STUMP » Articles » Taxing Tuesday: Trump's Tax Returns (Supposedly) » 29 September 2020, 06:51

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Taxing Tuesday: Trump's Tax Returns (Supposedly)  

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29 September 2020, 06:51

The following is about this NY Times article: Long-concealed records shows Trump’s chronic losses and years of tax avoidance. I am not going to dig through the variety of claims, because the NYT promises to make a series out of this.

Also, because digging into individual tax-related transactions is …kinda boring. Nobody is truly arguing the itty-bitty bits, but the big items of things like:
- the headline numbers of taxes officially owed for specific years (sometimes making the distinction between personal income taxes, corporate income taxes, payroll taxes, sales taxes, etc.)
- the concept of tax optimization (aka minimizing how much you pay in taxes)
- what is/is not deductible, is/is not a tax credit

The first item is getting the most play, as it’s the most easily comprehensible to people who have trouble with numbers in general.

(Look, numbers are difficult for most people…. probably not for people reading this, because you would have been scared off from this blog long ago)

The second two may get discussed, but people generally don’t want to talk about the principles behind tax policy. (SALT cap zero!)

In any case, I’m not really going to discuss any of the details, because it’s all about the politics, and I think this particular item is not going to move the needle much. I think the only thing this will do is cement the impression people already have of Trump.

Why I put (supposedly) in the blog title

There is this bit from the NYT piece:

In response to a letter summarizing The Times’s findings, Alan Garten, a lawyer for the Trump Organization, said that “most, if not all, of the facts appear to be inaccurate” and requested the documents on which they were based. After The Times declined to provide the records, in order to protect its sources, Mr. Garten took direct issue only with the amount of taxes Mr. Trump had paid.

So, they haven’t published the actual documents, even redacted. And, it’s not exactly clear which documents these are.

They asked for a response from Garten, not confirmation that the documents were the official ones. After all, Garten can’t confirm what he doesn’t see. It’s also hard to take direct issue with a summary letter. If all you’ve given are the amount of taxes paid (and that’s a nitpickery we can get into), and you know the specific check amounts written for specific tax years, then yeah, you can dispute that directly.

What documents are involved?

This is what the NYT claims to have done in its investigation:

The Times examined and analyzed the data from thousands of individual and business tax returns for 2000 through 2017, along with additional tax information from other years. The trove included years of employee compensation information and records of cash payments between the president and his businesses, as well as information about ongoing federal audits of his taxes. This article also draws upon dozens of interviews and previously unreported material from other sources, both public and confidential.

All of the information The Times obtained was provided by sources with legal access to it. While most of the tax data has not previously been made public, The Times was able to verify portions of it by comparing it with publicly available information and confidential records previously obtained by The Times.

Oh, I bet the source had legal access to it, just not the legal right to share that info with other people without permission.

First, let’s address that “thousands” of returns. Given they’re talking 18 tax years (2000 – 2017), you can only get to thousands of returns by taking Trump’s personal tax returns (18), and then the various Trump companies (no clue how many of those, and I bet many/most didn’t exist all 18 tax years), and mayyyyybe that will get you there. Okay, fair enough. But I would like to know if they had the individual returns of other people — Trump’s children, perhaps?

But then there’s that reference to “employee compension information”. That could be part of certain corporate filings, and for certain orgs you will see top-paid corporate officers listed with compensation, both cash and other items. But what if it’s a company’s entire payroll?

Is somebody’s audit status by the IRS confidential or not? Where might the audits be mentioned?

Where did the documents come from?

Given the purported level of detail, who provided these documents:
- the NY Attorney General’s office, as she was investigating Trump’s taxes?
- a bank where Trump had applied for a loan, and therefore had to provide all the financial docs?
- somebody working within Trump’s own organization?
- someone at the IRS?
- some combination of the above?

There are probably other possibilities I’m forgetting, but given that Trump very unlikely has put his hands on any of these (supposed) papers, it has to be someone with access to tax docs and general business doc for some purpose: investigation, conducting business (or maybe part of the accounting group), loan underwriting, or processing tax returns.

