consistently and considerably reduced Trump’s tax payments. The Times report details how the various businesses central to Trump’s empire have been hemorrhaging money for years. His golf courses alone, for example, have reported losses of $314.6 million over the past two decades. These hefty losses on his investments qualified him for a $72.9 million tax refund which carried forward, exempting him from income taxes for several years.
It’s no secret that Trump can’t run a business. In fact, many of his businesses are not profitable and haven’t been for years. But because companies only pay taxes on their profits, only profitable companies pay their taxes – but even the ones doing well can find other ways to funnel their profits into continued investments and new developments, effectively shielding them from the IRS. As long as Trump stated that he was operating on a loss, he would never pay taxes. This is part of how Amazon, General Motors, and other large corporations weasel out of federal income taxes.
All of this is in sharp contrast to our tax code’s treatment of ordinary working folks. When the average American has an unexpected, devastating life expense like a medical diagnosis or a pandemic forcing their small business to close, they don’t get to just write off their debts and skirt their tax bill. Millions of Americans fall into a vicious cycle of debt, high-interest loans, and painful IRS audits every year over mere hundreds of dollars, but if you lose millions, you’ll get off scot free.
We don’t have to be content with a system that will garnish the paychecks of a worker making $7.25 an hour but will bend over backwards to make sure a billionaire gets to scam the government out of millions and secure a seven-figure dollar refund on their way out the door.
Trump’s swindling isn’t a story of a clever individual gaming the system in their favor, but the result of decades of erosion to our tax code that increasingly are increasingly weighing the scales in favor of the wealthy. It’s a story of theft from all the people in this country who dutifully pay their taxes and expect a government that serves them and their interests in return.