Today, Explained - $750

Episode Date: September 28, 2020

That's how much "billionaire" President Trump paid in federal income taxes his first year in office, according to reporting from the New York Times. Transcript at vox.com/todayexplained. Learn more about your ad choices. Visit podcastchoices.com/adchoices

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BetMGM.com for terms and conditions. Must be 19 years of age or older to wager. Ontario only. Please play responsibly. If you have any questions or concerns about your gambling or someone close to you, please contact Connex Ontario at 1-866-531-2600 to speak to an advisor free of charge. BetMGM operates pursuant to an operating agreement with iGaming Ontario. Andrew Prokop, you're a senior correspondent covering politics here at Vox. The New York Times published a trove of information on President Trump's taxes.

Is this it? Are these the tax returns the country's been waiting four years for? Basically, yes. The Times did not publish the documents themselves that they obtained because they didn't want to jeopardize their sources. But they basically got to look at tax return data extending over more than two decades related to President Trump, including his complete returns as prepared by his accountants through the year 2017. And there's been a lot of focus, of course, on the president's taxes through court proceedings, through congressional hearings. What exactly has the country been waiting to learn this whole time? So it was very unusual that Trump refused to release his tax returns

while running for president in 2016. It went against decades of recent precedent, and he continued his unconvincing excuses about why he wasn't doing this ever since he's been elected. And as far as the tax returns, as soon as the audit's complete, like any lawyer would tell you, Greta Van Susteren, she was going over it a while ago. She's a lawyer. She said, well, no lawyer would let somebody release a tax return when they're under audit. There is, in fact, no law preventing him from releasing his tax returns if he's under audit. So many people suspected that he had something to hide here. And there were all sorts of theories going around. Was it that perhaps he paid no income taxes at all in some years?

Maybe he doesn't want the American people, all of you watching tonight, to know that he's paid nothing in federal taxes. Was it that he might not be as successful of a businessman as he claimed to be? And it's natural to wonder, well, what is it that he's hiding in his taxes? Maybe it's that Donald Trump doesn't earn nearly as much as he has so loudly told everyone. Maybe he's not as rich as he says he is. Who knows? Maybe it is. Or was he perhaps claiming some deductions and write offs that were a bit legally aggressive and perhaps dubious that might not stand up to close scrutiny? OK, so what does The New York Times reporting reveal on those three big buckets? The Times story reveals that all of those are true, that in several years from 2011

to 2014, Trump paid zero federal income taxes. And in 2016 to 2017, he paid the paltry sum of $750 each year. As in you and I probably paid more taxes than President Trump. Yes, I certainly did. I don't know about you, Sean. I did too. I did too. Okay, good, good. They also reveal that the reason Trump paid so little in taxes is because he claimed his businesses were losing massive amounts of money. And he used those losses as an excuse on these tax forms to avoid paying income taxes. So that, if we take it at face value, makes him look like a rather unsuccessful businessman. And then there's the issue of the dubious deductions. And the Times sniffed out a few deductions that he claimed or write-offs that he claimed that don't seem to really pass

the smell test. What are we talking about? The most prominent example is that Trump claimed on several projects that he had consultant expenses and he tried to write off consultant expenses as a business expense, millions and millions of dollars worth. But it turns out that, according to the Times' reporting, there were no outside consultants working on these projects for the company. And they figured out that some of these payments, the amounts, match payments given to Trump's daughter, Ivanka. So it looks like, at least in some cases, Trump was claiming that he was spending on consultants as a business expense. But those consultants were actually his children who also work for his company. And that raises some eyebrows.

When you say it raises eyebrows, I mean, a thing I wondered last night reading over this stuff is, is this illegal or is this just some shady accounting? Well, that's the question hanging over all this, because it's obviously possible to have really clever accountants. It's also possible to have really aggressive and perhaps unethical accountants. And the question of what was happening here, it's tough to conclusively say without having more underlying information about what was going on. But the Times also flagged payments for Don Jr.'s legal fees related to the Russia investigation as questionable because they say you're not supposed to deduct legal expenses that come

from a political campaign. And then there's also the New York attorney general is investigating certain charitable deductions Trump claimed. The petition also names four Trump organization properties under investigation. Seven Springs, a 212-acre New York family estate in Westchester, 40 Wall Street, a mixed-use building in Lower Manhattan, the Trump International Hotel in Chicago Tower, as well as Trump National Golf Club in Los Angeles. For basically agreeing not to develop on certain of his properties, he claimed that this was effectively a charitable donation from him that was very valuable and should be deducted from his taxes.

