Trump Tax Scandal

Overview

The Trump Tax Scandal refers to the fallout from documents leaked to the New York Times^[1] that indicate Republican presidential nominee Donald Trump could have avoided paying taxes since 1995.

History

Throughout the 2016 United States Presidential Election, Trump has bucked the tradition of presidential candidates releasing their tax returns, causing speculation that something detrimental to his campaign and reputation was hiding in them.^[2] In the first Presidential Debate, Democratic nominee Hillary Clinton questioned why Donald Trump had not released his tax returns. Trump may have alluded to the fact he had not paid taxes and bragged, "That makes me smart."^[14]

On October 1st, 2016, after receiving a leak of some of Trump's tax returns, The New York Times published an article that revealed Trump had lost $916 million dollars in 1995, "from the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan." Because of American tax laws, the loss would have wiped out over $50 million dollars in taxable income over the next 18 years.

Developments

The news dominated talk shows on October 2nd, 2016. On CNN,^[3] Rudy Giuliani called Trump a "genius" for avoiding his tax returns. Clinton released an ad attacking Trump about the scandal that day.^[4]

Slate,^[5] NPR,^[6] CNN,^[7] and more speculated the leak could hurt the Trump campaign. ThinkProgress^[13] and other Twitter users found instances of Trump complaining about where his now non-existent tax dollars were going. In a tweet,^[8] Trump suggested the news proved he knows America's tax laws better than anyone who has ever run for president and he was the only one who could fix them.

#LastTimeTrumpPaidTaxes

On Twitter, the hashtag #LastTimeTrumpPaidTaxes spread as users reveled in 90s Nostalgia and used it to mock how Trump had avoided paying taxes for maybe twenty years. Uproxx,^[9] Huffington Post,^[10] TIME,^[11] and Daily Mail^[12] covered the spread of the hashtag.

New York Times Update

On October 31st, 2016, The New York Times^[15] reported that it had discovered how Trump employed a number of legally questionable methods to avoid paying taxes, mainly the "stock-for-debt" swaps, a tax avoidance practice that had been routinely employed by large corporations for the same purpose. According to the article, Trump's proposed maneuvers were "so legally dubious" that his own lawyers advised him that the Internal Revenue Service (IRS) would most likely declare it improper and call for an audit for at least six different reasons.

"Say a company can repay only $60 million of a $100 million bank loan. If the bank forgives the remaining $40 million, the company faces a large tax bill because it will have to report that canceled $40 million debt as taxable income.

Clever tax lawyers found a way around this inconvenience. The company would simply swap stock for the $40 million in debt it could not repay. This way, it would look as if the entire $100 million loan had been repaid, and presto: There would be no tax bill due for $40 million in canceled debt."

The loophole practice eventually became regulated in 1993, the year after Trump pulled off the maneuver to minimize his tax filings. The New York Times also reported that Trump's tax advisers employed a similar concept in 1992, in which "stock" is replaced with "partnership Equity."

In the wake of the New York Times report, John L. Buckley, who served as the chief of staff for Congress’s Joint Committee on Taxation in 1993 and 1994, described Trump's act as “He deducted somebody else’s losses,” meaning that only the bondholders who forgave Mr. Trump’s unpaid casino debts should have been allowed to use those losses to offset future income and reduce their taxes.

Rachel Maddow's Report

On March 14th, 2017, MSNBC journalist Rachel Maddow tweeted a curious message revealing that her news team has obtained exclusive copies of "Trump's tax returns" about an hour and a half before the airing of her daily news program The Rachel Maddow Show on MSNBC. Given the shrouds of mystery surrounding President Trump's tax returns, Maddow's tweet immediately went viral, racking up more than 84,000 retweets and 155,000 likes in less than 24 hours.

Shortly after Maddow's teaser tweet began circulating the social media, the White House preemptively released a statement confirming that Donald Trump paid $38 million USD in federal income tax on over $150 million in income for the fiscal year of 2005.

Despite the high level of anticipation that built up in the hour leading up to the airing of the program, Maddow's findings from Trump's tax returns were largely met with lukewarm reception, as the documents seemed to suggest that Trump paid his taxes in compliance with the laws, and even criticisms from some progressives who interpreted the story as a distraction from the ongoing congressional debate on the healthcare bill.

Throughout the evening and the next morning, thousands of viewers who had tuned into The Rachel Maddow Show for the report continued to ridicule the anticlimactic nature of Maddow's findings on Trump's tax returns, including both supporters of President Trump and followers of Rachel Maddow, with hashtag #TrumpTaxReturns.

One of the most critical tweets came from none other than Donald Trump Jr., who sarcastically thanked Rachel Maddow for publicizing Trump's financial success and income tax filings (shown below).

New Jersey Law

On February 21st, 2019, the New Jersey State Senate passed a bill that would bar President Donald Trump from the 2020 presidential ballot in the state of New Jersey unless President Trump released his tax returns.^[25] This would be the second attempt to pass the bill, after it was vetoed by Governor Chris Christie in 2017. This 2020 version of the bill would not go into effect until Governor Phil Murphy signed it into law.

State Senator Loretta Weinberg, one of the bill's co-sponsors, said, "It is so obvious with this president that had voters known some of what seem to be his business interests, he may not have been elected president."

More than 30 states have introduced similar legislation, but New Jersey is the first to pass it in the state senate. Those similar bills were met with criticism among supporters and detractors of Trump alike. Former California Governor Jerry Brown vetoed a similar bill in 2017. He said at the time, "Today we require tax returns, but what would be next? Five years of health records? A certified birth certificate? High school report cards? And will these requirements vary depending on which political party is in power?"

Trump critic and Twitter^[26] user Ed Krassenstein lauded the news. He tweeted, "BOOM! The New Jersey Senate is voting on a bill that will prevent Trump from being on the 2020 Presidential ballot unless he releases his tax returns. Every damn state in America should be doing the same thing! We deserve to know! Who's with me?" The tweet received more than 14,000 retweets and 48,000 likes in 24 hours (shown below, left).

Twitter^[27] user @JerryAvalos7 disagreed (shown below, right). They tweeted, "Totally illegal, denying the people of #NewJersey the right to vote for a candidate is over the top unConstitutional, If it hasn't occurred to the #Democrats, the government does have Trump's tax returns, he does it every year, its called the IRS. Jeez."

Search Interest

External References