WASHINGTON. A so-called “blockbuster” article on President Trump’s tax returns that was recently published in the New York Times (NYT) claims that Trump “took part in suspect schemes to evade tax bills.” The NYT piece further claims that “He (Trump) and his siblings set up sham corporations to disguise gifts.” The Times further claims that Trump helped his father take “improper tax deductions.”
The article grandly concludes that President Trump is a fraud, claiming that he received $413 million from his father. That’s far more than the $1 million loan Trump says he received from his father many years ago to start his own businesses. But what this disgusting NYT article actually proves is that President Trump must never publicly release his tax returns.
This New York Times article itself is a hit piece, a sham. Its purpose seems to be to discredit the President and try to present Trump in an unfavorable manner. The truth is that Trump behaved exactly like every taxpayer in America.
Paying the least amount of taxes to the government is an American tradition upheld by law
Tax preparation services like H and R Block and tax preparation software packages like Turbo Tax have become very successful over the years. Tens of millions of Americans have become regular customers. Professional tax accountants have done well too, by providing tax preparation services for households from low-income earners to the highest income earners.
The success of these tax preparation services is based on a single premise: Americans want to minimize their tax liability. Many advertise they can help each taxpayer get the largest allowable refund from the IRS, meaning they pay the lowest amount of taxes.
That’s exactly what Trump and his family did.
While it is true that there may have been a couple of transactions where the Trump’s tax professionals got overly aggressive and were later instructed to reverse some transactions, the vast majority of these transactions were clearly legal.
In short, the Trump organization made use of existing laws, searched for tax loopholes and established new business entities to minimize tax liability. This is exactly what every profit-maximizing company in America does.
The case of Warren Buffett
Recall during the 2012 presidential election, when multi-billionaire Warren Buffet claimed it was blatantly unfair that he paid a lower tax rate than his secretary. In 2011, Buffet had taxable income of $42 million and paid $7 million in taxes, roughly a 17% tax rate. His secretary paid a higher rate. Why was that?
It happened because Buffet employes a team of top-notch tax attorneys and tax accountants whose sole job is to minimize his tax liability. They figured out how Buffet could take much of his income as a capital gain, which is taxed at a much lower rate than the “ordinary income” the rest of us report. Was Buffet – a lifelong Democrat – a tax cheat? A fraud?
Death taxes and tax loopholes: Facts of American life
Every high achieving individual who has earned substantial income and has acquired substantial assets wants to pass as much of that earned wealth as possible onto his or her heirs. The problem is, high estate taxes still exist, levied by the federal government, as well as additional taxes levied by many states like New York, where Trump resides, as well as neighboring New Jersey.
Every tax professional advises high net worth individuals to pass their assets to the heirs before death. This often eliminates the estate taxes. Had Trump’s father waited until death to pass on about $1 billion in wealth, the heirs would have had to pay $550 million in taxes. That means more than half of an individual’s life work would not go to the heirs but to the government instead.
By following the suggestions of tax professionals, the elder Trump passed on his estate and saved his heirs $500 million in taxes. He minimized his taxes by astutely taking legal advantage of the current tax laws. That’s exactly what most wealthy and middle class Americans try to accomplish as well.
The Times hit piece also claimed Trump’s father, Fred Trump, used his “sham corporations” to avoid paying gift taxes. They cite instances where invoices were padded so that higher than market prices were paid by sham corporations. The NYT claims this was done to pass along wealth and avoid gift taxes.
Even if that were true, the federal gift tax rate is lower than the rate shareholders of a corporation would pay. At the time, the gift tax rate was 55%. If Fred Trump padded invoices when selling from his corporation to corporations held by the heirs, the heirs’ corporations would have to pay 40% in corporate taxes. Then, when the heirs took the funds from the corporation as dividends, the government would tax them the 40% rate.
Since the Federal government taxes dividends twice, once at the corporate level and once at the personal level, Fred Trump’s effective rate when passed the money onto his son was 64%. That rate is substantially higher than the gift tax rate.
New York Times hit piece proves why President Trump must never publicly release his tax returns
The article clearly shows why President Trump should never release his tax returns. Once released the NYT would examine every deduction, every charge-off and every instance of earned income. Even if they all proved completely legal, Trump newspapers and media outlets like the Times would still charge him as a tax fraud, a tax cheat and a businessman who hurts other businesspeople.
Over time, President Trump built a multi-billion portfolio of assets. It is true he began his career with a $1 million loan from his father. It is also true that his father willed him $413 million. Still, the president systematically used the money to build his multi-billion dollar empire. He didn’t throw it away. He put his capital to work in the hope of generating more capital. That’s exactly how all genuinely capitalistic systems work.
All Americans seek to minimize their tax liability, not just the wealthy. That’s why this cagtegory includes President Donald Trump. Clearly, the disgraceful NYT hit piece on Trump’s finances is nothing more than a cheap shot designed to make a very successful President look as bad as possible to the American people. Shameful!