Implications of the Trump tax debate

I'm not really sure how this is going to trend out in the long run, as a negative for Trump or a negative for Democrats and probably does depend on one's own tax situation and experience and underlying knowlege of our tax structure.

There are a couple of givens I think, one being that no one, or very few people at most, enjoy paying taxes and the other that it is the sworn goal of most companies, both large and small, to limit their taxable profits.

This is not some esoteric or arcane tax strategy, most businesses would rather eat up any profits in salaries (mostly to the upper tier, since their profit making strategy also includes underpaying the lower tiers) or re-investing in equipment and upgrades, or research and development, etc.

The risk is Democrats looking ignorant or disingenuous at trying to exploit Trumps' use of the "loss carryforward." If Democrats are against the concept in general, they will lose every single small business person in the country, most of whom use this strategy with the same enthusiasm as Trump, if not his scale. I think the majority of small business in this country is done as Subchapter S corps, which allows the business owner to carry the profit or losses through to their personal returns.

Aside from small business, most real estate investors make use of depreciation in their tax returns, again, not esoteric or arcane. This also creates a deduction which also causes a lower tax rate.

Trump could swing this whole discussion around by asking HRC or any Democrat - "So you are for banning the loss carryforward? Really? Better tell that to your business base." Or he could also say, "So you advocate eliminating depreciation in real estate investment?" If he did do that, you would see some massive wriggling and squirming by Dems if he broadened out the argument about what they are complaining about.

I think we should have a debate about how the tax structure favors the wealthy and corporations, but I'm not convinced that the Democrats are prepared to have the conversation they are opening.

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Anja Geitz's picture

However so far as I have seen, I could run a better opposition campaign against Hillary than he has. Its inexplicable, really, when you think about it.

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There is always Music amongst the trees in the Garden, but our hearts must be very quiet to hear it. ~ Minnie Aumonier

as I am sometimes wont to believe.

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Anja Geitz's picture

That the conjecture is not as ridiculous as some would have us believe. I never really saw The Hairball wanting the actual job of the Presidency other than the adulation that came with it.

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There is always Music amongst the trees in the Garden, but our hearts must be very quiet to hear it. ~ Minnie Aumonier

Let' see if Trump is smart enough to make her and the NYTs eat it.

Clinton Campaign Admits Hillary Used Same Tax Avoidance "Scheme" As Trump

Well this is a little awkward. With the leaked 1995 Trump tax returns 'scandal' focused on the billionaire's yuuge "net operating loss" and how it might have 'legally' enabled him to pay no taxes for years, we now discover none other than Hillary Rodham Clinton utilized a $700,000 "loss" to avoid paying some taxes in 2015.

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"Religion is what keeps the poor from murdering the rich."--Napoleon

flowerfarmer's picture

'.....

The difference is that Hillary has no idea what taxes are, or what money is, or how it's to be used- she hasn't the faintest clue what a tax carry-forward is, just ask her......

For Hillary, all money is free and given blindly to her thru the grace of her own presence...'

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for HRC, although at that rate it would take a person about 16,000 hours or just about 8 years to earn one Goldman Speech.
Does she really have no clue on how she sounds?

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Kurt from CMH's picture

were incurred. If it was depreciation on real estate, capital investment, etc., he might have been able to pass it through to his personal income tax status, but we lack details on how Trump arrived at a $915 million loss in a single tax year. The response to "So are you in favor of eliminating carry-forwards" is "No, but a $915 million loss makes us wonder how good your business acumen is. What actually happened in 1995?"

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For at least another hundred years we must pretend to ourselves and to everyone that fair is foul and foul is fair; for foul is useful and fair is not. Avarice and usury and precaution must be our gods for a little longer still.
John Maynard Keynes, 1930

sojourns's picture

which include his failed casinos, Trump Plaza Hotel and his stupid airline venture.

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"I can't understand why people are frightened of new ideas. I'm frightened of the old ones."
John Cage

Frontline (PBS) recently aired an hour of slanted reporting on the histories of Trump and Hillary respectively. It seems to me that it gave the year 1995 as the year he lost a ton of money. I hadn't known that after that, he didn't build more Trump Towers, but there are buildings all over the world with Trump's name on them, which Donald sold the rights to use. His main product is and has been himself ever since.

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Phoebe Loosinhouse's picture

We don't know how the losses were incurred and 915 million is a staggering amount. I'd like to know the inside scoop.

I'm simply saying that Trump has the ability to make a compelling counterpoint if he chooses to because lots of small business people will relate.

I think we should have a major national discussion about our taxes and how we distribute and use our national wealth. For instance, there's this from Bernie Sanders: America's Top 10 Corporate Tax Avoiders which is an all-star round-up - GE, Boeing, Verizon, Bank of America, Citigroup, Pfizer, FedEx, Honeywell, Merck, Corning. Not only did these corporations not pay taxes in specific years, many are got refunds and/or bailouts.

So, the Democrats cracked this door, let's kick it wide open!

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" “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR "

TheJerry's picture

I'm an S-Corp and I have even done a carry forward on a loss.

