Trumpland

Six Questions Raised by the Times’ Bombshell Trump Tax Story

YUGEST YET

It’s probably the biggest story of the year. It told us a lot—but left a lot of other questions unanswered. Here are some key ones.

opinion
200928-trump-taxes-tease_l76txg
Mandel Ngan/Getty

Donald Trump reminds me a bit of baseball pitcher Phil Niekro, nicknamed “Knucksie” for the knuckleball pitch he mastered that enabled him to last 24 seasons in the majors. Knucksie won a lot of games, but he also lost over 20 games in a single season on two occasions.

The New York Times claimed in its blockbuster expose Sunday that Trump has probably lost more money in his business career than any other living American. That’s hard to do. Of course, it is the main reason why Trump has paid little to no taxes over the last 15 years. And there is some question as to just whose money Trump lost.

There were the millions of dollars that father Fred Trump spent to seed his son’s casino businesses that went sour over and over again. Then there were the millions of dollars Donald Trump transferred from his father’s business to himself and his siblings without paying gift taxes in the '90s, according to a previous epic Times report.

ADVERTISEMENT

And then there are the billions of dollars various big banks have loaned Trump over the last two decades, several hundred million of which come due in the next couple of years, loans that Trump has personally guaranteed. Given the decline in the Trump business cash flow these last couple of years, those loan repayments are looking grim.

But the financial predicament that the Times outlines in regard to financial knucklehead Trump is only one of many questions that require some serious answers as the presidential election nears. Here are six.

1. Are any of the activities described by the Times relative to Trump’s minimal tax payments fraudulent and/or subject to tax enforcement action?

It’s too soon to say. It is worth noting that analysis of tax returns is most productive when conducted with viable frames of reference. It should also be noted that the $78 million refund Trump received was triggered by a mandatory audit that has now been contested for years with no end in sight. While deducting $70,000 in hair cuts over the years may sound over the top, there are tax cases where such deductions have been allowed. So the only fraud here may be on the part of the hairstylist who has charged so much with such calamitous result.

Proving criminal tax fraud requires documenting overt actions on the part of the tax fraudster, for example maintaining a double or triple set of books, setting up a phony shell company to act as a conduit for corrupt payments, or participating in a fictitious invoice scheme to disguise personal expenses as valid business deductions. There’s no proof of any of that yet, although we do have Michael Cohen’s comment that Trump kept two sets of books, one without all the losses that he showed creditors and another with the losses, which he showed the IRS. We’ll see.

2. Isn’t the Manhattan DA investigating Trump for tax fraud? How will these disclosures impact that probe?

Cyrus Vance acknowledged before the 2nd Circuit Court of Appeals last week that his office needed compliance with a grand jury subpoena issued to Mazars USA (Trump’s accounting firm) in order to advance an investigation into tax fraud, falsification of business records, and possible insurance fraud. Trump’s attorneys claim that Vance is harassing the president and that the subpoena was overbroad and amounted to a “fishing expedition.”

The Times report demonstrates the global reach of Trump’s business entities, partnerships, licensing agreements, and more—all of which need to be reported on New York state tax returns, since that is where the main business is headquartered and centered. The three judges who heard oral arguments over the Mazar subpoena status expressed skepticism over the Trump legal position. It is likely that the Times article only succeeded in cementing that skepticism, and it won’t be long before we can anticipate a scathing circuit court opinion emerging supporting the Manhattan DA’s position.

3. Why is that important?

Mazars likely possesses documentation of Trump directives and communications relative to how he wanted his tax returns and financial statements prepared. The accountant’s work files are traditionally a trove of evidence of intent (mens rea, in the argot) with regard to the client taxpayer. It is worth noting that the accountant’s work files were devastating when introduced into evidence during the Paul Manafort criminal tax trial.

4. Will Trump regret declaring how much “he loves depreciation?”

The depreciation schedules attached to the Trump Organization tax returns should depict the true cost or “basis” of each Trump business asset being depreciated. Trump has exhibited knowledge of the tax and cash flow importance of depreciation—a process that some (read prospective jurors) may view as an arcane accounting process.

Surely Trump wouldn’t take any short cuts on property taxes, which go to fund our first responders!

The assets being depreciated on annual tax returns are the same assets being used by Trump in loan applications to banks for the purpose of obtaining more financing to procure such assets as golf courses, commercial real estate, and prospective NFL teams. Has Trump maintained consistency with regard to reporting the same cost “basis” of each of these assets on his loan applications as reflected on his tax return depreciation schedules? How about on his applications for insurance coverage? What about with regard to his property tax declarations? Surely Trump wouldn’t take any short cuts on property taxes, which go to fund our first responders!

Recall earlier we said that tax returns are one important piece to an overall financial frame of reference puzzle that represents Trump’s finances. Should Trump take inconsistent positions with regard to his “basis” in the assets he owns, as Michael Cohen charged, the DA will have him boxed in. In chess, such a position is called Zugzwang. Any move Trump makes from this position results in injuring himself.

5. What is the impact of the Times’ reporting on the House Ways and Means Committee subpoena of the IRS for Trump tax returns?

Recall Mick Mulvaney, ex-chief of staff to Trump, aggressively asserting that Democrats will “never” get their hands on Trump’s tax returns. Senator Mitt Romney also stated at the time that the subpoena was “moronic.”

Paying one's fair share of taxes isn’t just for the “little people,” Mr. Trump. You will soon find that out.

Given the many questions surrounding the colossal refund that Trump received emanating from an audit and the wrangling over whether Trump will be liable to repay this refund to the tune of $100 million, Ways and Means—which has oversight responsibility of the annual presidential audit—seems more than justified in pursuit of its IRS subpoena in light of the NYT report.

Never arrived Sunday, Mick! Who is the moron now, Mitt?

6. Do Donald Trump’s personal financial losses make him and therefore the country he purports to lead vulnerable to undue foreign influence?

Congressman Bill Pascrell thinks so. “To cover his losses Trump has looted the government and made himself vulnerable to heaven knows what foreign manipulation and blackmail.” Oliver Wendell Holmes Jr. once said that “taxes are the price we pay for a civilized society.” When we avoid paying our just taxes, the society we get is the one we deserve. Paying one's fair share of taxes isn’t just for the “little people,” Mr. Trump. You will soon find that out.

You are no Phil Niekro, Mr. President. What a knucklehead!

Got a tip? Send it to The Daily Beast here.