I Paid More Income Tax Last Year Than Trump Paid In The Last 35 Years (Combined)

You probably did, too

Apples-to-apples, almost everybody reading this has paid more US income tax than Donald Trump. This post goes deeper into the NY Times source story than most other articles that I’ve come across. Many news outlets are focusing on the $750 figure for 2016 and 2017 along with the fact DT paid “nothing in 10 of the past 15 years.” I’ll do the math on the past 35 years.

For starters, I found the language people were using to be pretty suspicious…

“Nothing in 10 of the past 15 years”

Which 10 years are you choosing and why won’t you tell me? What about those 5 other years?

You’ve only brought up 2 years when he did pay (2016 and 2017). How much did he pay in the 3 years you’re leaving out?

Why are Trump supporters saying that he actually paid over $1M in taxes in 2016?

I spent a day trying to work around the NYT paywall, to no avail. I even started to write this post relying solely on the journalistic integrity of secondary sources. But talking with enough people on both sides of the argument convinced me it was worth the subscription cost to get the real numbers here.

So let’s expose all the details of the exposé…

It’s important to specify that the numbers here focus on US Income Tax, both Federal and State/Local. But the key term here is income tax. We don’t know enough to talk about his capital gains or property taxes or any other type of tax that wealthy people are privy too.

But fortunately,

All of us can understand income tax because we pay it too.

Income tax is simply the tax that comes out of your paycheck.

Easy. Everybody knows that a piece of your paycheck goes towards taxes. And we all have mixed feelings about this. I’m fine with the principle of paying taxes to fund social programs and help the less fortunate. I’m upset when I find out $140,000,000 tax dollars have been used for DT’s personal golf trips since the inauguration.

Heck, we work hard! We don’t want 30% to 40% of our money taken away every time we get that small rectangular piece of paper rewarding us for all the hard work.

Everybody has felt like Rachel from Friends looking at that long, sad list of subtractions beneath our bi-weekly earnings.

As a result, most of us look for ways to reduce the total amount of taxes we owe. I keep track of everything I’ve donated, because that’s Tax Deduction 101. But the financial wizardry that DT has pulled off since 1985 (more accurately: that his accountants have pulled off for him), shows just how big of a gap exists between entry-level knowledge and a Master’s-level education in tax deduction.

The fact is: Trump paid $750/year in both 2016 and 2017.

That’s all. We don’t have information about 2018, 2019, or 2020 yet. So those aren’t the mysterious three years that are omitted in most reports.

Regarding the argument that he actually paid over $1M in 2016, that’s false. He made a required payment to the IRS to request an extension on his tax filings. That required payment was $1M in 2016 and $4.2M in 2017. But this is essentially just a deposit, and all of this liability was deducted when he actually filed. All except for the now-famous figure on line 56 of his 1040 form which specifies the total income taxes due: $750.

However, it turns out that Trump did pay taxes in 2005, 2006, and 2007.

Those are the three years that most articles are omitting.

What happened here?

In 2005, “The Apprentice” started earning Trump more income than he was able to deduct. So over the course of these three years, DT actually paid a combined total of $70.2 million in taxes. (For reference: that’s still less than half of what US taxpayers — us — paid for him to go golfing during his first term).

So why aren’t people talking about the fact Trump has actually paid $70million+ in taxes this millennium?

Well it’s because, in 2008, right after DT re-gained enough business losses to once again pay $0 in annual income tax, the entire economy collapsed around him. And the Federal Government thought that the best way to jump-start the economy was to issue “quickie refunds” to corporations who felt like they overpaid.

Trump’s accountants saw the opportunity to file for one of these quickie refunds, and did exactly that. In their mind, every dollar paid was overpaid.

In one of their craftier maneuvers to date, they had Trump formally declare to the SEC that he was “abandoning” his relationship with his colleagues running the Atlantic City casinos. The language he used was critical because it directly aligns with the IRS rules about declaring losses for personal business ventures that you simply walk away from, or “abandon.” DT was then free, in 2009, to declare over $700 million in business losses as a part of his “quickie refund” claim.

As a result:

Trump was personally reimbursed the entire $70 million dollars he paid from 2005–2007, plus an additional $2.7 million in interest.

That means he made money from the Federal Government. Of course, the interest claim is an argument that he would have made that much money over the years if it hadn’t been spent on taxes. So he’d argue that he was simply reimbursed for all that he was owed.

