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9 Key Points About Trump’s Income Taxes (And Many More Questions)

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9 Key Points About Trump’s Income Taxes (And Many More Questions)

9 key points about Donald Trump’s income taxes

Donald Trump, challenged again to release his tax returns, offers a nonsense excuse for keeping them secret. But worse than that, the national political reporters covering Trump’s presidential campaign have, yet again, missed big, obvious stories about his conduct and character.

Compounding these errors, some journalists have reported nonsense as egregious as Trump’s, concerning what his tax returns would tell us. Many seem certain that they will reveal his actual wealth even though tax returns measure income, not net worth, as I will explain.

Still, there is plenty we can learn about Trump from his tax returns. Among the big stories the political reporters missed in covering Mitt Romney’s comments about the potential “bombshell” hidden in Trump’s returns — and the former Republican nominee’s ensuing tiff with the potential future nominee:

  • How much income tax, if any, Trump has paid over the years, thanks to a special rule enacted by Congress two decades ago that lets full-time real estate professionals live tax-free.
  • How much NBC paid him for “The Apprentice,” which would establish whether Trump’s $65 million-per-year claim or NBC’s dismissal of that claim as “grossly inaccurate” is truthful.
  • How much, or little, Trump actually gives to charity, a significant issue in light of his claims to be an “ardent philanthropist,” even though his last modest gift to his eponymous foundation was in 2006.
  • How much Trump relies on tax-deductible interest to leverage his assets and, thus, how vulnerable he is to pressure from bankers if, as in 1990, he cannot pay his debts as they come due.
  • Whether Trump is trying to leverage the IRS to quickly close its current audit, applying the same tactic to limit law enforcement investigations into his conduct that he has wielded ever since he sought his Atlantic City casino license.
  • How much of Trump’s lavish lifestyle, which includes being surrounded by bodyguards and flying a Boeing 757 jet, is deducted as business expenses rather than treated as personal after-tax spending.
  • The degree to which Trump avoids income taxes by borrowing against his assets to finance his lifestyle, a common tactic among those with wealth that grows faster than their spending.
  • Possibly new details on Trump’s business associates and whether he continues his longstanding deals with major mobsters, a major drug dealer (his personal helicopter pilot), and a convicted felon who was his “senior adviser” on some proposed deals.
  • How much Trump made off his fraudulent Trump University, which charged up to $35,000 per student for advice you can get at a local newsstand, including Trump’s effort to shut down law enforcement exposing his conduct.

I expect Trump’s returns to be extremely aggressive, but well within the boundaries set by Congress and without even a hint of criminal tax evasion. I also suspect his returns will show negative income. That’s right — negative. The last line on the front page of his Form 1040 likely shows a number less than zero, because of a special tax rule for very rich real estate professionals that I’ll explain below. In essence, that rule means not having to pay income taxes. 

Therein lies the biggest missed opportunity of all for American journalists. If only they would do the work needed to show how our federal tax system actually operates. The awful truth is that Congress burdens most of us with taxes, but for many of the super-rich, including Trump, the income tax system is a massive source of wealth.

By law, billionaire business owners can live free of income taxes if they wish. Every major tax practitioner knows this, as I have explained repeatedly in articles and books going back two decades — and as I will show again now:

Congress requires taxes to be withheld from your pay before you get the residue.

Serious reporting on the Trump tax returns issue would show Americans how Congress lets figures like Trump and Romney delay paying their income taxes for years or decades. These wealthy people receive zero-interest loans from Uncle Sam equal to the taxes they do not have to pay now.

Imagine how rich you would be if all the income taxes withheld from your paycheck — from your first job until your death — were instead available for you to invest. In time, your investments would grow so large that you could voluntarily pay the deferred taxes and still enjoy a fortune several times the sum of those taxes, even after taking inflation into account.

Congress says that Trump and Romney are entitled to zero-interest loans of their taxes. You are not.

Keep in mind: Donald Trump’s tax plan would plunge America deeply into the debt that he claims is such a huge economic threat already, as the conservative (and anti-tax) Tax Foundation has shown. Trump would lavish even more valuable tax cuts on the rich than George W. Bush did, as the highly reliable Tax Policy Center computer model found.

If we had Trump’s complete returns – not just his Form 1040s — we could establish exactly how he would benefit personally from his tax policy proposals, both in his actual financial situation and if he had the same income from work, from non-real estate businesses, from securities investments, or from retirement accounts.

