Trump an epic tax cheat? Who knew?
Only the little people pay taxes,” said a New York celebrity real estate figure in the 1980s. It was not Donald Trump but Leona Helmsley, who was eventually convicted of tax fraud and served time in prison. But they had a lot in common.
On Tuesday night, The New York Times published a blockbuster story on Donald Trump's finances based on documents never made public before, including tax returns from his father, Fred Trump. The revelations are staggering.
They demonstrate that not only has Trump been lying for years about the enormous amount of money he was given by his father, but Fred Trump, Donald Trump and Donald's siblings were engaged in what amounted to a years-long conspiracy to commit tax fraud:
“He and his siblings set up a sham corporation to disguise millions of dollars in gifts from their parents, records and interviews show. Records indicate that Mr Trump helped his father take improper tax deductions worth millions more. He also helped formulate a strategy to undervalue his parents' real estate holdings by hundreds of millions of dollars on tax returns, sharply reducing the tax bill when those properties were transferred to him and his siblings.”
The Times story details a variety of schemes the Trumps used to avoid income taxes, gift taxes and, most critically, estate taxes. Together with his children — particularly Donald, his favoured son — Fred Trump constructed a system that allowed him to pass a fortune of more than $1 billion on to his heirs while paying only a tiny fraction of the estate taxes that should have been paid. At the 55 per cent rate at the time, Fred Trump's estate should have owed at least $550 million, but instead wound up paying only $52.2 million, or a mere 5 per cent.
In addition, the newly revealed documents show that Donald Trump's claim that he built his company all on his own is a lie. “It has not been easy for me,” Trump said during the 2016 campaign. “My father gave me a small loan of a million dollars, I came into Manhattan, and I had to pay him back, I had to pay him back with interest.”
While we have long known this claim was false, the Times shows that in fact, Fred Trump gave Donald vast sums over the years in gifts, “loans” that charged no interest and that he was never expected to pay back, and other vehicles that amounted to the equivalent of $413 million in today's money.
That's just one part of an extremely complex story, but it is important to note that the Times, in an article that was surely vetted carefully by its attorneys, describes what the Trumps did as “outright fraud”.
In other words, it wasn't enough for the Trumps to employ their tax lawyers to aggressively take advantage of all the loopholes that are available to the super-rich — particularly those in real estate, which has its own set of intricate tax regulations.
If the Times story is accurate, they decided to break the law as well — not here and there, not a time or two, but in a carefully planned scheme that had a complex web of components and took years to carry out.
I spoke yesterday morning to Daniel Shaviro, a professor at the New York University law school and an expert in tax law, and asked him whether this kind of thing isn't unusual among the super-rich. If we were to investigate a bunch of billionaire families, would we find that they are up to similar machinations?
Shaviro said the answer was no, and described the schemes in the Times article as “beyond the pale”. The estate tax in particular, he said, is rife with opportunities for planning to avoid tax liability. If you're a billionaire, there are plenty of legal ways to minimise your tax bill.
“Between the opportunities for tax planning and the risk of going to jail, why would you do this kind of thing if you're Mark Zuckerberg or Jeff Bezos?” Shaviro said.
“Most of the people I know in the New York tax bar,” Shaviro went on, “if they were asked to participate in this, they would not only have declined to do it, but they would have wondered if they have a duty to report what's going on” to the authorities so as not to be an accessory to a crime. Prominent tax lawyers “are not doing this stuff. They have reputations to protect. They're not interested in going to jail”.
For some time, I have been arguing that Donald Trump is not merely someone who skirts the rules or skates close to the line, but in fact may be the single most corrupt major business figure in America. Here's how I summarised it in April:
“He ran scams like Trump University to con struggling people out of their money. He lent his name to pyramid schemes. He bankrupted casinos and still somehow made millions while others were left holding the bag. He refused to pay vendors. He exploited foreign workers. He used illegal labour. He discriminated against African-American renters. He violated Federal Trade Commission rules on stock purchases. He did business with the mob and with Eastern European kleptocrats. His properties became the go-to vehicle for Russian oligarchs and mobsters to launder their money.”
And that is before we even get to what Trump has done with his taxes. Which of course, we only know bits and pieces of because, unlike every president and presidential candidate in the past half-century, Trump has kept his tax returns secret.
Just imagine for a moment if a story such as this one — detailing years of tax fraud — came out about Hillary Clinton. The Republicans who mounted seven separate congressional investigations of Benghazi would be making it rain subpoenas.
What are they planning to do about evidence that Trump has committed tax fraud — and the very real possibility that he still is? Not a thing.
But as Shaviro pointed out to me, for all the detailed information in the Times article, there are still places other kinds of fraud could have been committed. Much of the article concerns manipulation of gift taxes and estate taxes, but there is still more to learn about whether income taxes were evaded. The Times had Fred Trump's tax returns in writing this story, but not those of his children, so we don't know whether Donald Trump paid all the taxes he owed as he was funnelled all those millions from his father, often through shell companies.
Something tells me there may be some interesting things yet to learn.
• Paul Waldman is an opinion writer for the Plum Line blog