Paul L. Caron

Saturday, May 11, 2019

Batchelder: Trump Is A Bad Businessman. Is He A Tax Cheat, Too?

New York Times op-ed:  Trump Is a Bad Businessman. Is He a Tax Cheat, Too?, by Lily Batchelder (NYU):

The latest bombshell Times story on the president’s tax history confirms what we already suspected: Donald Trump is a terrible businessman. Despite inheriting more than $400 million and being bailed out by his father at critical junctures, he managed to lose (or at least claim tax losses) of more than $1 billion over a decade.

The latest story also shows how we do a terrible job of adequately taxing the wealthy. The 400 richest Americans often pay tax at lower rates than the middle class because so much income from wealth is taxed at low or zero rates.

But perhaps most important, the story reinforces the need for a congressional investigation of the president’s tax returns.

President Trump is not just a run-of-the-mill multimillionaire, paying taxes at a low rate. As the Times has documented, there is ample evidence that his father’s estate — of which he was the executor — engaged in tax evasion and outright fraud, failing to pay about $500 million in estate taxes.

Other reports have documented numerous instances where Mr. Trump has taken sketchy or unlawful tax positions. His former attorney Michael Cohen effectively suggested during his congressional testimony that Mr. Trump engaged in tax fraud and insurance fraud.

The latest revelations about the president’s eye-popping tax losses provide fresh grounds for concern that he has violated tax laws: Claiming large tax losses is one of a handful of positions taxpayers must automatically disclose to the I.R.S. as potentially abusive tax shelters. ...

President Trump also is not a run-of-the-mill wealthy man because he is, well, the president of the United States. He has vast power and influence. There is ample reason to fear that conflicts of interest have infected his approach to tax policy.

When campaigning, Mr. Trump promised to close tax loopholes based on his expert knowledge of them. But instead, the 2017 tax bill seemed designed to lower taxes on him and his family through special carve-outs. ...

All of this raises the question of whether the president steered the 2017 tax bill and subsequent regulations in directions that personally benefited him and his family. Moreover, because Mr. Trump is the only president for at least 40 years not to liquidate his business assets or put them in a blind trust, concerns about his financial conflicts of interest are uniquely heightened.

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The op-ed is well written and all that, but unless I’m mistaken, the IRS isn’t the only tax agency that audits your favorite President’s returns. I seem to remember that NY has a state income tax.

By the way, I was shocked to read that claiming large losses must be, as a matter of course, reported to the Office of Tax Shelter Analysis and/or is a reportable transaction.

Posted by: Former Student | May 11, 2019 6:24:45 AM

Can we replace ...

Trump ... with Hillary
Tax returns ... with government e-mails
Taking deductions ... with forensically deleting
Saving taxes ... with avoiding FOIA

Trump takes legal, albeit generous, tax deductions (it's real estate ... duh), and then some people overlook Hillary illegally obstructing justice in all sorts of ways.

Was Trump the fiduciary for his daddy's estate or something? Did he sign any returns for the estate? A quick Google search indicates a big NO.

Trump Derangement Syndrome is very real.

Posted by: Big Boi | May 11, 2019 8:05:03 AM

It is simply inaccurate that the 2017 Tax Act was only aimed at making people like Trump richer. The 2017 TCJA got rid of tons of business deductions (meals, sports tickets, etc) that will plainly affect the rich more than the middle class. Moreover the new interest expense deduction cap (irc 163(j)) only applies to individuals with $25,000,000 in gross revenue. It is easy to just say the TCJA benefitted the rich, and to be fair some of it did (I.e., IRC 199A, neutering the AMT, and lowering corporate tax rate), the reality is that many of the provisions were aimed squarely at raising the riches taxes. And as highly leveraged as it appears the Donald is, the IRC 163(j) interest cap deduction will almost certainly affect his bottom line. Fortunately for Lily and her Op Ed, most Americans do not understand taxes, so her conclusory statements will be taken as gospel. Lily is a tax expert, so I don’t believe she is confusing tax reporting with economic realities, so I presume she is wittingly misleading her readers when she says Donald Trump must not be rich or must be a bad businessman because he reported a billion dollars in losses. I don’t like trump and it is frustrating when I find myself defending him from half-cocked criticism. Trump has many faults and low hanging fruit to criticize. But trying to claim that richest president in US history( taking into account for inflation) is a bad business man is simply wrong. He may have inherited $400 million but most economists have him in the $2-4 billion range. I wish I was that bad at business, and to hear professors make this claim simply doesn’t pass the red face test. Do better than this partisan analysis, Lily, even if NY Times Wanted this article and provided good name exposure. Anyone that understands tax should see the holes in this analysis.

Posted by: UF LLM | May 12, 2019 7:42:21 AM

Lily Batchelder is essentially a Democratic political operative. It's disingenuous for her to write pieces like this as if they were neutral. It's just politics.

Posted by: Mike Livingston | May 13, 2019 2:15:27 AM

Big Boy: I don't personally care whether Trump is a bad businessman. I *do* care whether he's a tax cheat, and there's all kinds of evidence that he is.

Posted by: Gerald Scorse | May 13, 2019 7:11:25 AM

Trump did not prepare his own tax returns. Multiple top level tax advisors and preparers did not risk their licenses by cheating for him. Nor, did Trump tell them to cheat. Rather, the planners and preparers did their jobs to have the Trump family pay no more than the minimum amount the family was supposed to pay, by following the Code and relying upon substantial authority. Aggressive tax planning, subject to IRS audits, is not cheating.

The word "cheating" has been thrown around so loosely by Trump haters that they don't bother to think how all the corporate, real estate, investment, and estate financials and tax returns all come together. They have no clues, like some of us, what tax laws existed way back and how real estate depreciation and write-offs worked then. I suspect that most claiming that Trump cheated cannot even do their own taxes correctly with online software.

It's time to put partisan politics aside and quit the childish claims of "cheating" by journalists who slant news and tax law professors who should know better.

Posted by: Woody | May 13, 2019 6:01:32 PM

"Trump did not prepare his own tax returns. Multiple top level tax advisors and preparers did not risk their licenses by cheating for him." What a wonderful excuse for tax cheating: he didn't prepare his own taxes, and the professionals who did prepare them wouldn't risk their licenses by cheating. Pray tell: how does tax cheating ever happen then? Do you seriously believe it doesn't?

Posted by: Gerald Scorse | May 14, 2019 6:18:20 AM