Note to journalists: a 1040 is not a tax return; it’s merely one form. If Trump releases anything but the entire tax returns, the press corps should call him out on it.

It was during an appearance on Fox News, that Romney warned of a “bombshell” in Donald Trump’s tax returns:

“I think there’s something there. Either he’s not anywhere near as wealthy as he says he is or he hasn’t been paying the kind of taxes we would expect him to pay, or perhaps he hasn’t been giving money to the vets or to the disabled like he’s been telling us he’s doing.”

When Trump said he couldn’t release his returns because of a routine audit, Romney called him out, tweeting:

No legit reason ‪@realDonaldTrump‬‬‬ can’t release returns while being audited, but if scared, release earlier returns no longer under audit.

The Romney-Trump controversy created what journalists call a “news peg,” or a reason to write about an issue.

But the biggest issue still not getting covered is that Congress has created two tax systems, separate and unequal. One is for workers, who are efficiently and thoroughly taxed with only minor opportunities to cheat. The other is for real estate professionals (Trump), private equity managers (Romney), hedge fund managers, and other highly paid executives, athletes, and entertainers, for whom Congress converts the burden of taxes into a profitable investment by permitting delayed payment.

Romney is right that there is no legal reason for Trump to keep a tax return secret, even if the IRS is auditing his 2011 through 2014 returns. Significantly, Trump called this procedure a “routine audit,” undercutting his rationale for not disclosing those returns.

One of the few journalists to get that right is Kelly Phillips Erb, a tax lawyer who writes a Forbes column. She notes that there are political, but not legal, reasons to withhold the tax returns. Chris Isidore of CNN Money also got it right (citing me as a source).

Releasing the tax returns will not tell the IRS anything it does not already know. And if his returns are honest then, at most, the IRS will dispute such matters as the timing of deductions, not their legitimacy. If that happens I would be the first to say his returns are clean, just as I have said about Dick Cheney’s.

You might expect that the right-wing opinion journalists who champion the interests of the rich and dismiss concerns about America’s extreme inequality would display some informed knowledge about the intersection of personal finance and taxes in writing about the Trump tax returns. You might think that, but you would be wrong.

A good example of the know-nothing journalism is the most recent offering by Jim Geraghty, who writes in National Review that Trump’s tax return will tell us how rich he is, citing a handful of clips.

Geraghty wrote, “If Trump’s fortune is multiple billions as he contends, one or two tax returns would have demonstrated the three sources [who claimed otherwise] were wildly off-base.” But Geraghty is wrong. Tax returns tell us about what Congress requires taxpayers to report as income, but not about their wealth. Trump’s returns might tell us something about the actual scope of his wealth, however, depending on how much of it is from depreciable assets.

Warren Buffett demonstrated how this worked in 2010, so it is not something that only a tax policy expert can understand (or that journalists couldn’t learn before writing). Buffett disclosed in a letter to a Republican Congressman that his 2010 tax return showed income of $62,855,038. Now that is a lot of money, more than the average American taxpayer would have reported after living for 1,110 years.

That year, Forbes Magazine estimated Buffett’s net worth at $50 billion, based on his Berkshire-Hathaway shares which, significantly, do not pay dividends and none of which Buffett has ever sold. He has given many shares away.

Buffett is much richer than Forbes reported, owing to other investments, but we do not know his actual net worth. And even if Buffett released his tax returns we would not know.

The income that Congress required Buffett to report equaled a bit more than a tenth of one percent of his wealth. Had he chosen to do so, however, Buffett could have legally lived tax-free by borrowing against his assets because Congress has decreed that borrowing is not a taxable event. Donald Trump’s tax returns, if we had all of them, may tell us how much he has used borrowing to avoid taxes.

I revealed Trump’s income and tax payments from his early years in my book Temples of Chance. In 1977 he made $118,530 and paid $42,386. The next year Trump reported an income of negative $406,379 and paid nothing. In 1979 he reported negative $3.4 million and again paid no taxes.

No doubt that reflects what Romney hinted: Trump may well report negative income and live tax-free, an issue the mogul and I once discussed at the old Trump Castle Casino in Atlantic City. (Incidentally my employer, then The Philadelphia Inquirer, paid for my lunch.)

Trump seemed to want to interfere with the IRS audit when he tweeted: “As far as my return, I want to file it. I will absolutely give my return but I’m being audited now.”

Asking the IRS to close the audit or face criticism seems innocuous, unless you understand what is going on politically with tax law enforcement.

