Trump paid $750 in federal income tax in 2017; Spokane County’s poorest residents paid more on average
Tue., Sept. 29, 2020
WASHINGTON – President Donald Trump paid $750 in federal income tax in 2017, a New York Times investigation published Sunday found. That same year, Spokane County taxpayers who earned less than $25,000 paid more than the commander-in-chief – an average of $858, according to Internal Revenue Service data.
The Times’ reporting found the president, who has broken with precedent and refused to release his tax returns, also paid $750 in 2016 and paid no federal income taxes in 10 of the 15 years before that.
“The thing about the president’s tax returns that we don’t know is what was legal and what wasn’t,” said Ann Murphy, a Gonzaga University law professor and former IRS attorney. “He could have paid those amounts quite legally, but I don’t think so, because they’re just too low.”
The details of his tax filings show how Trump used losses and deductions for personal expenses – including $70,000 to style his hair while filming “The Apprentice” – to pay far less in federal income taxes than the average American.
Taxpayers in Spokane County whose adjusted gross income fell between $25,000 and $49,999 in 2017 had an average tax liability of $2,684, according to IRS statistics of income, while those who earned between $50,000 and $74,999 owed an average of $5,580, not accounting for withholdings.
Roughly 43% of American taxpayers paid no federal income tax in 2017, according to the nonprofit Tax Policy Center, because their deductions and tax credits exceed their taxable income. Most of those are low-income workers, but some wealthy taxpayers use strategies that Trump reportedly has to eliminate their federal income tax liability.
“Essentially everyone, barring the very poorest people in the country, paid higher taxes in 2016 and 2017 than Donald Trump,” said Natasha Sarin, a professor at the University of Pennsylvania Law School. “The number is so inconsequentially small that all but the very bottom of the distribution paid more in taxes than he did.”
“There are tons of opportunities for very wealthy people with very sophisticated tax planners to either legally toe the line with respect to the taxes that they owe or just illegally evade taxation altogether,” said Sarin, who is also a professor at the university’s Wharton School of Business, Trump’s alma mater. “That said, this is an exceptionally egregious and puzzling case.”
Trump announced in an official disclosure that he made at least $434.9 million in 2018, but his tax filings revealed a loss of $47.4 million, the Times reported. He also appears to be responsible for loans totaling $421 million, and most of that debt would come due during a potential second term in office, raising concerns about his obligations to lenders who likely would not want to foreclose on a sitting president.
The tax filings show that Trump wrote off his multiple homes, his private plane, and more than $95,000 paid to his daughter Ivanka’s hair and makeup artist. The Trump Organization also claimed $747,622 in consulting fees as deductions, an amount that exactly matched payments Ivanka reported receiving from a consulting firm she co-owned.
“I’m sure that he would argue that his looks were part of the image that he needed to convey to enhance his media personality,” said Eugene Steuerle, a fellow at the Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, two Washington, D.C. think tanks. “I don’t know how it would play out with the IRS, but it’s not something that most taxpayers can do.”
Real estate investors like Trump have an exceptional range of tools to help them dodge taxes. A major factor is that they don’t have to pay tax on capital gains from properties accruing value unless they sell them, and meanwhile can claim property taxes as income tax write-offs.
“People who have more money have more ability to shelter their income,” said Beau Baez, a law professor at the University of Idaho. “The more money you make, the more opportunities you have to invest that money and for some of those investments to help reduce your taxable income.”
“The bigger issue goes well beyond whether Donald Trump did or did not pay what we might think is a fair level of taxes,” Steuerle said. “The bigger issue are all the policies that lead to this type of situation and the extent to which those policies – in a much broader, societal sense – lead to greater inequality of wealth and lower growth in the economy through very inefficient investment.”
Sarin said that while Trump’s tax filings are unusual in some respects, they illustrate a wider problem. The IRS’s budget has been cut substantially since 2010, leaving the agency less able to audit the wealthy. The enforcement portion of its budget fell by nearly a quarter from 2010 to 2018, ProPublica found, and its revenue from audits fell by $10 billion in that period.
“The kind of gaming that President Trump has engaged in,” Sarin said, “has been facilitated by the gutting of the IRS in the last decade and the fact that the agency just simply doesn’t have the resources it needs to go after super-wealthy tax evaders.”
A 2019 analysis by Sarin and former Treasury Secretary Lawrence Summers found that restoring IRS funding levels could raise more than $1 trillion over the next decade, mainly by collecting taxes the very rich otherwise dodge.
Murphy said simply using his wealth to avoid paying as much as middle-class Americans doesn’t set Trump apart from the super-rich, but her experience trying tax fraud and business deduction cases in the U.S. Tax Court tells her something is amiss with the president’s tax filings.
“I worked at the IRS for a long time and I’ve seen stuff like this,” she said. “Real estate people do get incredible tax benefits, but to me, these are suspicious.”
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