Should Donald Trump show the world his tax returns?
You may have heard something today about Donald Trump and his tax bill. It wouldn’t be the first time. Questions have been asked about how much tax he pays for a while now, but new information just published has put the presidential nominee under even more pressure.
What’s the story?
Well, Trump has refused to release details of his payments, saying that the information is private. But the New York Times were emailed one of his old tax returns by an anonymous source and ran a story on Sunday that showed he declared a huge loss of $916 million in 1995.
What does this mean?
Tax experts consulted by the Times have confirmed that registering such a big loss could have allowed him to legally avoid paying any federal income tax for up to 18 years. That’s because the amount could have been used to cancel out subsequent tax on income up to $50 million over those years. How? It’s all to do with something called ‘net operating loss’, which, as the NYT article explains, allows an “array of deductions, business expenses, real estate depreciation, losses from the sale of business assets and even operating losses to flow from the balance sheets of those partnerships, limited liability companies and S corporations onto the personal tax returns of men like Mr Trump.” So that means he may not have had to pay any tax on the $50,000 to $100,000 per episode he earned from his appearances in The Apprentice.
Is this illegal?
No. This is all perfectly legal. In fact, it’s important to note the word ‘could’ in the report. No one knows yet if he actually did do this because they haven’t seen his tax returns for the years after this. All the experts have confirmed is that he may have done this because it makes financial and business sense to do so.
What’s the response been?
It’s split down the middle. Some people have defended him, saying that as a businessman he has a responsibility to his investors and employees to pay as little tax as legally possible. Former New York mayor Rudy Giuliani said: “The man is a genius, he knows how to operate the tax code for the benefit of the people he is serving.” But others have criticized him. Democrat senator Bernie Sanders said: “If everyone in this country was a genius like Mr Trump and did not pay taxes, we would not have a country.” Trump himself tweeted:
Who’s right?
That’s difficult to say. It really boils down to whether you think the way the whole tax system works is fair. There are ways to get out of paying tax, but it’s often only those who run businesses who can make use of them. Millions more pay through their employer and so can’t do this. It also helps to be rich, because then you can afford the expensive accountants who know how to work the system in your favor.
But the reason these tax breaks exist is to try and encourage businesses to thrive, so they can make money for their shareholders and also create jobs for people. The problem is that many think the tricks of the accounting trade can be taken too far, so you end up with huge companies like Apple paying very small amounts of tax in certain countries in relation to how much money they make.
How’s this gonna end for Trump?
Who knows? But whatever you think about the fairness of the tax system, it doesn’t really look good for a man who has criticized others for not paying their tax and who says he’s champion of the working man and woman to be suspected of not paying tax on his own income. Unless, the full returns are released, we won’t be able to tell. But the pressure is building for him to do just that. Is the real reason he hasn’t done so because he’ll be embarrassed by what they contain? Possibly. Could he still win the presidency? Maybe. Will we be hearing a lot more about this in the coming weeks? Definitely.