There is a mixed nature to the documents the NYT claims to have investigated, in that many of the details aren’t ones that would be on a tax return, but would be on various financial reporting in business.

But then, who would have 18 years’ worth of Trump’s tax returns?

I do assume that the NYT had more than one source on its documents, just to get this sort of coverage, especially since they intimate they have a smattering of other records outside the 2000-2017 range.

I do look forward to finding out where the NYT got all these documents, even if, like with “Deep Throat” Mark Felt, it takes decades to uncover.

A nutshell on likely illegality

Here is the easiest explanation for everything:
- Trump has people to do his taxes
- Trump has people who advise him on setting up tax shelters, and all the other legal moves that minimize his tax liability….. or, more specifically, that on net his cash position is the highest. It’s all about optimization.

You are very unlikely to find something illegal in his operations, especially after all these decades of digging. To be sure, it’s possible.

My assumption is that the point of the NYT series to come is: look at all these skeezy transactions! How dare he!

The problem is, they’ve been yelling HOW DARE HE! for at least 4 years now, if not longer. The “HOW DARE HE!” argument doesn’t hold a lot of weight.

To move the needle, you need to do something actually new. They tried this shit back in 2018 and it didn’t stick [I will demonstrate below]. Try something different, you dummies.

In any case, the only blatant illegality everybody will see is that at least one person did something illegal in passing Trump’s returns (and, it looks like, confidential company information, too, covering employee compensation), and it would be useful to know where that person got the documents from.

The only post on Trump’s taxes you need to read

That is, if you just want to save yourself some time in not becoming a tax accounting pro.

Larry Correia: NO, YOU IDIOTS. THAT’S NOT HOW TAXES WORK. – AN ACCOUNTANT’S GUIDE TO WHY YOU ARE A GULLIBLE MORON

I think you get the gist of it from the headline, but here are some substantive items: [oh, and warning: NY language to follow, even if Mr. Correia is not a NYer himself]

First off, “morality” doesn’t have jack shit to do with taxation. You pay what you legally owe. Nobody willingly pays the government more than they legally owe.

This has always been this way since America has had income taxes. There is endless court precedent. You pay what you legally owe. That’s it. If you pay less than you legally owe, then the government will fine or imprison you. If you pay more than you legal owe, the government will laugh and laugh, because you are an idiot, and you deserve to be poor.

Every single person who barks about how somebody else should be paying more? They themselves are paying the minimum they can get away with. As they should. As should you.

I remember when I was taking my first tax class back in college. This class was all accounting majors by this point. At the beginning of the semester the professor (who’d had a long career as a tax guy) gave us an imaginary family as our clients and had us do their taxes. One kid didn’t take advantage of all the obvious deductions for his clients. When the professor asked why, the kid said some mushy thing about how he didn’t think it was FAIR to keep that money from the government… Holy shit. The professor ripped this kid a new asshole. HOW DARE YOU IT IS NOT THE GOVERNMENT’S MONEY! IT IS YOUR CLIENT’S MONEY. YOU OWE THEM YOUR BEST! IT IS YOUR SACRED DUTY TO SAVE THEIR MONEY! YOU DISGUST ME AND YOU SHOULD NEVER BE A CPA!

I think you get the idea.

Quick tangent: Sci-fi/Fantasy involving (a little bit) of accounting

As an aside, Larry Correia was an accountant before he became better known as an SF/Fantasy author, with his best-selling series Monster Hunter International.

In the first book of the series, Monster Hunter International, the protagonist is also an accountant… until he finds out his boss is a werewolf. It kind of goes from there. There is little accounting in the series, but there are GUNS. Some people call it urban fantasy, I call it hunting down traditional monsters with GUNS and other technology. Given I consider Dracula a high-tech thriller (yes, the original Bram Stoker novel), it seems similar to me.