So that was already under scrutiny from the New York attorney general. So I guess it remains to be seen whether any of this is explicitly illegal or not. Is that fair? Yeah, I mean, that's a question for investigators and prosecutors to determine. But it certainly doesn't seem absolutely, obviously, entirely legal. What more do we learn about the president's debts? paid to the mention in the article that Trump has a great deal of debt, over $400 million worth that will be coming due in his second term. $400 million. Yeah. Now that is actually not a new revelation. That has been known since Trump filed his financial disclosure forms back during the 2016 campaign. So there was a lot of questioning about who exactly that debt was to, especially because the Times pointed out that the tax returns do not actually mention who holds that debt.

But according to Trump's financial disclosure forms, we actually do know the largest debt holder for Trump is Deutsche Bank. It's about $300 million in debt. And these are for all active, successful projects. These are golf courses in Florida. This is partially for his hotel in Washington, D.C., which we know just opened. You know, rather than secret Russian money being confirmed by this or something like that, it seems that this debt that's being disclosed on the tax returns, at least so far as we know, appears to be to financial institutions and about mortgages. And is it all these debts that prevent the president from paying taxes like people like

you and me, like most Americans? So the story as outlined in the Times article, what seems to have happened is that Trump used various parts of the tax code to avoid paying much income taxes for many years. And then in the mid-2000s, that's when The Apprentice premiered. And The Apprentice sent tons of money pouring in to Trump's coffers. And he actually ended up paying a lot of taxes.

From 2005 through 2007, according to The Times, a total of $70 million in federal income taxes. The first time he paid substantial income taxes in his life. And he appears to have not liked this very much. So he changed his financial strategy and business strategy. What he was going to do from this point forward was to spend a lot of money and plow it often into what on paper looks like money losing businesses. And then he would claim those losses as business losses and use them to avoid paying income taxes in future years. So if you lose this much money, then you don't owe taxes on the parts of your

business that are actually profitable. And that's how the president, who may or may not be a billionaire, gets away with paying $750 in income taxes. Yeah. So the question hanging over this is whether the massive losses that Trump has declared are actually real, because there's one picture in which Trump is actually a pretty incompetent businessman. He's losing a ton of money by just plowing it into mainly golf courses that are losing a ton of money. and that that's why he's paying no taxes on the part of his business that is profitable because he's losing so much money on the unprofitable parts of his business. The other explanation would be that this is a bit of

trickery on Trump's part, that he wants to avoid paying taxes. So he has made his golf courses particularly seem very unprofitable on paper, whether this accounting is legal or not. We don't really know. It's impossible to say. But that that he is kind of seeming to be more unsuccessful than he is just because he doesn't want to pay taxes. More with Andrew in a minute. Money, money, money, money. Money. Money, money, money, money. Money. Money, money, money, money. Support for Today Explained comes from Aura.

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That's A-U-R-A-Frames.com promo code EXPLAINED. This deal is exclusive to listeners and available just in time for the holidays. Terms and conditions do apply. So you've got to ask yourself, why won't he release his tax returns? And I think there may be a couple of reasons. First, maybe he's not as rich as he says he is. Andrew, four years ago, Hillary Clinton was talking about Trump's tax returns in the presidential debates. Or maybe he doesn't want the American people, all of you watching tonight, to know that he's paid nothing in federal taxes. And I remember the president proudly saying his not paying federal income taxes made him smart. That makes me smart. Reading this reporting from the New York Times, all the loopholes and smoke screens certainly seem like the work of someone very smart or incredibly stupid.

Well, the question is, how far do you go in claiming aggressive tax deductions or write-offs without going too far? And it does seem that Trump is in serious danger of having gone too far. The story reveals that he really is under audit from the IRS. He has been for several years and that the audit looks really serious. If there is an unfavorable finding to Trump, it could cost him about $100 million in back taxes. So, you know... That is more taxes than you and I probably paid, Andrew. Yes, that would be more taxes than I paid last year. I will admit that. Tell me a bit more about this audit. It sounds epic.

