“UnPresidented” is a new column discussing the transition and first days of the Trump administration.
In the next chapter of a more-than-a-year-long saga, two pages of Trump’s 2005 tax returns were leaked on Tuesday. The leaked documents, which were publicized and released on Rachel Maddow’s MSNBC TV show, show that Trump paid $38 million in federal income taxes on his reported income of close to $150 million, resulting in a tax rate of around 25 percent, 10 percent below the federal tax bracket rate of 35 percent. Trump was also able to avoid millions of dollars in taxes by claiming large losses, reducing his adjusted gross income to below $50 million.
What is significant about the form is that $31 million of the amount paid was under the alternative minimum tax (AMT). The AMT, which was created after it was revealed that 155 wealthy taxpayers paid no money in federal income taxes in 1966, is essentially a secondary tax system put in place to stop the rich from claiming certain deductions that would drastically reduce their taxes. Without the AMT, Trump would have had an effective tax rate of 4 percent, instead of 25 percent.
So it may come as no surprise that one of Trump’s policy goals is to completely eliminate the AMT, as Trump’s primary obligation has always been his own personal benefit, not the interests of the populist revolution he claims to represent.
Beyond the aforementioned revelations, the 2005 tax returns really do not answer all the questions surrounding Trump and his finances. Rather, they are two pages full of information that was easily guessable. The leaked documents don’t reveal the sources of Trump’s income, the deductions he’s claimed or information on any of his investments. Perhaps most important, they don’t reveal any more insight into his business entanglements, or any relations with Russia. However, Trump’s tax returns do have important implications, especially in regards to foreign policy.
Trump made headlines throughout the campaign for refusing to release his tax documents after initially stating in Jan. 2016 that he planned to release them. In doing so, he became the first major party candidate since Richard Nixon to refuse to offer up this information.
Though the Watergate scandal was his ultimate demise, Nixon also was notorious for his tax dodges. In 1973, the story broke that Nixon paid income taxes approximating $800 in both 1970 and 1971, despite an annual income of more than $400,000. Nixon also claimed deductions for out-of-date donations he made by backdating deeds.
And perhaps Nixon himself said it best, when in his defense he said, “I welcome this kind of examination, because people have got to know whether or not their president is a crook.” While Nixon pled innocence in the next sentence, the sentiment stands true today.
Trump not releasing the tax returns is not, as he put it during a presidential debate, “smart,” rather it raises questions about Trump’s shady financial dealings.
The 2005 documents are just one clue in the largely empty picture of Trump’s finances. Of the limited documents available, court records show that Trump paid no federal income taxes in 1978 and 1979 by claiming losses and taking real estate deductions. Other court records indicate the same for 1984. Leaked documents of Trump’s 1995 returns displayed a $916 million deduction that could have allowed him to avoid paying income taxes for 18 years after. Due to the limited nature of the 2005 documents, it is unclear whether the $103 million in losses that Trump claimed that year resulted from the large 1995 deduction.
Trump’s tax returns are important, but more forms like the leaked 2005 ones (which the White House seemed to confirm as true in a press release) are unlikely to showcase a more comprehensive view of Trump’s finances. We already know that we have a president who has frequently taken advantage of the tax code. The real questions lie in his foreign connections.
In many ways the tax returns serve as a distraction from the larger issues at hand. We should continue to question and investigate Trump’s tax returns, but is important not to forget the other issues at hand. Congress and the president are currently trying to pass major health reform that would, in addition to cutting coverage for lower income citizens, lower taxes on the wealthy, something with far larger implications than Trump’s taxes. The leaking of these two largely insignificant pages, in many ways, serve as a distraction from a number of major policy actions, including the fact that Trump’s revised travel ban will go into effect at midnight.