Congressional Republicans, sometimes with the acquiescence of President Obama, have cut the IRS budget so severely that its computer systems are starting to fail and its capacity to pursue major tax cheats is drying up from a political El Niño. Yet wage earners are still being fully taxed. Thanks to shoddy reporting, most Americans believe the IRS “targeted” conservative groups seeking to influence elections — the so-called C4 organizations — giving Congress an excuse to cut the IRS budget. In fact, a mid-level manager in Kentucky who is a self-described conservative Republican ordered the focus on C-4 groups. And the documents show he was doing his duty because many of the C4 applications stated that the groups were partisan, which Congress has made a no-no for tax exemption.

Trump’s IRS tweet was part of a pattern. He only got his Atlantic City casino license because he somehow persuaded the New Jersey Division of Gaming Enforcement to limit its inquiry into his background. Had Trump not succeeded he would not have been found eligible for a license because he concealed that he was the target of a bribery investigation, an issue outlined in items 13 and 14 of my 21 Questions for Donald Trump. Lower-level employees were denied licenses over much smaller matters.

Consider the contrast between Trump seeking to shield himself from law enforcement and his plans for harsh treatment of those who protest his proposals (including suggesting they be beaten up), his plan to send armed federal agents into millions of homes to find suspected illegal residents, and his plans to bar Muslims from entering the country, evidently including currently serving soldiers and sailors.

Trump should release his tax returns – not just a few but at least those since 1988, when he sought the vice presidential nomination that went to Dan Quayle of “potatoe” fame.

Dozens of tax returns by Presidents and candidates back to Franklin D. Roosevelt are available here thanks to historian Joseph J. Thorndike and Tax Analysts (for which I write columns on taxes).

Every return Hillary Clinton has signed since 1992, in full, is there to read, including her 2014 return showing the Clintons made almost $28 million that year, while giving more than a tenth of those earnings to the Clinton Family Foundation.

Since there is no legal reason to hide his tax returns, and since Trump wants to make a major change in our tax system that analysis shows would shower favors on people like himself, and since he has a long history of trying to restrict law enforcement inquiries into his conduct: Why aren’t we seeing gaggles of reporters demanding answers from him?

The reason is that Trump keeps journalists in a fenced-off corral, to make sure no one can ask a question he does not expect. Think about that in terms of accountability if Trump were to become president.

But the equally important issue that Romney, of all people, has opened the door to examining is how our federal tax system takes from the many while enriching a select few.

Why has not one presidential debate questioner asked about the tax system? Why is this inequity not a Page One story in every paper in America? Why is this sore topic never mentioned on the nightly network newscasts? Why do politicians left and right nearly all avoid this issue?

Where are the editorials calling for hearings and naming the politicians who (often unknowingly) voted to create this system of redistribution for the richest of the rich?

Oh, I forgot, it takes a lot of work to understand our tax code and then translate how it works in plain English. And why do the work at reporting when Trump will say wild, baseless, and sometimes crazy things that fascinate big audiences, regardless of whether they are applauding or appalled?

Why risk criticism for doing what should be the routine work of trying to make a politician accountable, especially when journalists win so many rewards for the easy job of glitz-mongering?

If you want to understand these issues in depth read my books Perfectly Legal, Free Lunch, and The Fine Print; this cover story I wrote for Newsweek ,and my Tax Analysts columns (paywall for most) including this one outside the paywall headlined “Master Limited Partnerships: Paying Other People’s Taxes.”

Photo: Marco Rubio and Donald Trump react to each other as they discuss an issue during the debate sponsored by CNN for the 2016 Republican U.S. presidential candidates in Houston, Texas, February 25, 2016. REUTERS/Mike Stone

David Cay Johnston

David Cay Johnston won a 2001 Pulitzer Prize for his coverage of taxes in The New York Times. The Washington Monthly calls him “one of America’s most important journalists” and the Portland Oregonian says is work is the equal of the great muckrakers Ida Tarbell, Lincoln Steffens and Upton Sinclair.

At 19 he became a staff writer at the San Jose Mercury and then reported for the Detroit Free Press, Los Angeles Times, The Philadelphia Inquirer and from 1995 to 2008 The New York Times.

Johnston is in his eighth year teaching the tax, property and regulatory law at Syracuse University College of Law and Whitman School of Management.

He also writes for USA Today, Newsweek and Tax Analysts.

Johnston is the immediate past president of the 5,700-member Investigative Reporters & Editors (IRE) and is board president of the nonprofit Investigative Post in Buffalo.

