A first look at the thousands of pages of Donald Trump’s tax returns, which a key congressional committee released on Friday, confirms that the former president used business losses worth tens of millions of dollars to reduce his annual tax liability, sometimes down to zero.
One of Trump’s biggest businesses was found guilty of criminal tax fraud earlier this month, but Trump himself has not yet been accused of doing anything wrong with his taxes or personal accounting. But this raises more urgent questions about the fairness of the U.S. tax code and tax rules, which have millions of words and, in Trump’s case, turned out to be almost impossible to enforce.
Tax reform supporters say people need to change their thoughts about taxes. They say that the way people think about taxes as being punitive and bad for the economy is what makes it possible for people to avoid taxes over and over again, like Trump.
“Now that Donald Trump’s tax returns are public, we know that in some years he didn’t pay any federal income taxes,” Frank Clemente, director of the tax group Americans for Tax Fairness, told The Hill in a statement. Clemente said that Trump avoided paying taxes because of “a tax system full of loopholes that needs major changes.”
Trump talked about using the tax code to his advantage on Friday. He specifically talked about using business losses to eliminate his tax bill.
Trump said in a statement, “The ‘Trump’ tax returns show once again how proudly successful I have been and how I have been able to use depreciation and other tax deductions as an incentive to create thousands of jobs and beautiful buildings and businesses.”
According to a report from the House Ways and Means Committee that came out last week, U.S. tax collectors were not auditing Trump’s taxes every year, which seems to go against IRS policy, which says that presidents must get regular audits.
It’s unclear why, but Trump’s complicated finances and the tax laws that make it possible may have been too much for the IRS to handle with their resources. The Ways and Means report said, “The former President’s tax return included the activities of hundreds of related and pass-through entities, a large number of schedules, foreign tax credits, and net operating loss carryforwards worth millions of dollars.”
The one IRS agent in charge of one of Trump’s audits said, “We didn’t look into some things on the former president’s returns because we didn’t have the resources to do so.” According to the report, an internal IRS memo said, “With more than 400 flow-through returns reported on Form 1040, there are not enough resources to look into all possible problems.”
The committee released thousands of pages of Trump’s tax documents on Friday but didn’t include any IRS audit files. This is a big deal since the whole point of getting and releasing Trump’s tax returns was to let the IRS keep an eye on him.
In an email, to The Hill, tax expert Steve Rosenthal asked, “Where are the IRS workpapers?” “I thought the Ways and Means Committee was letting the public see Trump’s tax returns so they could judge how the IRS audit was going. The Joint Tax Committee said that the audit by the IRS was terrible, which seems to be true. But Joint Tax used IRS work papers to explain things. We should also go see them.”
Over the next ten years, the IRS will get an extra $80 billion in funding. This will nearly double the agency’s annual operating budget and make it easier for the IRS to audit complicated businesses like Trump’s. But the way workers and business owners are taxed differently in the U.S. means that this new money for law enforcement might not be as useful as more legal reforms. In 2021, Treasury Secretary Janet Yellen said, “Under the current system, American workers pay almost all of their taxes, while many high earners use loopholes to avoid paying billions of dollars in taxes they owe.”
“At the heart of the problem is that different kinds of income are reported to the IRS differently. For example, income sources that are hard to track often don’t get checked, while wages and federal benefits are usually subject to almost full compliance. She said, “This two-tiered tax system is unfair and keeps the country from having enough money to pay for important things.”
People who want to change the tax system say it’s time to tax wages and capital similarly. “We should tax money made from wealth the same way we tax money earned from working. In an editorial for Newsweek, Amy Hanauer, director of the Institute on Taxation and Economic Policy, said that most of Trump’s money came from selling assets he inherited that had increased in value.
“This makes no sense. “Lawmakers should make these rates the same so that someone who gets up at 6 a.m. and walks to work in the rain doesn’t pay more than someone who lives in a mansion they inherited and watches their stock portfolio grow,” she wrote. Fred Goldberg, who was in charge of the IRS under George H.W. Bush, said in November that making the U.S. tax code easier to understand has been a long-term goal of lawmakers.
“For 40 years, that’s been the holy grail,” he said. Trump’s complicated tax returns raise questions about policy. Still, their release is the latest chapter in years of political fighting over his business career and how he got rich and famous.
During his first run for office, Trump and his supporters promised he would be a tough negotiator for the American people. Trump said he was successful because he worked hard and was good at negotiating. However, financial records, media reports, and lawsuits showed that he built his real estate empire mainly through tax credits, bankruptcy litigation, and fraud.
Democrats often criticized Trump for saying he was a great businessman even though he had gone bankrupt four times and racked up billions of dollars in debt to pay for deals. They also asked for Trump’s tax returns to find out how much money he has and how many financial ties he has abroad.
Rep. Don Beyer (D-Va.) said in a statement on Friday, “The public will now be able to see that Trump used questionable or poorly supported deductions and a number of other tax avoidance schemes to justify paying little or no federal income tax in several of the years looked at.”
Trump and the Republicans who voted for him in Congress, on the other hand, said that the former president’s business practices were standard for the real estate business. In 2016, the former president called himself the “king of debt” because of all the criticism he got for going bankrupt in the past, which he said was an excellent way to keep his business going.
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