Searching for the Truth in Trump's 1995 Tax Return
Rudy Giuliani has tried to make it easy for anyone who might be perplexed about his friend Donald Trump’s income tax maneuvers. All you need to know, Giuliani said Sunday on CNN, is that the tax code is complex and Trump is a “genius” for figuring out how to navigate it.
Giuliani was trying to help viewers understand the New York Times’s revelation that Trump may have used $916 million in business losses to legally lower his federal income taxes -- or avoid paying them at all from 1992 to 2010.
“The man’s a genius,” Giuliani said. “He knows how to operate the tax code to the benefit of the people he’s serving.”
“Operate the tax code” is a fun, Trumpy locution, but this has nothing to do with genius. If it did, Trump would have already released his returns in full so the public could have a transparent look at his brilliance.
As I’ve noted before, I’ve seen Trump’s tax returns -- in conjunction with an unsuccessful libel suit he filed against me in 2006 for my book “TrumpNation.” While I can’t write specifically about what I saw, I can say that the returns would give voters useful and tangible insights into Trump’s actual track record as a businessman, philanthropist and taxpayer.
But Trump has chosen not to release his returns. And I doubt he ever will, because they would reveal that the career he boasts so much about is built on sand. That’s just one reason the 1995 tax return anonymously sent to the Times is so valuable. It refutes Giuliani’s argument in big numbers (numbers that even the Trump campaign does not dispute).
Most of the $916 million loss that Trump claimed for 1995 is probably derived from about $900 million in bank loans taken out in the mid- to late 1980s that he had personally guaranteed and that he used to wildly overpay for hotels, airlines, yachts, barren land and other trinkets. Trump couldn’t afford to buy any of this with his own money, he lacked the good judgment and foresight to pay the right price for almost everything he bought, and once he bought all of it, the interest payments on the loans quickly became unmanageable. Corporate bankruptcy ensued.
None of these things are hallmarks of a great business operator or dealmaker, two of the central themes that Trump, Giuliani and the rest of Trump’s supporters have gestured toward when flogging Trump's resume and suitability to occupy the Oval Office.
“This is a guy who, when lots of businesses went out of business in the early 1990s, he fought and clawed back to build another fortune, to create tens of thousands of more jobs,” another Trump surrogate, Chris Christie, told Fox News on Sunday, discussing the Times’s report. “This is actually a very, very good story for Donald Trump.”
No, it’s not.
The $900 million in loan guarantees reflected in the 1995 return expose decision-making so poor, it almost forced Trump into personal bankruptcy. His bankers’ forgiveness and loans from his father’s estate helped him escape that fate, but his fumbling ultimately led to years of corporate bankruptcies, job losses and investors getting pummeled.
Trump, who told Hillary Clinton during the recent presidential debate that not paying federal taxes “makes me smart,” responded to the Times’s report with a bit of counter-programming:
But Trump isn’t that financially sophisticated. In my interviews with him, he had trouble explaining such basic real estate concepts as “cash flow.” And in the present campaign, he has dropped alarming howlers about how he might manage federal finances as president. His eyes tend to glaze over when complex numbers come into play. Trump’s own former accountant, Jack Mitnick, told the Times that it was always Trump’s ex-wife Ivana who asked probing questions about the couple’s taxes. Trump himself, Mitnick said, was disengaged, and less detail-oriented than his father, Fred.
Trump’s accountants probably used losses on the sale or write-down of assets that Trump purchased with the $900 million in loans to help generate the enormous business loss reported on his 1995 tax return. Whatever minimal financial dexterity and tax savvy is reflected in those moves is theirs, not Trump’s.
In addition to making the “genius” argument, Giuliani said that Trump had a “fiduciary obligation” to his bankers and others to take the $916 million write-down. But by 1995, Trump’s beleaguered bankers were already well on their way to separating themselves from him for good. They would have had no interest in how Trump handled his personal income taxes.
Giuliani also tried to put the tax issue in perspective by noting that Trump had no need to release tax records because he had already disclosed enough through filings made earlier this year with the Federal Election Commission.
“We know that he made $680 million last year from his 104-page financial disclosure form which describes considerably more about his finances than the tax return,” Giuliani said.
Well, that’s another nonstarter. The FEC forms that Giuliani cites, released earlier this year, actually claim Trump had $557 million in income last year. And the $557 million figure is sketchy, because the FEC forms are based on Trump’s self-produced estimates of revenue ranges for his businesses. They offer none of the crucial detail that income tax returns provide.
In the FEC reports, Trump and his team also apparently conflated business revenue with the income he draws from the businesses. So Trump’s actual income is likely to be a fraction of what’s in the FEC forms -- which brings us back to that 1995 return.
In addition to the $916 million deduction, it contains two other disclosures of interest. The bulk of Trump’s 1995 income came from $7.4 million in interest and dividend payments and just $3.4 million in business income. Those would be enviable amounts for most people, but it’s not the kind of money you would expect a leading real estate and casino business to produce.
It’s now been more than two decades since the 1995 return was filed. In that time, Trump has become an international celebrity and made his riches a fixture of his presidential campaign. But how much has his business operation really improved?
Trump could answer that by releasing all his tax returns -- which is maybe exactly why he hasn’t.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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