His latest book Divided: The Perils of Our Growing Inequality an anthology he edited. He also wrote a trilogy on hidden aspects of the American economy -- Perfectly Legal, Free Lunch, and The Fine Print – and a casino industry exposé, Temples of Chance.

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  1. WhisperofReason February 26, 2016

    Thanks. Well written and easy to read article. I’ve been inquiring about these missing tax returns since Nov 2015. Just couldn’t imagine why the news organizations had not jumped on this issue sooner. You handily answered that.

  2. Kiers February 26, 2016

    Mr Johnston If clintons gave 1/10th of their $28mn income to CGI, did they have to pay Gift taxes on that?

    1. davidcayjohnston February 26, 2016

      Gift taxes apply to gifts to people – children, grandchildren, friends.

      The gift tax was introduced in 1924 by conservative Republicans to prevent abuse of the income tax, not as many people wrongly believe to backstop the estate tax, which is a levy on the right to transfer large amounts st desth.

      1. Kiers February 26, 2016

        my God! that means they get to give tax free as a charitable contribution!!! So, the formula is: become rich, start your own charitable organization that helps you get more elected jobs, and extract…..sick!

        BTW, thanks for your wonderful articles! truly a service to the lay person (myself) as opposed to lame stream media (who are paid SO HIGHLY for their WORK).

        1. davidcayjohnston February 26, 2016

          No, that is not how it works.

          The Clinton Family Foundation, an operating foundation, helps poor people like African subsistence farmers who get training in better crop management, how to get better prices, etc.

          Foundations, like all charities, are barred from involvement n politics. The C4s I mentioned in my column (a made up controversy) are nonprofit, but they are not charities. They can be engaged in “voter education,” a ruse expanded by SCOTUS in the 2010 Citizens United decision.

          I would prefer that only public charities get tax-deductible gifts, but I also appreciate that much fine work has come from private foundations and private operating foundations (financing the grain crop research that has saved a billion people from starvation, vaccines for polio, etc.).

          Also, most journalists do not make big bucks.

          Don’t confuse a few multimillionaire network anchors and star on-air talent with the local newspaper reporters who do the hard lifting — TV just rips off their work without credit. Even at the NYTimes the Guild top minimum is $108,000, a lot in Keokuk, Iowa, but not much in Manhattan. And anyone good enough to work for The Times could have made a lot more doing something else. A masthead editor once asked me why I was exposing tax dodges when it was obvious I could design them and rake in a fortune. Journalists are like that — for those of us who investigate its a calling.

          1. Kiers February 26, 2016

            indeed. (by “lame-stream” i meant the highly paid talking heads on TV…the ones that are easiest accessed by people, NOT print journalism).

            i will research more on “foundations” to learn (though CGI is attributed a lot of political involvement). cheers to your “calling”!

  3. Kiers February 26, 2016

    The “System” truly serves it’s beneficiaries. Bottom Line. It goes OUT OF ITS WAY to serve.

  4. Independent1 February 26, 2016

    It’s clear from David’s article that over the years, America’s wealthy, including corporations, have managed to rig the tax code in a way that allows them to get away without anywhere near their fair share of what it takes not only to keep America running; but also with respect to the enormous burden they place on our country’s infrastructure and services; and even it’s natural resources. Which makes the fact that especially the super wealthy are ripping off America far more than it would appear even from David’s article above.

    Just think about it for a minute using Mitt Romney as an example. Mitt owns at least 5 houses in disparate parts of the U.S among which he is constantly utilizing air travel flying back and forth to visit or even driving between them far more often than the average citizen. To homes, some or all of which, he probably has people keeping open and functioning in case he should choose to visit one at the spur of the moment. So here you have one American couple, Mitt and his wife, utilizing the electricity/oil/gas whatever year round to heat/cool these homes – possibly more than five average Americans would. In homes that many of which probably have their own cars garaged which must be maintained should he and his wife choose to drop in via his hoping around the country at will utilizing air travel far in excess of the average American.
    And that’s only a small portion of the picture with regard to how America’s wealthy (many of which have yachts and other ‘Big Boy Toys’ like planes), that utilize multiple times our country’s infrastructural and natural resources that the average American family would; and yet these super wealthy people like Mitt seem to have no qualms at gimmicking the tax system and taking every tax deduction possible which lets them often pay next to nothing comparatively speaking to support a country that allows them to make the maximum uses of their wealth. How absolutely disgusting!!!

