Until recently, calls for the release of Donald Trump’s tax returns have been about getting to the bottom of Donald Trump. People want to know how rich he is, how charitable he is, where his income comes from, and yes, how creatively he uses the tax code to keep his earnings to himself. But the recent publication by The New York Times of a slice of Trump’s 1995 tax return the paper says was anonymously mailed to a reporter made it clear how much more Trump’s returns could offer.
The partial return says he claimed a $916 million loss that year, which could have been carried forward for as long as 18 years to shelter that amount of income from taxation. Trump’s returns from that year and others could illuminate much of what’s wrong with our tax system. He could use them as a lesson to inform the nation how to overhaul and simplify it.
After the story broke, he tweeted, “I know our complex tax laws better than anyone who has ever run for president and am the only one who can fix them.”
Fair enough. Get to it.
Trump would have amassed such large losses from his business debacles in the early 1990s, when his purchase of the Eastern Air Lines shuttle and the Plaza Hotel, and his investments in Atlantic City casinos were floundering. These losses let him cancel out income from cash generators like “The Apprentice” and the licensing of his name as a brand, assuming the deductions were legitimate and withstood IRS scrutiny.
During last week’s debate, Trump said paying no taxes “makes me smart.” Yesterday, at a rally in Colorado, he said, “I have legally used the tax laws to my benefit . . . I have brilliantly used those laws.”
Average Americans take all the deductions they can, too. But the wealthy use lobbyists and political contributions to manipulate the tax code in ways that benefit them and their businesses, including special types of partnerships, foundations and the routing of money in and out of international investments. That’s why wealthy people pay a maximum tax rate of 15 percent on dividends, capital gains and carried interest, while the top federal income-tax rate is 39.6 percent. Powerful people such as Trump don’t just “take all the deductions,” they create them. And far from promising to abolish such breaks, Trump is actually proposing the 15 percent limit be extended to “pass-through income,” another move that would benefit the wealthy like him.
Trump’s tax returns are hundreds of pages. He and his accountants likely know every strategy and loophole that should be discontinued — so the rich pay their fair share and the middle class gets a break. Some of them include claiming personal expenses as business expenses and shifting profit and loss — strategies so arcane most people can’t imagine them. The debate that’s needed is whether these deductions are the best social policy for the nation. Trump needs to tell us what a tax system that incentivizes investment but is equitable to the middle class would look like. And how he would get it passed in Congress.
Trump has long said he has a plan to defeat the Islamic State, but he refuses to release it because he does not want to reveal his strategy. He should have no such worries about releasing his detailed blueprint to reform the U.S. tax code, because it’s American taxpayers he’ll be enlightening. — The editorial board