As a CPA of 12 years and an owner of a tax practice in Lake Nona, a community within Orlando, FL "the City Beautiful", I am plenty qualified to evaluate Donald Trump's Tax Returns. The headlines, meant to shock you into clicking of course, say Trump paid only $750 in taxes for 2016 and 2017. Is there political spin? What's the truth?
Let me start with my own apology for the click-bait title. Unfortunately, I do not know the answer to the question, "Did Trump really only pay $750 in taxes while making billions of dollars of income?" However, there are several issues and tax principles that I will address that apply to this question.
If you would prefer to watch the video:
First - My political disclaimer - I am commenting on taxes, not giving political opinions. I am neither for nor against any political party or candidate in this post. I am not defending Trump or any other political platform. This is my objective view of what the tax code actually is as of today and how you should respond to it.
I am mad at the New York Times. I am not a journalist, so I could easily be wrong. However, I have seen and prepared thousands of tax returns. I cannot think of one reason why they cannot release the tax returns without jeopardizing their source. I suspect they simply want to keep exclusive rights to them, because in the news, exclusivity is profitability. I could give way more commentary if I could actually see the Trump tax returns for myself, but alas, that's not possible.
A billionaire paying only $750 in tax... really? Look, there are deductions in the tax code and ways to offset taxable income with deductions, credits, losses, etc. However, no one can both simultaneously make billions of dollars and pay only $750 in income tax. So, either Trump doesn't make as much as claimed or he paid more in taxes. As a quick example, yes, you can make $5,000,000 on a W2 of taxable income and if you have another business that lost $5,000,000, that is deductible, your taxable income would be $0 and you would pay no income tax. However, you can't exactly sustain that for very long... where's the money coming from to fund the losses?
You are taxed on what you MAKE, not what you HAVE. You can not just look at two tax returns by themselves. Perhaps there are massive business losses being funded by income generated in a previous year. If you made $400M in 2015 and paid $125M in income taxes, but then lost money in 2016 and 2017 you don't still have to pay taxes just because you HAVE money. You already paid taxes on that income... $125M in this example. Let's bring those numbers down so us normal folk can grasp this idea... if you make $50,000 this year and pay taxes on it, spend $40,000 and retain $10,000 in your checking account after year end, do you want to be taxed AGAIN on the $10,000 in your checking account next year? No, you already paid taxes on it. This is how the system works currently... you pay tax on what you earn, not what you have.
"Tax Loophole" is a ridiculous term. These are tax laws passed by Congress. They aren't secrets. Some are complex and hard to understand, but thy aren't secrets: you can read the tax code here for yourself. Everyone is entitled to the standard deduction. The charitable gift deduction, business expense deductions, qualified business income deduction, etc. are no more of a "loophole" than the standard deduction. If you're not willing to voluntarily forgo the standard deduction and pay more income tax, then you shouldn't ask someone else to voluntarily forgo a deduction they are legally entitled to and pay more income tax.
What you really mean by "tax loophole" is... Before you start jumping all over me in the comments... yes, some of these tax laws are written in a way that only certain people benefit from them. You only get a charitable deduction if you give to charity. You only deduct business expenses if you have a business and incur expenses. This is part of the reason why there is a standard deduction, so everyone gets some deduction. Also, the reason for these is to incentivize behavior... to incentivize giving, home ownership, starting a business, buying equipment, investing, etc. They are incentives open to anyone.
Forget the taxpayer, focus on the laws. Again, until you're personally willing to forgo a tax deduction you qualify for, do not waste your breath complaining about people who make more than you and get these 'tax breaks' you don't qualify for. Focus on the tax law itself. People will always take what they qualify for and we can't blame them for it, because we do it too. Complain about congress, vote, and get the actual laws changed. The tax code is way too complex, we can all agree on that one!
Do rich people really pay less than you in taxes? Look, if Trump paid $750 in income tax in 2016 and 2017 then it means he made almost no money. It doesn't mean he doesn't HAVE money, it means in those particular years he MADE very little (re-read point 3 above if needed). With perhaps some activity (charitable giving for example) that offset some of what he made. That's the reality. People who make a lot of money are paying more than you and me in taxes, I promise. Forget the percentages and look at whole dollars. They are paying more, I can assure you.
Bonus: I hear this all the time and people don't quite understand taxes, of that I am certain. Getting a tax refund does not mean you didn't "pay taxes". It just means you paid in more than you owed and got some back. If you or someone you know wants to have your return explained to you in plain language and how much in taxes you're really paying, please contact me at (407) 243-8678 or brad@wootencpa.com or schedule an appointment.
-Brad
I enjoy helping individuals with tax preparation and tax planning as well as offering tax help to individuals dealing with tax debt, IRS liens, IRS levies, Wage Garnishments, etc. I also serve businesses (including nonprofits and churches) by providing tax preparation and tax planning as well as consulting for accounting, bookkeeping, and other finance related questions. I live in Orlando, FL, but I serve clients all across the country. Schedule an appointment if you need assistance and take a look at the resource page.
6900 Tavistock Lakes Blvd Ste 400
Orlando, FL 32827
(407) 243-8678
Serving clients in Orlando, Lake Nona, Altamonte Springs, Apopka, Azalea Park, Celebration, Hunters Creek, Lake Buena Vista, Lake Hart, St Cloud, Winter Garden, Winter Park and via the latest technology remotely around the country.
*The blog posts (as well as the YouTube channel) are my personal opinions and thoughts about a wide range of topics. They are not meant to apply to individuals specifically and should never be relied on as tax or investment advice. You should contact a professional for specific advice before taking action.
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