    (And I have even gotten into the American Corporate perspective where most companies depend to a major extent on America’s infrastructure in one way or another, in order for their businesses to even operate and be profitable – and yet they feel justified in gimmicking their financial/tax statements in a way that let’s them often get away with paying zero in taxes. Even more disgusting!!)

    1. ralphkr February 27, 2016

      OK!, Independent1, now I understand from your post how the wealthy truely are the job creators. Look at all those servants.

  5. John Turner February 26, 2016

    If Trump gave 50 million a year to charities (would never happen) would he get any tax benefits with the surmised tax liabilities?

  6. davidcayjohnston February 26, 2016

    If you have negative income on your tax return then gifts to charity are deductions against less than zero. No tax reason to give in that case.

  7. JDavidS February 27, 2016

    So what’s surprising? Trump’s a liar and a sleaze, a blow-hard and an empty suit, spewing stupidity and crass, blatant bullshit. Not one serious platform to run on. Smoke and mirrors… All Trump is offering the American people is an empty illusion, bread and circuses. Wake the hell up, people!

    1. davidcayjohnston February 27, 2016

      Columnist here…

      Really, JDavidS, you knew that Congress allows a rich few to turn the income tax into a source of wealth while it burdens the rest of us?

      If so, I am thrilled, as you must have been reading my reporting for years. Sadly, though, very few people understand this so please drop the cynicism and encourage people to read my work and learn what they need to know to make our democracy function.

      1. JDavidS February 27, 2016

        I will be more than happy to encourage people to wake up and look at the reality, however, until you or anyone else gives me a solid reason NOT to be cynical, I will remain so.

        1. davidcayjohnston February 27, 2016

          Columnist here…

          Action, not griping, is what brings about change. It took 750,000 deaths to get rid of slavery. People fought long and hard for child labor laws, suffrage, collective bargaining and other improvements.

          The whole idea of the United States of America is that we are responsible for solving our problems. Cynicism just helps the worst among us (see my column at this website headlined KAKISTOCRACY.) Cynicism accomplishes nothing. Change comes from working at change, recognizing errors and abandoning mistaken actions and cajoling people into new understanding so they, too, will embrace the wisdom and determination needed to create a better America.

          We are not powerless, but if we think griping on social media will change anything we are delusional. Building anything that matters — a business, an enduring marriage, a happy family, a school system that teaches us how to teach ourselves, a criminal justice system that protects the innocent — is hard work. It requires a lot of GOYA/KOD (Get Off Your Ass/Knock on Doors).

          The right in America gets this. They do a lot of hard work at every level, from Washington down to taking over local school boards so they can infuse the curriculum with their faux history to intimidating teachers on evolution and other science.

          My role is to tell you what you did not know in ways that you can understand. I dig up hidden facts, policies and procedures and how how they hurt you and benefit others. I have been working hard at it for almost 50 years. Despite all sorts of obstacles, I never give up. I just keep trying as best I can by my action to make America better, to promote the freedom of the human spirit, to protect the liberties of the people and to expose wrongdoing, both institutional and on big issues individual.

          Act. Don’t enable those who benefit from eroding wages, debt and highly concentrated capital ownership. Do.

          1. latebloomingrandma February 27, 2016

            Thank you for doing your job. What happened to the others in your once noble profession?
            Second question–Do you think that those serious Republicans (if there are any left), that truly care about our country, come November, will hold their nose and vote for Hillary rather than that abomination Trump?

          2. plc97477 February 28, 2016

            I have begun thinking that the last nail in the coffin holding the fourth estate was the firing of Dan Rather. It became to dangerous to research and find those stories that make people sit up and take notice.

          3. JDavidS February 27, 2016

            The flaw in your argument is that the opposite of cynicism isn’t “action” It isn’t “doing”. I can be a cynic and still “act”. You are assuming I’ve done nothing. And you couldn’t be more wrong. I’ve spent decades fighting, through union work and political action, fighting “those who benefit eroding wages”etc. yet when I look around, I see the likes of Trump about to become the Republican nominee. That’s cause enough for cynicism. A pollyanna-ish outlook just will not cut it. Never has, never will.

          4. davidcayjohnston February 27, 2016

            Columnist here..,

            Fair enough. I jumped to a wrong conclusion (my judgment influenced because so many other people gripe, but don’t fight). My apologies.

          5. JDavidS February 27, 2016

            I may be a cynic but I will continue the fight, as, I trust, will you. My best to you, sir.

