Trump’s $750 Tax Bill

By Michael Rainey

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.

Send your tips and feedback to yrosenberg@thefiscaltimes.com.
Follow us on Twitter:
@yuvalrosenberg,
@mdrainey and
@TheFiscalTimes. And please tell your
friends they can
sign up here for their own copy of this
newsletter.

News

Views and Analysis