Should Donald Trump pay more taxes

How Trump managed to pay only $ 750 in taxes despite an income of millions

Question: What makes the New York Times report explosive?

Answer: Donald Trump and his tax ethics have often been the subject of public debate. So far, the president had disclosed almost no tax documents, only older declarations from the 1990s were known. They showed that for many years the president has paid next to no income tax. The "New York Times" has now evaluated Trump's tax returns from 2000 to 2017 for the first time. They not only show what tricks he used to make tax debts disappear as an entrepreneur, but also how he used the same tricks as president.

Question: So Trump paid few taxes?

Answer: Not only has he paid little, but according to the "New York Times" almost nothing at all for many years. In eleven of the 18 years for which the information is available, Trump paid exactly zero dollars to the US tax authority, the IRS. In other years it was a negligible amount - despite his income in the millions. In 2016, the year he won the presidency, he paid just $ 750 in income tax. In 2017, the first year in office, it was also only $ 750.

Question: How did that go? Is it fraud?

Answer: While Trump and the IRS are conducting a delicate legal battle in a branch of the cause, a large part of this tax optimization has expired legally in the period mentioned. As an entrepreneur and media mogul, Trump has two pillars. First there is the income from his successful TV reality show "The Apprentice" (in German, for example: the apprentice), which brought him more than 400 million dollars in income. In addition, many of Trump's real estate investments have proven to be lucrative, such as the Trump Tower in New York. He earned more than $ 170 million by 2017. Trump has invested this money in numerous golf clubs and a hotel - and these companies are posting horrific losses, over 600 million.

Question: And did he offset these losses with profits?

Answer: That's the way it is. When Trump started his TV show, he owned two golf clubs and had two more renovated. He now has 15 plus a luxury hotel in Washington. His most expensive golf resort alone, the National Doral near Miami, which he acquired in 2012, has since accumulated losses of $ 120 million. The IRS does not doubt this information, although some are questionable according to the "NYT": His administrative expenses at another golf club - in Bedminster, New Jersey - increased fivefold from 2016 to 2017.

Question: And what other tricks has the president used to minimize his tax liability?

Answer: Trump has paid more than $ 20 million in consultancy fees, some to his own family, such as his daughter Ivanka Trump, according to the New York Times. Another strategy: Trump and his lawyers exploit loopholes in laws. Trump's lenders have waived nearly $ 300 million in loans, documents show. Often because business was not going as well as expected. Waived loans are actually income and should be taxed. But a special rule allowed Trump to postpone back tax payments for five years - and then pay them off over five years. His most controversial trick got him into legal trouble.

Question: How did that happen?

Answer: In 2009 Trump claimed a repayment from the tax authorities: He demanded the taxes he had paid for the years 2005 to 2008 to be returned and also received the money, 73 million. Trump had suddenly claimed $ 700 million in losses that he had not yet declared to the IRS. The background to this was a law passed by the Democrats during President Barack Obama's tenure: until then, companies could offset losses from two previous years with current profits in their tax returns. In 2009, however, as a measure to counter the financial crisis, the period was extended to five years. Where did the 700 million losses come from? Probably from Trump's stake in a casino in Atlantic City. US law allows all losses from an investment to be claimed, provided that the investor is selling the deal and has demonstrably not made a cent of profit from it. That's what Trump did in 2009, he left casino society. But: The Atlantic City Casino went bankrupt, and Trump held a five percent stake in the subsidiary. The IRS therefore sees the law violated - Trump received some of his investment - and wants the 73 million plus interest back. A legal dispute that has not yet been resolved is raging over this.

Question: Is Trump an isolated case, or do rich Americans pay no taxes at all?

Answer: Wealthy Americans can use a number of legal tricks to lower their tax burden, but few do it as aggressively as Trump. According to the Washington Tax Policy Center, a liberal think tank, the wealthiest 0.1 to one percent of Americans recently paid an average of 26 percent in income tax. The one percent group includes people with an annual income of more than $ 700,000. For comparison: the average tax rate in the USA is a little more than ten percent. Wealthy citizens pay less; in the 1970s, top earners were still paying 40 to 60 percent in taxes.

Question: Okay, taxes are down for the rich, but they still pay a lot more.

Answer: In absolute numbers, of course. But not in relative terms. At least that's the result if you look at all taxes and duties in the US. Income tax returns that employees file with the federal IRS cover only a small portion of the field. In addition, there are various state taxes and sales tax. The economists Emmanuel Saez and Gabriel Zucman have analyzed all of this and processed their results in an exciting book ("The Triumph of Injustice") last year. Core thesis of the authors: In the USA today teachers and classic workers pay higher taxes on their income on average than a small group of 400 multi-billionaires, including Facebook boss Mark Zuckerberg and Amazon founder Jeff Bezos.

Question: How come

Answer: If you look at all duties and taxes, the USA has a flat tax: whether classic employees, to which 50 percent of Americans belong, or the middle class and the upper middle class, the combined tax burden is always somewhere between 25 and 30 percent. Only the small top group of the wealthiest, the 0.01 percent of society, pays less than 20 percent in taxes on their income. There are several reasons for this. Just one example: a large part of the income of capital owners remains untaxed. If Facebook's share price rises, Mark Zuckerberg, who owns a fifth of the company, will benefit. But as long as Facebook does not pay dividends, this profit remains untaxed. Thanks to complex offshore structures, Facebook hardly pays any taxes. Zucman and his co-author therefore argue that the US system is broken because it cannot balance it out.

Question: Back to Trump: How does he justify himself?

Answer: Trump's lawyers told the New York Times that the article was based on fake news. However, they did not publish their own documents to support this. In past TV debates in the running for the presidency, when Democrat Hillary Clinton accused Trump of not paying taxes in the 1990s, his counterattack was: "That makes me smart." (AndrĂ¡s Szigetvari, September 28, 2020)