Johnston: Nine Key Points About Trump’s Income Taxes

David Cay Johnston (The National Memo), 9 Key Points About Trump’s Income Taxes (And Many More Questions):

Donald Trump, challenged again to release his tax returns, offers a nonsense excuse for keeping them secret. But worse than that, the national political reporters covering Trump’s presidential campaign have, yet again, missed big, obvious stories about his conduct and character

Compounding these errors, some journalists have reported nonsense as egregious as Trump’s, concerning what his tax returns would tell us. Many seem certain that they will reveal his actual wealth even though tax returns measure income, not net worth, as I will explain.

Still, there is plenty we can learn about Trump from his tax returns. Among the big stories the political reporters missed in covering Mitt Romney’s comments about the potential “bombshell” hidden in Trump’s returns — and the former Republican nominee’s ensuing tiff with the potential future nominee: ...

I expect Trump’s returns to be extremely aggressive, but well within the boundaries set by Congress and without even a hint of criminal tax evasion. I also suspect his returns will show negative income. That’s right — negative. The last line on the front page of his Form 1040 likely shows a number less than zero, because of a special tax rule for very rich real estate professionals that I’ll explain below. In essence, that rule means not having to pay income taxes.

Therein lies the biggest missed opportunity of all for American journalists. If only they would do the work needed to show how our federal tax system actually operates. The awful truth is that Congress burdens most of us with taxes, but for many of the super-rich, including Trump, the income tax system is a massive source of wealth.

By law, billionaire business owners can live free of income taxes if they wish. Every major tax practitioner knows this, as I have explained repeatedly in articles and books going back two decades — and as I will show again now: ...