So back in 2010, just after the financial crisis, Trump claimed an income tax refund that was worth $72.9 million. That was all of the federal income taxes he paid from 2005 through 2008, according to the New York Times. He asked for it back. And this is back when he was making money off The Apprentice. If you work hard, you can really hit it big. Yes. I used my brain. I used my negotiating skills, and I worked it all out. Now my company is bigger than it ever was and stronger than it ever was. And I'm having more fun than I ever had. So he claimed essentially that he lost so much money during the recession, one point four billion dollars. For me, failure is never an option that he deserved a refund of the taxes he actually paid in previous years. There is no

such thing as failure. Is that how federal tax code works? If you lose a bunch of money at one point, you can claim that you gave a bunch of money before and then get it back? So this was a specific change that was passed under President Obama that Trump was trying to take advantage to. Thanks, Obama. And so he basically, he wanted all of his tax money back that he paid since 2005. And then initially, he actually got it. According to Michael Cohen, his longtime lawyer and fixer, according to Cohen's testimony to Congress last year, Trump showed him off a huge check from the U.S. Treasury. He showed me what he claimed was a $10 million IRS tax refund.

And he said that he could not believe how stupid the government was for giving someone like him that much money back. But the thing is, that was just a preliminary refund. And the question of whether Trump actually deserved all that money back is the topic of the audit that has been unfolding ever since. Has the president said anything about all of this now that the New York Times reporting seems to corroborate something that Michael Cohen said under testimony? He basically said it's all fake news. Totally

fake news. We shouldn't believe it. It's wrong. Made up fake. He has complained about the audit often. Every year they audit me, audit me, audit me. He's complained that you have people in the IRS. They treat me very, very badly. So, yeah, he's talked about both the audit and the Times report specifically, but not in a particularly candid way. What about his tax attorneys? Are they on the line here? Have they commented on what the Times has reported? organization. And he claimed that most, if not all, of the facts appear to be inaccurate, but he didn't seem to really have much specifics. He claimed that Trump has actually, over the past decade, paid tens of millions of dollars in personal taxes to the federal government. However, as the Times report points out, personal taxes is not federal income taxes. That could also include Social Security, Medicare, payroll taxes for employees. Of which he has quite a few.

Yes. works for the wealthy, the well-connected, the powerful people like Donald Trump who live in gold rooms at the top of skyscrapers? There are two schools of thought on this. One is that the super rich have all sorts of ways to take advantage of the tax code and try to minimize their tax liability. I absolutely used it. And so did Warren Buffett. And so did George Soros. And so did many of the other people. You know, this is just rather than something unique Trump does,

that this is something of a broader scandal that is unfortunately quite common. The other school of thought is that Trump goes further than others. For instance, there is this question of the audit. That is clearly a sign that the IRS is at least concerned that there is something not entirely on the level here. To be a super rich person, if you end up paying maybe 10% of your income in taxes, that is pretty common. if you end up paying maybe 10% of your income in taxes.

That is pretty common. To pay zero is more unusual. It is not necessarily illegal. There are potentially legal paths to get there, but it's not the norm. The Times reporters write that in many years, Mr. Trump lost more money than nearly any other individual American taxpayer. We're talking declared losses in the year 1995 of nearly a billion dollars, for instance. I mean, a billion dollars of debt, a fight with the IRS over $100 million, an agency under his own supervision.

Just reading this article, I felt like the entire Trump presidency is just a conflict of interest. Yeah, and one of the most ominous things in the report from The Times is to return to a topic from before. The fact that Trump has all of these debts coming due, for $400 million during his second term, who could be on the hook for another $100 million if the audit doesn't go the way he likes. Trump has a lot of money at stake. And in the midst of a pandemic that's killed some 200,000 Americans and economic crisis and reckoning on race and everything else going on in this country right now. Is it possible that this information, these revelations from the New York Times will make a difference in this election? Well, it certainly wouldn't help Trump. He's running out of time at this point. He's trailing in the polls. He needs to turn things around. And this is obviously not what he wants to be talking about. I think there's a question of how many people who currently support Trump might change their minds over this. But average people pay taxes. They know how much taxes they pay. And many of them will probably think that it is quite strange that they are paying more taxes than their supposed billionaire president. I think it's a little strange, Andrew. How about you?

Yeah, I would agree with that. Thank you. Bye.