Continuing on this theme of accounting-related sci-fi, there’s a short sci-fi series starting with Trans Galactic Insurance: Adventures of a Jump Space Accountant. I haven’t read the other two books in the series yet, but I did enjoy the first one. Again, it’s a sci-fi thriller, with the protagonist on the run (and yes, he’s an accountant….an INSURANCE accountant), but this actually does have some figuring as part of the plot. Yes, insurance fraud is involved!

Those in insurance know that insurance fraud can be extremely boring… or insanely wacky (that links to a story about a woman who sawed off her hand, as part of insurance fraud. We still get faking-a-death insurance fraud, can you believe it?). In any case, while accounting knowledge of the main character is a plot point, you don’t need to understand any accounting to enjoy the story. Lots of intrigue.

Check them out!

(I bet you weren’t expecting recommendations on accounting SF/fantasy when you came here)

Old posts on Trump taxes

I have addressed various speculation on Trump taxes before.

May 2019: Taxing Tuesday (on Monday): Trump Taxes! Surprise Money! Or Not!

…why are all these people hyperventilating over Trump’s tax returns?

They are highly unlikely to find the level of detail needed to indicate pay-offs, etc. I’ve had non-wage income sources, and the IRS mainly cares that I don’t under-report, and that I don’t classify a certain type of income in a way that’s tax-advantaged when it’s not.
…..
I can think of several potential motives, from trying to humiliate and/or expose Trump as a liar re: his supposed riches to trying to catch potential illegalities (that one is highly unlikely, I think, but I have different prior probabilities than the people seeking the returns) to just hoping that, after the Mueller report deflation, they can find that pony in the pile of horseshit.

Good luck with that.

The people who are asking for this info are not tax professionals, and they wouldn’t know how to conduct an audit of anything, much less of tax returns.

Trump hasn’t “done” his own taxes in years, if ever. His dad had somebody do the taxes when he was young and a lovely tax shelter…. which reminds me of this post.

October 2018: Taxing Tuesday: Shenanigans! Illegality! Something!

Okay, Toddler Trump was “earning” $200,000/year (inflation-adjusted dollars… that was 1949, so let’s inflation adjust it right back: $19,000 in 1949)

So… Toddler Trump was “earning” this money via investments. And then what? It accumulated in his own investments? Did it go to his clothes & toys? Heck if I know.

The point they were trying to make with this item, and the next few, was that Trump got a lot of money from his dad, and wasn’t the big financial success he has made himself out to be. That’s not quite a tax fraud/shenanigans tale (except to try to avoid tax hits for wealth transfer without benefit of trust funds, I suppose).
….
I mean, the other items I’m reading are about Trump’s parents dodging various taxes, and setting up the estate just like other rich people do via trusts and other stuff. Yes, undervaluing or overvaluing assets to lower the tax hit is, again, iffy, but you really want to be combing through all trusts? Various lawyers would like to talk with you. If you think this would stop with Trump… yeah, I don’t think so.
…..
The “this time we’ve really got him!” folks need to calm down for a bit. Maybe you got him this time. If you did, there’s no hurry. Just chill. Fire up the lawsuits and court cases when you amass enough evidence – don’t jump before you’re ready.

FWIW, I don’t think the Trump family tax dodges would budge most people from the positions they’ve already taken re: Trump, any more than the pro-Clinton folks were that put off about old Bill’s sexual shenanigans. It definitely won’t push people to go vote if all the other stuff going on didn’t do it.

I wrote that in 2018.

What is different now?

Other Reactions

I really have nothing further to say on this, unless something very weird comes up.

But plenty of other folks have something to say!

From the last linked item:

Have you heard—Donald Trump admits that he takes advantage of the tax code to minimize his taxes! And he’s even admitted it to the New York Times! Here’s the scoop:

Donald Trump Acknowledges Not Paying Federal Income Taxes for Years

….
The date of this scoop: October 10, 2016.

Yeah, they’ve been going after him on the taxes for at least 4 years, to no effect.

But this time — they’ll get him! For sure!


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