However, there are limits to what is reasonable. And I am sorry, a nearly $1B loss is not reasonable. The guy is literally profiting from a loss. Because I will guarantee you that in addition to the write off, every single one of his creditors took huge "haircuts" and he paid them far less than he owed them. So, my bet is that if we could see the full story, I am sure there was a lot of hokey pokey as he turned himself around.

My bet is that he double dipped, claiming one amount while actually having to pay out less than he claimed as the loss.
Now, that would be illegal, but hard to prove with out testimony from all his creditors.

Regardless, the problem is it's a serious abuse of the system and is symptomatic of the problems with the current tax code.

The guy claims to make hundreds of millions per year, but he plays a bunch of games to reduce it to under $50M/year and so pays nothing.

So here is the thing, if he tries to fight back on this, the proper response is: "Something is fishy with what you are doing, you must show us your tax returns so the people can understand what you are doing."

It's not that hard to smash him on this effectively.

The problem is HRC and her team are morons and horrible campaigners and "guilty of many of the same things"

What we need is an untarnished candidate who can claim the moral high ground on this issue, and still be business friendly.

So she will be throwing mud uphill.

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____________________________________________________________________________
"I'm not interested in preserving the status quo; I want to overthrow it. "
-Niccolo Machiavelli

"Sorry Hillary"
-TheJerry

While at the same time draining huge amounts of cash out of failing businesses (deliberately failing?) which he then walks off with at greatly reduced or zero taxes. At least that's my impression so far. You also have to figure in the ability of the .01% to buy tax loopholes from cooperative congresscritters.

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Phoebe Loosinhouse's picture

subliminal argument that they are "pro-tax". Which is re-inforcing a negative for a number of people who reflexively connect Democrats and taxes.

I am not anti-tax and I would be for increased income tax rates if we could finally get something tangible that accrues to the citizens for those taxes, like free tuition and single payer healthcare.

IMO, many Americans are anti-tax because they don't perceive that they personally are seeing any benefits - Our infrastructure IS crap, we don't have good mass transit as all of Europe invests in, and when we bail out , we bail out the corporate evil doers and not the citizens harmed by their actions. I can understand people thinking the entire system being corrupt and simply defaulting to anything that allows them to keep more of their own dollars. Why is anyone surprised?

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" “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR "

Phoebe Loosinhouse's picture

very progressive, very fiery, very anti-corporate bad practices - preying on employees and the public, etc., Well Fargo being scummy, she sounded like the second coming of Emma Goldman.

Here's the problem - I don't believe her. Based on her entire previous public life and her actions as Secretary of State. I. Don't. Believe. Her.

It's also interesting that in being the new Champion of the People, inherent in her presentation is that someone else hasn't been.

Now I did believe Bernie Sanders. Trust is not transferable.

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" “Human kindness has never weakened the stamina or softened the fiber of a free people. A nation does not have to be cruel to be tough.” FDR "

Raggedy Ann's picture

I'll never forget her words, back in 2002, "mom, we just submitted a very aggressive tax return and we owe nothing on the half million he made last year." I know a half million is a drop in the Trump/Clinton bucket, but when I owe $8,000 in income taxes, paying nothing on a half mil doesn't seem fair to me.

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"The “jumpers” reminded us that one day we will all face only one choice and that is how we will die, not how we will live." Chris Hedges on 9/11

Damnit Janet's picture

that it was disgusting that he paid less in taxes than his secretary.

The loopsholes are only afforded to the elite rich.

Time to eat the damn greedy rich. Soylent GreeD.

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"Love One Another" ~ George Harrison

Unabashed Liberal's picture

that definitely deserves our attention; although for reasons well beyond the 2016 Presidential election (IMO).

Frankly, I don't see Dems as having much of an opportunity to use DT's legal tax deductions against him. The NYT admitted that, according to the documentation they obtained, they had no proof of illegality.

Heck, in our small way, we use real estate tax deductions for rental properties. And we don't feel 'guilty' doing so. At all.

I'm 'guessing' that one reason the corporatist MSM has seized upon this talking point, is that it allows them to push for Bowles-Simpson's proposals on so-called tax reform--eliminating tax 'loopholes' (such as the tax shelter for Group Health insurance, used by lower and middle income individuals, as well as the well-heeled) in exchange for slashing the marginal tax rates for corporations and 'the wealthy.'

So, I'll definitely be watching how these bipartisan negotiations unfold.

For the record, the following top marginal tax rates for individuals were proposed:

33% -- Donald Trump, in a speech at the Economic Club Of New York (September 15, 2016)

33% -- Paul Ryan, also speaking at the Economic Club Of New York (September 19, 2016)

Here's an excerpt from Speaker Ryan's speech,

“We want to make our tax code simpler, flatter, fairer. Bring the number of tax brackets down from 7 to 3. Lower rates for everybody. Bring the top individual rate down to 33 percent. Close those special-interest loopholes. Consolidate those deductions and credits. Make it so simple that the average American can do their taxes on a postcard. But also cut taxes on small business. Lower their top rate to 25 percent. Cut our corporate tax rate from 35 to 20 percent. Stop taxing people when they bring money into our country. Stop taxing new investments. Don’t punish people for saving and investing. Reward them. The Tax Foundation says this plan would create 1.7 million new jobs right here in America.

