Donald J. Trump
explicitly acknowledged for the first time during Sunday’s debate that
he used a $916 million loss that he reported on his 1995 income tax
returns to avoid paying personal federal income taxes for years.
Mr. Trump’s response — “Of course I do. Of course I do” — was the fullest the wealthy developer had provided since The New York Times reported
that he had declared the loss, and that the tax deduction could have
been large enough to allow him to avoid federal income taxes for up to
18 years.
Previously
he had declined to comment on the documents, issuing a statement that
neither challenged nor confirmed the $916 million loss.
Asked
directly during the debate if he would say how many years he had
avoided paying federal income taxes, Mr. Trump responded, “No.”
But
at the same time, he asserted that he paid “hundreds of millions of
dollars in taxes,” calling it a “simple” thing. “I pay tax, and I pay
federal tax, too,” he said.
Unless
Mr. Trump, the Republican presidential nominee, releases his tax
records, it is impossible to determine exactly how he has handled his
taxes and what he has paid over the years. If he does not make his taxes
public, he will be the first major-party presidential candidate in four
decades not to do so.
Though the issue has been overshadowed in recent days by a recording of Mr. Trump’s lewd comments about women,
his refusal to release his tax returns — and the possibility that he
had not paid federal income taxes for years — has emerged as a central
issue in the campaign.
During
the debate, Mr. Trump appeared to shed some light on his approach to
taxes, saying that he knew more about the tax code than any other
presidential candidate in history.
“I have a write-off. A lot of it is depreciation, which is a wonderful charge,” he said. “I love depreciation.”
But
as Mr. Trump explained his own tax situation, he tried to make the case
that his Democratic opponent, Hillary Clinton, was among those
responsible for the tax code that enabled him to get benefits.
“She has given it to us,” he said.
Mr.
Trump also went on to invoke Mrs. Clinton’s wealthy allies. “Many of
her friends took bigger deductions,” he said. “Warren Buffett took a
massive deduction.”
Mrs.
Clinton, though, contended that Mr. Trump provided an example of what
needed to change in the tax code — saying he was among the people who
“paid zero in taxes, zero for our vets, zero for our military, zero for
health and education. That is wrong.”
She proposed a tax on people who make more than $5 million, calling it the “Buffett rule.”
In
Mr. Trump’s case, what is clear is that he derived remarkable tax
benefits from the financial ruin he left behind in the early 1990s
through mismanagement of three Atlantic City casinos, his ill-fated
foray into the airline business and his ill-timed purchase of the Plaza
Hotel in Manhattan.
“Simply
put, the organization is in dire financial straits,” New Jersey casino
regulators concluded after reviewing his business balance sheet woes in
1990.
The
1995 tax documents, which were anonymously mailed to a New York Times
reporter, were the first page of a New York State resident income tax
return, the first page of a New Jersey nonresident tax return and the
first page of a Connecticut nonresident tax return. They did not include
any pages from Mr. Trump’s 1995 federal return.
Mr. Trump was correct when he said he benefited from a provision that had been used by other wealthy families.
Known
as net operating loss, it allows an array of deductions, business
expenses, real estate depreciation, losses from the sale of business
assets and even operating losses to flow from the balance sheets of
those partnerships, limited liability companies and S corporations onto
the personal tax returns of people like Mr. Trump. In turn, those losses
can be used to cancel out an equivalent amount of taxable income.
With
a $916 million net operating loss in 1995, Mr. Trump could have avoided
paying more than $50 million a year in taxable income over 18 years.
Mr. Trump appears to have embraced other elements of the tax code.
In
1991, he lobbied federal lawmakers to relax tax rules that he claimed
had strangled the real estate industry. And in less than two years, as
part of a wide-ranging budget deal, Congress passed a set of provisions
sought by developers that could have helped Mr. Trump avoid large tax
bills linked to his enormous debt racked up by the early 1990s, while
also allowing him to spin other real estate losses into valuable offsets
on his future earnings in licensing, television and other ventures.
One
provision allowed real estate investors with highly leveraged
properties to accept forgiveness of their bank loans without paying
taxes on the money, in exchange for giving up other tax benefits.
Another allowed them to apply some real estate losses against other
kinds of income.
While
details of Mr. Trump’s income taxes and any deductions are scarce,
limited details are contained in government filings that have been
unearthed during his campaign.
For
example, Mr. Trump paid more than $71,000 in federal income taxes on
about $218,000 of taxable income earned from 1975 to 1977, according to a
1981 report assessing his fitness for a casino license. During the next
two years, 1978 and 1979, he paid no taxes, the report said.
Mr.
Trump also avoided paying any federal income taxes in 1984, tax court
records show. With his Atlantic City casinos in financial trouble in
1991 and 1993, casino commission reports show that he claimed losses
that would have allowed him to avoid paying income taxes in those years.
Voters
in recent polls have shown interest in Mr. Trump’s taxes. A CBS
News/New York Times poll last month showed that 59 percent of
respondents said it was necessary for him to release his tax returns.
Mr. Trump has said he will not release his taxes while he is facing an audit from the Internal Revenue Service.
“I
pay hundreds of millions of dollars in taxes, but, but as soon as my
routine audit is finished I’ll release my returns,” he said. “I’ll be
very proud to.”
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