Donald Trump’s tax returns: US President had to pay millions due to tax law he aims to scrap
The “alternative minimum tax”, introduced to ensure the mega wealthy pay a fairer share of tax, comprised $31m of Trump’s tax bill.world Updated: Mar 25, 2017 11:33 IST
Donald Trump’s leaked tax return reveals that he had to pay tens of millions of dollars in a single year because of a tax rule that he has specifically promised to abolish as president.
A two-page section of Trump’s tax return for 2005, which was published by MSNBC late on Tuesday, revealed that the president paid $38m in federal taxes on more than $150m in income in 2005.
But the documents also showed that about 82% of the total paid to the Internal Revenue Service that year by Trump and his wife, Melania, was incurred due to a tax that Trump has said should be abolished.
The “alternative minimum tax” (AMT), which was introduced to ensure the mega wealthy pay a fairer share of tax, comprised $31m of Trump’s tax bill compared with $5.3m in regular federal income tax. In the run-up to November’s election, Trump pledged to eliminate the AMT altogether , meaning the president campaigned for a change in the tax law that would have benefited him.
The publication of the paperwork prompted immediate condemnation from the White House, which accused MSNBC’s Rachel Maddow of breaking the law and pre-emptively released figures from the same year.
“You know you are desperate for ratings when you are willing to violate the law to push a story about two pages of tax returns from over a decade ago,” a Trump administration official said in a statement.
“Before being elected president, Mr Trump was one of the most successful businessmen in the world with a responsibility to his company, his family and his employees to pay no more tax than legally required.”
The official added that Trump “paid $38m even after taking into account large-scale depreciation for construction, on an income of more than $150m, as well as paying tens of millions of dollars in other taxes such as sales and excise taxes and employment taxes, and this illegally published return proves just that.”
“Despite this substantial income figure and tax paid, it is totally illegal to steal and publish tax returns,” the official said.
“The dishonest media can continue to make this part of their agenda, while the president will focus on his, which includes tax reform that will benefit all Americans.”
Contrary to the White House’s claim, Maddow said the return was “turned over” to David Cay Johnston, a 2001 Pulitzer prize-winning investigative journalist who focuses on tax and finance issues and joined her on the broadcast. It is not a violation of the law to publish leaked tax returns. Appearing on the Maddow show, Johnston said he did not know who sent him the excerpts from Trump’s 2005 return, which appeared in his mailbox.
The documents indicate that Trump paid an effective federal income tax of about 25% in 2005 and reported a $105m write-down. Hillary Clinton, Trump’s Democratic opponent in last year’s election, had an effective federal rate of 30.8% that same year, according to her campaign.
Trump’s son, Donald Trump Jr, welcomed the leak, adding to speculation over whether the president leaked a favourable portion of his own tax return .
Either way, Tuesday’s partial disclosure will further pressure the White House to publish the president’s tax returns in full. As a candidate, Trump broke with a 40-year precedent by refusing to release his tax returns despite repeated calls from his opponents in both parties.
The last major-party nominee to withhold tax records was Gerald Ford, who assumed the presidency after Richard Nixon’s resignation in 1974. Ford released a summary of data from eight years of tax returns but did not disclose the full documents.
Trump initially said he could not release his tax returns due to an ongoing audit by the IRS, even though such a fact would not legally preclude him from doing so. Nixon released his tax returns while they were under audit in 1973.
Related: Hot air and intrigue: did Donald Trump leak his own tax return?
Trump’s campaign later pivoted to saying his taxes were a nonissue that would “distract” from his message. Polling in the campaign found that a majority of Americans, including a majority of Republican voters, wished to see the real estate developer’s tax returns.
But despite Clinton’s efforts to cast a spotlight on Trump’s refusal to disclose his returns, the subject failed to have a lasting impact as voters headed toward the polls. Following his victory in the November election, Trump declared in his first press conference as president-elect that Americans did not care about his tax returns.
“You know, the only one that cares about my tax returns are the reporters, OK? They’re the only ones,” Trump said. “I won. And became president,” he continued when asked if the matter was not of concern to the American public.
“I don’t think they care at all ... I think you care.”
Polling conducted since the election has found otherwise, with nearly three-quarters of Americans responding that Trump should release his tax returns.
A report in the New York Times last year, based on a filing from 1995, found Trump could have taken advantage of a loophole that potentially enabled him to legally avoid paying any federal income taxes for up to 18 years.
That year, Trump declared a $916m loss on his income tax returns, stemming from a series of struggles pertaining to his casino empire and a failed attempt to enter the airline business. Tax experts said Trump could have used the loss to offset the equivalent amount of taxable income for up to two decades due to a tax code advantage for real estate developers.
The alternative minimum tax was created in 1969 (and amended in 1979) to address the fact that some of the uber-wealthy could use so many deductions and loopholes that they ended up paying zero federal income tax. People with high incomes have to calculate their taxes twice – once with all their deductions and once without many of them. The taxpayer must then pay the higher of the two figures.
The AMT brought in about $28bn, or roughly 2% of all individual income tax revenues in 2015, according to the Tax Policy Center, a nonpartisan thinktank, which said that 4.1m people paid it.
The gap between those two figures can be enormous – as is made clear by these Trump tax returns, which show Trump would have paid a fraction in taxes were it not for the AMT.
“If we didn’t have the alternative minimum tax, he would have paid taxes at a lower rate than the poor who make less than $33,000 a year,” David Cay Johnston said on MSNBC about the returns. The AMT was applied to just a few hundred wealthy individuals when it was first imposed, but today it hits almost 5 million taxpayers .