Trump’s tax returns look bad on paper, but they might not be as bad as they seem

Trump%27s+tax+returns+look+bad+on+paper%2C+but+they+might+not+be+as+bad+as+they+seem

Jaden Welborn, Author

In the months approaching the 2020 Presidential election, we have seen both sides using aggressive tactics to expose and discredit their opposition. In the last couple weeks, President Trump’s tax returns were leaked after much suspicion and talk about their integrity and validity.

It came out that during 2016 and 2017 Trump payed a meager $750 in taxes. On paper that looks bad, but tax returns and bookkeeping are not that simple. So many temporal factors and exemptions go into bookkeeping that this number doesn’t tell us as much as it seems to. A bill was signed after the 2008 recession to aid big businesses in their losses, in hopes that they would create more value for society through these bailouts.

A quote by Redstate.com’s Nick Arama elaborates on this,

“Business losses can work like a tax-avoidance coupon: A dollar lost on one business reduces a dollar of taxable income from elsewhere…””

— Nick Arama

…”The types and amounts of income that can be used in a given year vary, depending on an owner’s tax status. But some losses can be saved for later use, or even used to request a refund on taxes paid in a prior year.”

Until 2009, these retroactive reimbursements could only go back two years, but President Obama signed a bill that increased this retroactive window to help businesses recover from the recession. It’s important to note that these reimbursements are tax exempt, as are Trump’s million-dollar losses, and can be carried forward a year to act as a tax shield. Trump’s accountants essentially compiled several years of losses together throughout approximately 500 businesses. It is a lot of numbers going both in and out.

However, where it gets a bit shady is that Trump possibly payed members of his family tens of millions of dollars in “consulting fees.” It’s almost as if he was hiding money so it couldn’t be taxed. While this bends the rules, it is legal. Trump also donates his presidential salary.

Nearly every Fortune 500 company uses some practices of tax evasion. There is a concept of foreign subsidiaries; registration in a country with lower tax rates. Minnesota’s Medtronic did this by registering in Ireland. It then does not have to pay taxes on those foreign earnings until they’re brought back to the states. But, it’s as simple as never bringing those earning back. In Trump’s case, it is sometimes as simple as making donations or giving a gift.

Donald Trump is the sole or principal power of approximately 500 different businesses, about 250 directly under Trump’s name (a lot of them in real estate). Real estate depreciates, and those depreciation expenses can be deducted from income and ultimately taxes. Investopedia.com shares that as long as those deductions are continuously invested, they can be indefinitely deferred over time.

The rich are constantly taking advantage of tax laws and finding loopholes to do it legally. Most people would argue that there should be stricter, less flawed tax laws to prevent evasion. We praise Jeff Bezos, Mark Zuckerberg, and Elon Musk for their contributions to society, but to think that they aren’t finding loopholes in the system is completely naïve. A hot titled news report will always get people fired up, but when it comes to taxes and bookkeeping over 500 businesses, it’s just not that simple. Unfortunately, the rich will always find loopholes in tax laws, but don’t hate the player, hate the game.