By John Cassidy
They were released just when Trump needed a diction, raising questions about where they came from during last year’s election campaign, some tax experts and financial reporters suggested that Donald Trump may not have paid any federal income taxes since the nineteen-nineties. Trump’s dogged refusal to release any of his returns contributed to this speculation. So did his state tax returns from 1995, portions of which were sent to the Times.
These showed that he had used aggressive accounting tactics, taking a loss that year of more than nine hundred million dollars. Experts suggested that Trump might have exploited this huge write-off in subsequent years, too, greatly reducing or eliminating his tax liabilities. “It is likely that Trump has not paid any income tax since 1978, or maybe a little bit in a couple of years,” David Cay Johnston, a former Times tax reporter who published a critical biography of Trump last year, told me in September. At some point recently, somebody sent Johnston two pages from Trump’s 2005 federal tax return. “It came in the mail, over the transom,” Johnston told MSNBC’s Rachel Maddow on Tuesday night. Earlier in the evening, Maddow had created a lot of excitement by tweeting out, “BREAKING: We’ve got Trump tax returns.”
What she had, courtesy of Johnston, turned out to be the front and back pages of a single 1040 form, but what these showed was undoubtedly newsworthyalthough not in the way that many of the people who tuned in might have been expecting. According to the return, which Johnston also posted on his Web site, Trump and his wife, Melania, had taxable income of about a hundred and fifty-three million dollars in 2005, and he paid about $36.5 million in federal income tax. That’s an effective tax rate of about 23.9 per cent, which is a long way from the zero per cent that many people, myself included, had speculated about last year.
Almost as noteworthy was the fact that most of the tax Trump paid was captured by the Alternative Minimum Tax, which is a backup tax designed to insure that people with a lot of deductions don’t entirely escape taxes. Because Trump took a write-down of more than a hundred million dollars in 2005, his initial tax liability was just $5.3 million. If not for the Alternative Minimum Tax, which he and other Republicans want to get rid of, his effective tax rate would have been about 3.5 per cent. Because he was liable to the A.M.T., he was forced to pay an additional thirty-one or so million dollars.
In a statement released on Tuesday night, the White House confirmed the authenticity of the partial 2005 return. “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 statement said. “That being said, Mr. Trump paid $38 million dollars even after taking into account large scale depreciation for construction, on an income of more than $150 million dollars, 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.” (Johnston pointed out that the White House got to thirty-eight million dollars by including some Social Security taxes. The more accurate figure is $36.5 million.)
Trump’s return demonstrates why preserving the A.M.T. is essential. More immediately, it also raises the question of who leaked it. During Maddow’s show, Johnston suggested that the documents could possibly have come from Trump himself, or someone acting at his direction. “With Donald, you never know,” he said. Obviously, this is just speculation, but there are a number of reasons why the theory that someone connected to Trump may have been the leaker is far from implausible. During last year’s election campaign, some tax experts and financial reporters suggested that Donald Trump may not have paid any federal income taxes since the nineteen-nineties. Trump’s dogged refusal to release any of his returns contributed to this speculation. So did his state tax returns from 1995, portions of which were sent to the Times.
These showed that he had used aggressive accounting tactics, taking a loss that year of more than nine hundred million dollars. Experts suggested that Trump might have exploited this huge write-off in subsequent years, too, greatly reducing or eliminating his tax liabilities. “It is likely that Trump has not paid any income tax since 1978, or maybe a little bit in a couple of years,” David Cay Johnston, a former Times tax reporter who published a critical biography of Trump last year, told me in September. At some point recently, somebody sent Johnston two pages from Trump’s 2005 federal tax return. “It came in the mail, over the transom,” Johnston told MSNBC’s Rachel Maddow on Tuesday night. Earlier in the evening, Maddow had created a lot of excitement by tweeting out, “BREAKING: We’ve got Trump tax returns.”
What she had, courtesy of Johnston, turned out to be the front and back pages of a single 1040 form, but what these showed was undoubtedly newsworthyalthough not in the way that many of the people who tuned in might have been expecting. According to the return, which Johnston also posted on his Web site, Trump and his wife, Melania, had taxable income of about a hundred and fifty-three million dollars in 2005, and he paid about $36.5 million in federal income tax. That’s an effective tax rate of about 23.9 per cent, which is a long way from the zero per cent that many people, myself included, had speculated about last year.
Almost as noteworthy was the fact that most of the tax Trump paid was captured by the Alternative Minimum Tax, which is a backup tax designed to insure that people with a lot of deductions don’t entirely escape taxes. Because Trump took a write-down of more than a hundred million dollars in 2005, his initial tax liability was just $5.3 million. If not for the Alternative Minimum Tax, which he and other Republicans want to get rid of, his effective tax rate would have been about 3.5 per cent. Because he was liable to the A.M.T., he was forced to pay an additional thirty-one or so million dollars. In a statement released on Tuesday night, the White House confirmed the authenticity of the partial 2005 return.