But paying $70 million in taxes then receiving $72 million back sounds like a gain to me. Even if he had to wait 4 years for it to happen.

Technically this is not yet a done deal. The legitimacy of his “quickie refund” claim is the focal point of that pesky tax audit we keep hearing about, that never seems to go anywhere. Based on his history of litigation, the one thing DT is demonstrably good at, I would wager that Trump can live out his final days without ever seeing the result of this audit.

The audit has been 10 years in the works, and now that he’s the sitting President with party control over all other branches of government, I don’t think we’ll see it resolved any time soon.

I say this trying to be realistic rather than pessimistic. In the words of an experienced litigator and one of the most important voices of our generation:

“Our criminal justice system treats you better if you are rich and guilty than if you are poor and innocent.”

—Bryan Stephenson, Just Mercy

Frankly, even if the auditors do come to a conclusion and demand that DT repays the money, his lawyers and accountants likely have their next steps already mapped out to further delay any real action.

This is the definitive case about Trump’s taxes over the last 15 years (since 2005). Anybody who says “he hasn’t paid any taxes in 10 of the last 15 years” is misleading you. Anybody who says “Trump paid millions in taxes” is not wrong, but that’s also misleading. Everything Trump paid since 2005 was reimbursed, and then some. Leaving only the 2 meager $750 he paid during the first two years of his Presidency. Which he likely paid to have a bit of credibility in his claims at rallies and press conferences that he does pay taxes.

So where did my “35 years” number come from?

Well, we’ve identified that Trump can deduct from his personal taxes by claiming losses on his business expenses. This is not some turn-of-the-twenty-first-century trick he figured out recently. DT (and, ostensibly, most other wealthy people) have known how to work the system this way for decades. In fact, in 2019 the NY Times reported that DT had “lost more money than nearly any other individual American tax payer.” He’s been at this a long time.

Through an investigation on his taxes between 1985 and 1994 along with a glimpse at his returns in 1995, DT reported business losses that would have granted him enough tax allowance to avoid paying federal income tax for those two entire decades.

The taxes DT paid on his income from “The Apprentice” in 2005 were the first substantial income taxes he’s paid in his entire life.

To right that “wrong,” he went on a buying spree between 2005 and 2007, acquiring 10 new golf courses and a new hotel. This allowed him to once again post enough business losses to owe $0 of personal income tax.

All this to say: I paid more income tax last year than Trump has paid in the last 35 years, combined.

Let’s give some benefit of the doubt and assume that Trump has continued his (largely symbolic) annual installment of $750 per year since he took office. That means he paid a total of $3,000 between 2016 and now.

Given that he paid a net total of $0 (and arguably even gained money from his tax refunds) between 1985 and 2016, that means that

Trump has paid no more than $3,000 in income taxes between 1985 and today.

Just last year, I paid roughly $4,000 in income taxes.

That’s not a lot, by any stretch of the IRS’s definition. But it’s still more than Trump.

Not only did I owe $4,000 in income taxes. I actually paid over $5,000 throughout the year in regular deductions from my paycheck. This means I genuinely overpaid, and was issued a refund of approx. $1,000.

Side note:

Refunds are great and all, but the problem with tax refunds is that you receive all your money back at once and it feels much more like a gift or a bonus. Prompting a really strong urge to splurge and enjoy the sudden influx of cash. (which otherwise would have gone to a wider range of things that you might have had to cut back on throughout the year — anything from bill payments and grocery trips, to fancy dinners and family trips).

Personally, I prefer to slightly overpay and receive a small refund. It feels nicer to get a check from the Government rather than write them a check after doing all that math on the IRS’s behalf.

But it’s important to treat this money just like you’d treat any other money at any other time of the year.

I paid more income taxes in one year than this “billionaire” has paid in 35 years.

I’m tempted to write them off as an evil family — like father, like son.

But frankly, I can’t blame Trump at all. The government sets the rules, and Trump hires people to exploit them. He even called out Biden directly during the debate last night for creating all the loopholes that he’s happily walked through. (More accurately: for participating in the government that created all the loopholes for Trump and other big businesses).

The wisdom of Trump and his band of lawyers and accountants is truly no different than the wisdom of Pablo Picasso:

Learn the rules like a pro so you can break them like an artist.

If you won the lottery and $600 million fell into your lap, then I came around and presented you with two open doors: Walk through the first door and pay $200 million of that in taxes. Walk through the second door and keep 100% of it.

What would you do?

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