Trump’s $750 Tax Bill

Trump’s $750 Tax Bill

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Plus - Comparing presidential taxes
Monday, September 28, 2020

Trump’s $750 Tax Bill

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)

Quote of the Day

“Most very wealthy people can easily avoid individual taxation with support from tax laws that provide them with discretion over how much tax they pay, bankruptcy laws that allow them to pass on losses to others even while they retain gains elsewhere, bank lending practices that favor the rich, and a monetary policy that for the last three decades has hugely subsidized wealthy investors.”

C. Eugene Steuerle, cofounder of the Urban-Brookings Tax Policy Center, who served as deputy assistant secretary of the US Department of the Treasury for Tax Analysis from 1987 to 1989. (Washington Post)

US Household Wealth Grew From 2016 to 2019

American households grew wealthier between 2016 and 2019, according to the latest Survey of Consumer Finances released Monday by researchers at the Federal Reserve Bank. But long-running patterns of inequality remained in place, leaving households in the top of the distribution much better prepared to weather the coronavirus crisis recession this year.

The report confirms a steady decline in relative wealth over the last 30 years for the bottom 90% of the U.S. population (the orange and blue lines in the chart below), and an increase for the top 10% (yellow and green lines).

“Affluent families have ... held a growing share of the nation’s wealth — savings amassed overtime, rather than the money a family earns in a given year — over recent decades,” The New York Times’ Jeanna Smialek wrote Monday. “They retained that advantage through 2019. In 1989, the top 1 percent of wealth holders held about 30 percent of the nation’s net worth. That jumped to nearly 40 percent in 2016 and was little changed in the latest survey.”

Chart of the Day

Assuming the numbers reported by The New York Times hold up, President Trump’s low federal income tax burden will be another thing that distinguishes him from his predecessors. (Washington Post)

Other Chart of the Day: 60 Games Later

Although it may feel like the baseball season just started, the 16-team playoffs are ready to begin, starting tomorrow. Just like the coronavirus-shortened season, the playoff series will fly by, with the World Series scheduled to start on October 20.

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