US President Donald Trump paid a tax rate of 25 per cent in 2005, but it could have been much lower
President Donald Trump paid US$38 million (NZ$54.7 million) in federal taxes in 2005 on income of US$153 million (NZ$220.2 million) and reported a US$105 million (NZ$151 million) write-down in business losses, according to a copy of his tax return.
Trump paid an effective tax rate of 24 per cent and saved millions of dollars in additional taxes by claiming the losses, according to the document, the first two pages of which were obtained by Pulitzer Prize-winning journalist David Cay Johnston and first reported by DC Report, a nonprofit news site he runs, and on MSNBC's The Rachel Maddow Show on Tuesday night (Wednesday NZ Time).
The return shows that Trump paid US$36.5 million (NZ$52.5 million) in income tax, of which about US$31 million (NZ$44.6 million) was in the form of an "alternative minimum tax," a supplemental tax designed to cut down on filers with excessive deductions. He also paid about US$1.5 million (NZ$2.2 million) in Medicare and Social Security taxes.
The document offers a rare snapshot of Trump's personal finances, considering he has refused to disclose his tax returns to the public. The White House issued a statement chastising MSNBC for reporting on Trump's taxes - "totally illegal," read the statement - but also confirming top-line numbers from the return and defending Trump.
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Still, Trump tweeted early on Wednesday (Thursday NZT) that the report was "FAKE NEWS" and asked: "Does anybody really believe that a reporter, who nobody ever heard of, 'went to his mailbox' and found my tax returns?"
Does anybody really believe that a reporter, who nobody ever heard of, "went to his mailbox" and found my tax returns? @NBCNews FAKE NEWS!— Donald J. Trump (@realDonaldTrump) March 15, 2017
Trump's taxes were a major flash point in last year's campaign and continue to be a subject of intense scrutiny from Democrats and others who believe they would show whether he has financial relationships with any Russian entities.
The newly revealed pages from his 2005 return do not detail his financial ties, but they do seem to disprove the theory that some Democrats advanced in last year's campaign that Trump avoided paying any federal income taxes during that period.
In their first general-election debate, Democratic nominee Hillary Clinton speculated about Trump, "maybe he doesn't want the American people - all of you watching tonight - to know that he's paid nothing in federal taxes." At that, Trump quipped, "That makes me smart."
Donald Trump Jr, the president's oldest son, tweeted, "Thank you Rachel Maddow for proving to your #Trump hating followers how successful @realDonaldTrump is & that he paid $40mm in taxes! #Taxes"
Last fall, the New York Times revealed that Trump reported a massive US$916 million (NZ$1.32 billion) loss in 1995, which he could have carried over to allow him to offset taxable income and avoid paying income taxes for up to 18 years. Though Trump was able to use those net losses as a deduction in 2005, the returns show, they did not zero out his tax obligation altogether.
Trump used real estate deductions to pay no federal income taxes in 1978 and 1979, according to Trump tax returns submitted years ago to New Jersey regulators. Much of those losses came from a deduction offered to real estate developers, like Trump, allowing them to subtract from their income on the basis that buildings depreciate in value over time.
Trump repeatedly has refused to release his income tax returns - breaking with four decades of tradition for presidential nominees - claiming that he has been under audit and that his lawyers have counselled him not to release them.
The Internal Revenue Service has not confirmed that it is auditing Trump's taxes.
The Washington Post could not independently verify the 2005 return, but a statement from the White House indicated that it is authentic. The statement, issued to reporters anonymously to be attributed to a White House spokesperson, accused MSNBC of unlawfully releasing Trump's tax returns.
"You know you are desperate for ratings when you are willing to violate the law to push a story about two pages of tax returns from over a decade ago," the statement said. It added that Trump, as "one of the most successful businessmen in the world," paid "no more tax than legally required."
WH responds to MSNBC report on Trump tax returns: "you know you are desperate when you willing to violate the law..." pic.twitter.com/DCedFdxWCc— Jim Acosta (@Acosta) March 15, 2017
The statement went on to say: "Mr Trump paid US$38 million dollars even after taking into account large scale depreciation for construction, on an income of more than US$150 million dollars, as well as paying tens of millions of dollars in other taxes such as sales and excise taxes and employment taxes and this illegally published return proves just that. Despite this substantial income figure and tax paid, it is totally illegal to steal and publish tax returns. The dishonest media can continue to make this part of their agenda, while the President will focus on his, which includes tax reform that will benefit all Americans."
The tax documents were sent to Johnston, a veteran investigative reporter who specialises in taxes and formerly worked at the New York Times. He speculated on air to Maddow that Trump himself may have sent him the returns.
The return shows Trump and wife Melania paid most of their income taxes as an alternative minimum tax. Taxpayers requesting many itemised deductions must pay the AMT in certain circumstances. The AMT rejects specific deductions, including for dependents and assorted real estate write-downs. In his tax-reform plan, Trump has called for eliminating the AMT.
The return shows that Trump's business income in 2005 totalled roughly US$42 million (NZ$60.4 million), with capital gains from investments totaling roughly US$32 million (NZ$46 million) and income from partnerships, trusts and so-called "S corporations" totaling roughly US$67 million (NZ$96.4 million).
Trump used roughly US$103 million (NZ$148.2 million) in net operating losses, carried over from previous years, to greatly lower that tax obligation. Trump also used such losses, likely from a series of costly business failures and Atlantic City bankruptcies, to lower his tax bill in 1995.
Trump has routinely taken pride in his aggressive working of the nation's tax laws.
"I have brilliantly used those laws," Trump said at a campaign event in October. "I was able to use the tax laws of this country, and my business acumen, to dig out of the real estate mess - you would call it a depression - when few others were able to do what I did."
Trump's reported income in 2005 may call into question his net worth. Trump says he is now worth more than US$10 billion (NZ$14.4 million), but independent estimators have said that figure may be overstated. In 2005, Trump said he was worth more than US$5 billion (NZ$7.2 million).
Trump sued author Timothy O'Brien after his 2005 book, "TrumpNation," cited anonymous sources suggesting Trump was instead worth US$150 to US$250 million (NZ$216 million to NZ$360 million). In depositions from that case, O'Brien's attorneys revealed estimates from two lenders to Trump, North Fork Bank and Deutsche Bank, who suggested Trump's net worth was between US$800 million and US$1.2 billion (NZ$1.15 billion to NZ$1.73 billion).
Trump's current finances are set to face a new test with the coming April 18 tax deadline. He has steadfastly refused to release his returns, pointing both to ongoing audits and to his belief that Americans do not care to see them. However, a Pew Research Center survey in January found that 60 per cent of Americans believe that Trump has a responsibility to release his returns.
All US presidents are automatically audited every year, as prescribed by a guideline in the Internal Revenue Service manual in place for presidents and vice presidents since the 1970s. Trump could urge Treasury Secretary Steven Mnuchin to change that provision, legal experts said. Trump has not said whether he would do so.
- The Washington Post