  8. Leftout February 27, 2016

    All of this is nonsense, as you stated that these rules were the result of congressional approval, and tax returns should not be released , they are political rules of engagement and little is learned due to their allowable routings of incomes to various shelters. If there was a flat tax on gross warnings at point of sale , everyone/corporations that are people , all would pay at least something . You present a good syllabus for the corruption present in the tax codes to benefit the user , but the rest of us pay, most corps At Least Provide jobs that are taxed limply for these schemes

    1. Joan February 27, 2016

      Well, no they did not. Mergers very seldom provide jobs, mergers usually result in jobs lost. If you have a company, you need a book keeper. When two companies merge, one of the book keepers is no longer needed. Brains Capital was a jobs wrecking crew. Trump’s earnings are now primarily based on license deals he has made for the use of his name, no jobs.
      I have no ideal what might be meant by your suggestion that we tax “warnings at point of sale”. Are warnings a profitable sales item where you live, cause we get them for free here. Over and over you have used words that do not mean what you seem to think they do.

      1. Leftout February 27, 2016

        Most mergers I have seen merge concepts for better purchasing power by the facilities – hospitals particularly – and facilitiws remain intact, surely some new technologies may eliminate some jobs but again many are given severance to read- educate or allow transfer ifor some staff. It should be a crime to build facilities in another country and ship those same goods back here .

        NAFTA was a big drain on our industries , it should never have been allowed. If Mexico wants to build low wage air conditioners or autos for their people they should do so and sell Them to themselves , but not ship it back here .
        Warnings – Earnings typos sorry!

    2. davidcayjohnston February 27, 2016

      Columnist here…

      I wonder, Leftout, if you know why so many presidents and would-be presidents released their tax returns (see links above). Did you know we had a crook in the White House who cheated on his taxes, brazenly so? Nixon did not go prison (he got a pre-indictment pardon) but his tax guy did go to prison.

      It is about accountability. In a free society we are the government and those entrusted temporarily with the power to write, administer and judge must be held accountable or our liberties will perish. Of course, sadly in my view, many Americans do not support the principles of our Constitution and do not understand or support its principle of limited power for those in high office.

      A flat tax on sales would be a) easily evaded and create a huge Soviet-style black market, b) violates the oldest civic principle*** in Western Civilization and therefore the most conservative principle, c) violates (for those who care) the teachings of the Bible, Koran and every other major world religion whose texts I have consulted, d) creates a system that would radically reduce the tax burden of those who gain the most economically from living in America while increasing the burdens on those who benefit least.

      There are ways to smartly tax consumption, but a sales tax is an inefficient, easily evaded and therefore dumb way to do it. A subtraction method value-added tax is virtuous because it is inherently self-reinforcing and with proper rules close to cheat-proof.

      Later this year I will finish my next book, The Prosperity Tax, which requires no tax filing, eliminates the corporate income tax, taxes capital only when withdrawn for consumption and is cheat-proof unless you engage in a criminal act with a second party.

      *** Intertwined with the birth of democracy 2,500 years ago was the development of the moral basis of progressive taxation in which those who have gained the most from a society bear the greatest burden to foster that society’s enduring existence.

      1. Leftout February 27, 2016

        You say a agora tax can be easily evaded, but that is What is occurring today with present convoluted system. The only ones not able to evade is the common worker.
        You are advocating a Properity tax “consumption tax ” to me that is same as a flat tax paid on goods or services at point of sale , No. ?
        If all corporate loopholes were closed
        Including all Reinvestment of capital for research schemes and expenses for this and that, it would be a fair system, the Angst to all of us is that there is an impression that some very wealthy entities are not paying anything.

        Sales Taxes are somewhat efficiently collected by states, unless you you deal in cash, like pizza parlor a and drug lord?…there is a chance of some oversight here …., but if you have to pay for goods/ services that you use in your business all of these monies / most could be captured .
        You seem to be good at principles of this , why not present a case study on why it could not work or can work as in your proposal . Most people give dismissive arguments that it would not be fair to this group or that group .

        1. davidcayjohnston February 27, 2016

          Columnist here…

          Now you are conflating entirely different issues — a retail sales tax with a flat rate (you wrote about that above with a bollixed word “warnings”) and a flat tax, which is a tax on income.

          The best known “flat tax” proposal — promoted by Steve Forbes — is just a way for those who are already rich to live tax-free and shift the burden entirely to workers. Under the flat tax Forbes proposed wages would be taxed, but interest, dividends, capital gains, rents and some royalties would be tax-free. Forbes himself would never have to pay income taxes again, but workers would.

