What many people have long suspected is true – billionaire presidential candidate Donald Trump has likely not paid one damn dime in federal income taxes in eighteen years. Moreover, while many average Americans struggle to keep up with their tax obligations, Trump actually bragged about it, calling himself “smart.”
Apparently, he is, at least when it comes to avoiding paying his fair share to support the nation that has supported him in such grand style for so long – because it was all likely completely legal, thanks to the numerous loopholes and provisions in the tax code that favor very rich people, both natural and corporate.
It’s something that former presidential candidate Senator Bernie Sanders wants to see changed.
Trump pulled no punches when he addressed an audience in Colorado earlier this week. He said, “As a businessman and real estate developer, I have legally used the tax laws to my benefit, and to the benefit of my company and my employees.” Then, he placed the blame squarely where it belongs:
“It is these politicians who wrote the tax code, and who are constantly adding, revising, and changing, an already over-complicated set of laws – all at the behest of their favored donors and special interests.”
Trump claims that one reason he is seeking office is to reform the rigged, complicated U.S. tax code. And if you believe that, there’s a bridge in Brooklyn we can sell you real cheap. The fact is that he has benefited from provisions that allow many exemptions for real estate developers such as himself. (Those provisions are also a big part of why gentrification, unaffordable housing, and homelessness has become an epidemic in the U.S. – but that’s a whole other rant.)
Next year, Bernie Sanders will be introducing a bill that would change all of that. The bill, which is still being written, will affect what are known as “passive loss” tax regulations that benefit the real estate industry.
Some of these were addressed under the Reagan Administration in 1986, which stopped taxpayers from offsetting their actively earned income with losses from businesses in which they had no direct involvement. However, real estate developers get to benefit from what are known as “carve-outs.” In Trump’s case, he used some 200 “pass-through” businesses that he owns. Some of those businesses make money; others suffer losses. However, all of those profits and losses are entered into his personal tax return. Because of this, he is allowed to count losses from those that don’t do well against his other income.
Alexandra Thornton, who oversees tax policy at the Center for American Progress, points out that Trump owns a wide variety of pass-through businesses, all of which are limited liability corporations (LLC’s). These include his casinos, golf courses, resorts and his rental properties. However, they also include a modeling agency, a charter jet company, a bottled water operation, his so called “Trump University” (now defunct), and a TV production firm. Thornton says, “any income he has from those other things he can offset with losses that he may have from his other pass through businesses.” Because it is “pass-through” income, it is taxed at a 15%, rather than the 40% to which he wold normally be subject. After his legal deductions, he winds up paying virtually nothing.
Sanders’ plan would end such carve-outs and put a stop to Trump and those like him claiming losses on businesses in which he is not personally involved.
Bernie’s legislation is not the only tax reform that have been introduced or proposed in recent years. President Obama as well as former President George H.W. Bush and Mitt Romney have proposed reforms that would force the very wealthy to pay more in taxes. However, whenever such bills reach the floor, real estate lobbyists go into action. Over the past eighteen years, spending by the real estate industry has increased by 200%; in 2014, that totaled $95 million.
There is a political agenda here as well. As an outsider, Donald Trump has somehow been able to project himself as some sort of “populist.” However, true populists are looking for true reforms to a rigged and broken tax system. Bernie himself points out that Trump
“[B]oasts how rich he is, how much he has, and does not pay a nickel in federal income taxes. In one day, Donald Trump did more than I have done in a year to show how corrupt the political system is, how rigged the tax system is.”
We definitely have to give the Donald credit for that.