The analysis released Sunday evening by The New York Times of President Trump’s tax filings stretching back over more than two decades has caused quite a stir as we enter the final weeks of the presidential campaign. Among many other details, the report alleges that Trump paid $750 in federal income taxes in 2016, the year he won the presidential election, and again in 2017, the year he took office. In ten of the 15 years before that, Trump paid no federal income taxes at all, the Times said.
Trump dismissed the report as “fake news” and “totally made up,” despite bragging in the past that he doesn’t pay taxes. (“That makes me smart,” he famously said in 2016.) He also accused the Times, somewhat paradoxically, of using “illegally obtained information” in its report.
We’ll leave it to the political experts to debate the effect the news might have on the presidential campaign, but we want to highlight a few comments on the Times report that help connect the alleged details with a broader picture of the U.S. tax system.
* Trump’s alleged income tax payments were exceptionally low: “Taxes on wealthy Americans have declined sharply over the past few decades, and many use loopholes to reduce their taxes below the statutory rates. But most affluent people still pay a lot of federal income tax. In 2017, the average federal income rate for the highest-earning .001 percent of tax filers — that is, the most affluent 1/100,000th slice of the population — was 24.1 percent, according to the I.R.S. Over the past two decades, Mr. Trump has paid about $400 million less in combined federal income taxes than a very wealthy person who paid the average for that group each year.” (David Leonhardt, The New York Times)
* More typical of low-income households: “Looking at how federal individual income taxes are distributed by income, $750 would be less than what a typical family making $30K-$40K pays before credits, and less than what a family making $40K-$50K pays after credits.” (Ernie Tedeschi, Evercore ISI)
* And less than the average family: “The average middle-class American household paid approximately three times as much in federal income taxes in 2016 and 2017 as President Trump, a billionaire real estate mogul with properties and developments all over the world.” (Jeff Stein and Christopher Ingraham, Washington Post)
* Trump appears to be taking advantage of tried and true methods to avoid income taxes: “One way to avoid taxes as a wealthy person: 1) Take advantage of tax laws that let you ‘depreciate’ investment real estate that is actually going up in value to offset income 2) Never sell 3) Unrealized capital gain goes to zero at death.”
“Second way to avoid taxes as a wealthy person: 1) Own growth company. Don't pay dividends. Invest in growth to minimize corp taxes 2) Don't sell. Your wealth = an unrealized, never-will-be-realized cap gain 3) Unrealized cap gain goes to zero at death.” (Steven T. Dennis, Bloomberg)
* Not a good look for more tax cuts for the rich: “Trump’s own history of avoiding tax payments – and often paying nothing -- is the other issue that should alarm the president’s supporters. Trump and the Republican Party engineered a massive tax cut in 2017 that largely benefitted the most affluent Americans and the largest corporations in the U.S. Now we learn that the president who pushed a tax cut that didn’t deliver the economic stimulus he claimed it would, but feathered the nests of the most privileged, has rarely paid taxes in recent years.” (Timothy L. O’Brien, Bloomberg)