          The flat tax idea grows from European democratic socialism, as I have explained elsewhere. And, BTW, the eminent economist who came up with the idea , Robert Hall, says he should have put in graduated rates.

          As to your initial comment on a sales tax at the checkout counter, that is a single point tax. Evading a single point tax is easy, unless we were to ban cash and requires transactions to be digital (red cards, debit cards). If we ban cash then bye-bye liberty as there would now be a rich record of where you were and when available to law enforcement, estranged spouses, litigants and creditors.

          I have written extensively on the reasons the retail sales tax is an unworkable idea administratively and also how the rate needed to make it work would create a permanent depression. As with all my work it was based on extensive interviewing and study and used verifiable sources.

          The best analysis of moving to a retail sales tax shows a 33% rate is needed — and by the way you would be taxed to fund the 33% tax on government purchases? Does that make any sense? Would you maintain your car the way airlines do planes and keep yours for a million miles or pay the 33% tax and buy a new one more often?

          I urge you to read my trilogy — Perfectly Legal, Free Lunch and The Fine Print — and my columns.

          For Tax Analysts, those outside the paywall are here: http://www.taxanalysts.com/www/website.nsf/Web/DavidCayJohnston?OpenDocument

          For Reuters here:

          For AJAM here:

          and, of course, at NationalMemo.com

          1. Leftout February 27, 2016

            Warnings = earnings a typo sorry,
            I actually have come across some of your writings unknowingly , looking for he whereabouts of the missing 7 trillion dollars over the past 8 years .

      2. Carolyn D February 27, 2016

        Interesting about your support for a VAT. Look forward to your book.

        1. davidcayjohnston February 27, 2016

          Columnist here…

          Please read with care. I did not say I supported a VAT, I described it.

          1. CrankyToo February 27, 2016

            As an American service member stationed in England in the mid-1980s, I (like her majesty’s subjects) was subjected to a 16% VAT on everything I purchased “on the economy”. And I can tell you with absolute certainty that the VAT “informed” my every purchasing decision – and dissuaded me from many.

            My point is that a VAT (particularly one in the realm of 16%) can have a fairly deleterious effect on consumerism. So, I’m just wondering – do you support a VAT, such as the one you described? It would seem to place a heavier tax burden on those at the lower end of the income continuum.

            PS – I’m a big fan of yours.

          2. davidcayjohnston February 27, 2016

            Columnist here…

            Thanks for the kind words. We can make anything our tax base. Think about the defining technology of the modern world — electricity. We could run all our government services off charges for juice if we wanted.

            A VAT may be a smart tax if used as a mass-purchasing levy the way the Nordic countries do. Focus on the levy, not the rate.

            The Nordics finance universal, no out-of-pocket health care with a VAT tax because that is efficient and logical since it is really disguised premiums for universal insurance with no rejection of claims. You and I and Bill Gates will need about the same health care and the few really expensive cases — medical or genetic misadventures, accidents, costly illnesses — are widely risks we need to spread.

            My next tax book will, in plain English, show how we can have a simple, effective system that does the least damage and raises any sum we choose while encouraging savings, work and good behavior.

            You may be interested in this, too, my column on a 60-year-old idea of how to make every man a capitalist:

          3. CrankyToo February 27, 2016

            It can be tough focusing on the levy, not the rate when the rate is 16% and you’re raising a family on a GI’s pay (and I made significantly more than the average Englishman).

            Nonetheless, your explanation of the use of a VAT to fund Nordic healthcare systems illustrates how effective such a levy can be.

            I’ll look forward to reading more from you. Cheers.

      3. salestax February 28, 2016

        Value added tax is definitely not self-reinforcing (?enforcing) and cheat proof. Check the compliance gap studies done by the EU and you will find compliance gaps in several countries that are considerably higher than for the federal individual income tax. That said, there are many sound economic reasons for adopting a national value added tax as a replacement for part of the individual and corporate income taxes.

        1. davidcayjohnston February 28, 2016

          Columnist here…

          You confuse the specific VAT taxes in Europe with how a subtraction method VAT could be designed.

          Done right each producer gets stuck with the tax bill unless they pass it on to the next until the tax is ultimately paid by the consumer.

          This is exactly why my next book is an entirely new federal tax code for the 21st-century economy. Proper design is crucial. What we get is design by donation.