But the kicker is that in June of 2014, Senator Ron Wyden disclosed to WSJ's Washington Bureau Chief, Gerald Seib, that he had negotiated lowering the top marginal tax rate for individuals and corporations to 24%.

At that time, Senator Wyden was the Chairperson of the Senate Finance Committee; he is currently Ranking Member of same.

Senator Orrin Hatch, who was the Ranking Member in 2014, is the current Chairperson of the Senate Finance Committee.

Regarding FSC's supposedly call for raising taxes on the wealthy--I say, Poppycock!

Biggrin

Mollie


“I believe in the redemptive powers of a dog’s love. It is in recognition of each dog’s potential to lift the human spirit, and, therefore, to change society for the better, that I fight to make sure every street dog has its day.”
--Stasha Wong, Secretary, Save Our Street Dogs (SOSD)

National Mill Dog Rescue (NMDR) - Dogs Available For Adoption

Update: Misty May has been adopted. Yeah!

Misty May - NMDR

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Everyone thinks they have the best dog, and none of them are wrong.

but Imo people are shooting the messenger, trump did not pass the laws that let him use these tax loopholes, the amount is not really relevant. The tax laws are the problem and I'm doubt many pass up a deduction just so Uncle Sam can have a little extra spending money. If Trump does not turn this around on hrc and the dems. he is a ringer for sure, no one could be that stupid.

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Truly disgusting to hear about Trump avoiding taxes through loopholes and investigating trade deals in Cuba.

I mean it's not like Bill Clinton ever pardoned Marc Rich or anything... Oh he did? That's OK, it's only bad when other people do it.

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Hetrose's picture

The discussion should not about Trump and Clinton pointing fingers back and forth. It should be about Tax Avoidance Strategies that they and other Rich People use regularly that the HUGE majority of Us will Never be able to use. Screw that!

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The rest of us have precious little to say about it, which is one of the many reasons we need a revolution....

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Damnit Janet's picture

We need to rise up and gobble them all up. There's more of us than them. 99.9% > .01%

Here's one of my favorite pix that I took from the early OWS here in Portland.

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"Love One Another" ~ George Harrison

On this issue and went into some of the technicalities involved with Trump's tax minimization (really avoidance scheme).

http://www.wbur.org/hereandnow/2016/10/03/trump-1978-taxes

Background:

http://www.thedailybeast.com/articles/2016/10/03/art-of-the-steal-this-i...

Trump’s gambit is easy to explain in plain English, but for tax wonks the short version is this: Trump combined tax benefits under Section 1231 of the Internal Revenue Code with the exception provisions in Section 108.

The story of Trump’s income tax-free life begins in 1990 with Trump’s well-documented mismanagement of his casinos and his admission that he paid far too much for “trophy properties” like the Plaza Hotel in Manhattan and 23 worn-out jetliners for the short-lived Trump Shuttle airline.

These mistakes created about $1 billion of “net operating losses,” or NOLs, under Section 1231 of the tax code.

NOLs are incredibly valuable. These tax losses can be used to offset salaries, business profits, and income from, say, a television show or making neckties in China. Thanks to his $916 million of NOLs, Trump could earn much over 18 years in salaries, profits, and interest, but pay no income taxes.

Net operating losses should reflect economic damage suffered by the owner of the NOLs. But Trump found a way to gain from these losses by spreading the costs around to bankers and investors.

NOLs can be used right away or be applied to reduce taxes from two previous years and up to 15 future years. In contrast, Congress requires that real estate be depreciated for tax purposes over 39 years. The faster a tax break becomes available, the greater its value. Trump’s advisers found a way to convert real-estate depreciation into NOLs that were much more flexible and could be used faster.

Trump claimed to be worth billions in 1990, just as he does now, yet he could not pay his bills. He stiffed hundreds of small-business suppliers, including those for the Trump Taj Mahal casino in Atlantic City, which will go out of business next week. In all he owed more $3 billion, nearly a third of his debt secured by nothing more substantial than his signature on bank loan papers.

This guy isn't some small business owner. He's a trust fund brat who has a long history of burning investors, creditors and contractors (including many actual small business owners). At least in terms of the values that I was raised with there was an expectation that privilege came with a debt to society. A guy like Trump has none of those values.

The guy has taken a lot more than he has given back to this country.

The same could be said of the Clintons.

The question of scale here is a big part of the issue. This is also a guy who wants to eliminate the estate tax on all of that income that he has been able to accumulate tax-free -- effectively millions of ordinary income earners with less capacity to pay are being forced to pick-up his slack.

As far as the Dems leadership position goes, I think this is all about posturing, and if Donald Trump wasn't involved, they wouldn't care. And if he loses, they will probably drop the whole issue. One way or another we do have to find ways to finance our debt and federal investments, and before we start cutting into Social Security or the safety net, I think it's obvious that more vigorous efforts need to be made to make people like Trump and the Clintons contribute more substantially to the federal treasury and limit access to these kind of loopholes and tax avoidance strategies.

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