          1. salestax February 28, 2016

            Definitely not cheat proof. Among the ways: collect VAT on sales and keep it, bogus invoices to reflect purchases not made and get credit for fictitious sales, or claim VAt paid on personal purchases as refundable business purchase. Tht only scratches the surface. Australia and NZ do better than Europe.

        2. davidcayjohnston February 28, 2016

          You confuse the specific laws in those European countries with how a properly designed subtraction method VAT can work and be cheat proof.

  9. Carolyn D February 27, 2016

    If people are permitted to do all these things under law, how is it Trump’s fault if he tries to take advantage of the situation? Nobody likes paying taxes.

    It’s lawmakers, folks. They’re the culprits.

    1. davidcayjohnston February 27, 2016

      Columnist here…

      And THAT is exactly what my column says. The scandal is the law — and it will not get fixed until voters demand it. Trump’s plan would quadruple-down on the GWBush tax cuts.

  10. Ekpe February 27, 2016

    Paying other people’s taxes!! One may think that is the rich showing their benevolence! No, it’s the poor in the service of the rich. That is the country some want to retain or “get back”.

    1. davidcayjohnston February 27, 2016

      Columnist here…

      Click on the link “THIS ONE” at the end of my column. I predict your blood will boil.

  11. fortunev February 27, 2016

    The corrupt system will never change. Politicians and lawyers hold the key to the asylum and manipulate the tax codes to their advantage. It’s their job. Their careers are based on the misleading fine print. If there are any changes made they are made to their benefit while crowing that they are for the “little guy.” Just ask all the morans out there who support tRump and his minions.

    1. davidcayjohnston February 27, 2016

      Columnist here…

      So I guess you judge the whole idea of America a failure. What would you like now — a Trump dictatorship? A theocracy? Military rule?

      We created this country so that we could decide our fate. But if you tell yourself we cannot change policies then you are embracing the end of the United States of America and our Constitution. I am not willing to do that because, flaws and all, this is the country has in the past and can in the future improve the human condition.

      We ended slavery, got child labor laws, got food safety laws, got collective bargaining rights and environmental laws as well as suffrage. Those were much more difficult to achieve than what we face today.

      Don’t complain, act. Get to work electing people from city council to the White House who represent the laws you favor, whatever they are. Organize people,. Get them registered. Vote.

      1. Independent1 February 27, 2016

        David, despite all the downer messages on America we hear from some presidential candidates, not everyone buys into all that negative rhetoric – certainly not Warren Buffet. In a recent article in the Christian Science Monitor, Warren Buffet says: ” babies born today will live “far better” than their parents did.”

        For the benefit of some other NM posters, here’s a brief excerpt from the CSM article:

        It’s an election year, and candidates can’t stop speaking about our country’s problems (which, of course, only they can solve). As a result of this negative drumbeat, many Americans now believe that their children will not live as well as they themselves do.

        American GDP per capita is now about $56,000. As I mentioned last year that – in real terms – is a staggering six times the amount in 1930, the year I was born, a leap far beyond the wildest dreams of my parents or their contemporaries. U.S. citizens are not intrinsically more intelligent today, nor do they work harder than did Americans in 1930. Rather, they work far more efficiently and thereby produce far more. This all-powerful trend is certain to continue: America’s economic magic remains alive and well. That view is dead wrong: The babies being born in America today are the luckiest crop in history.

  12. notafoxfan February 27, 2016

    mr trumps attorney group, as well as his “advisors”,will tell him not to disclose anything to anyone,and the sheep who follow him will not care either way because he is their “pied piper..if he said the world was flat,they would believe him. talks and stupidity follows…

  13. stsintl February 28, 2016

    Why can’t the media get Trump’s, as well as other POTUS candidates’, tax returns from IRS directly under the Freedom of Information Act?

    1. davidcayjohnston February 28, 2016

      Columnist here…

      Because Congress enacted Section 6103 of the Internal Revenue Code making tax returns secret. In the 1920s they were public.

    2. davidcayjohnston February 28, 2016

      In addition to my earlier comment, many presidential tax returns are here: http://www.taxhistory.org/www/website.nsf/web/presidentialtaxreturns

  14. TiredOfTheHaters February 28, 2016

    I can’t stand to even look at Trump the Chump these days. ?

  15. cliff elgin May 14, 2016

    How much has he paid in taxes during his lifetime?

    During this time he says he has made ten billion dollars. Has he paid three billion in taxes?

    From what I have read, it seems like he has paid around .05% tax on his $10 billion.


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