By Alan M. Milner
Tellus News Digest
The copy of Trump’s Form 1040 released by Rachel Maddow on her 9 P.M. MSNBC program last night turned out to be another case of “much ado about nothing” because Form 1040 is a summary of an actual tax return and we needed to see the details, not the summary.
The tax return, which was sent anonymously to Pulitzer Prize winning journalist David Clay Johnston, was posted on MSNBC and may be viewed here.
Johnson, the reporter who broke the story on his own DC Report website, was Maddow’s guest for the entire 9 o’clock hour, which then bled over into Lawrence O’Donnell’s 10 P.M. stint, during which the news anchors and various reporters delved into the little bit of information provided by the return.
Instead of evidence of Trump’s misdeeds, the two page Form 1040 tax return documented gross income of $152,7 million in 2005 but an adjusted gross income of only $48,592,825, on which Trump paid federal taxes of $38,435,451.
Wait a minute! He paid taxes of $38.5 million against a taxable income of $48.5 million? That’s an effective tax rate of 79.38 percent of his adjusted gross income. How is that possible, or even fair? Looked at another way, over a ten-year period, if his income continued to average out, the tax return proves Trump’s contention that he has paid hundreds of millions of dollars in federal taxes, despite reports claiming he pays none at all.
That 2005 tax bill is the cumulative effect of the “Alternative Minimum Tax,” a rule that Trump wants to remove from the IRS Tax Code, but before you agree with him, remember that his $38.5 million tax bill was only 25.21 percent of his actual income of $152.7 million. This makes it clear why Trump wants to do away with the AMT, and equally clear that this would be a bad idea for the 99 percent who don’t get those big write-offs.
Instead of making a great big hairy thing out of Trump’s 2005 return, what Maddow and Company should have said was the exact truth: Trump’s returns proved that he did pay substantial federal taxes (as well as substantial state taxes) but shed no new light on Trump’s business dealings with foreign governments or their representatives…because they don’t.
By making a great big hairy thing out of one two-page tax return, Maddow played right into Trump’s hands, as did everyone else who made a big deal out of finally getting a portion of his 2005 return. Now, Trump can legitimately state that (a) he pays a lot of money in taxes and (b) there is no evidence of foreign involvements in the tax return.
The three items Trump opponents needed to see, but didn’t get, were Schedule C for 2005, which showed business income of $42.3 million, Statement 1, which documented a loss of $103.2 million shown on line 21, and Schedule A, which generated a $17 million deduction itemized on line 40, which is reserved for itemized deductions.
The information Trump Watchers wanted could be in one, two or all three of these documents. Schedule C would show any interest paid on business loans. Statement 1 would explain the loss of $103.2 million, which may be carried over from a massive $919 billion business loss he reported on his 1999 New York State tax return for that year, copies of which are available. Since he was entitled to spread those losses over 15 years, there might have been enough left in 2005 to account for a $103 million deduction.
The most dramatic item would be interest paid on business loans, which could have reduced the gross business income downward to a net of $42.3, but that item could also show up on Schedule A if the loans were made directly to Trump rather than to his companies, in which case the interest paid on those loans would appear there.
The problem for Trump haters, however, is that it is quite likely that Trump has not made any interest payments on any of these alleged loans because such large jumbo loans are often structured as balloon notes on which the principal and interest are paid off at the end of the loan period. More importantly, you are not required to report interest expenses on commercial loans UNLESS you want to claim them as deductions.
In other words, much ado about nothing. Johnston put the icing on the cake by making matters worse when he said that this return disproves Trump’s assertion that he has paid hundreds of millions of dollars in taxes. Trump only paid $38.4 million in PERSONAL taxes in 2005 but, in the 12 years since, if everything stayed the same (and we know that Trump has done very well during the intervening years), Trump would have paid around $456 million in federal taxes, thus substantiating his claim that he has paid those hundreds of millions in taxes over time.
This number doesn’t include taxes paid by Trump’s businesses, which are subject to an array of taxes in addition to his personal income taxes, or the 7.45 percent in payroll taxes that his companies pay each year.
All Maddow and Company proved last night was that Trump pays taxes. He paid more taxes in 2005 than 99 percent of us make in a whole lifetime, but we already knew that.
In the meantime, Maddow and Johnston managed to miss some salient points: The tax returns were unsigned. Neither Trump, nor his wife, nor the tax preparer’s signature appear on the version of the tax return published on the MSNBC website, but all of the reporters missed the fact that an unsigned tax return is not valid. Without signatures, there is no evidence that the tax returns were ever seen or signed by the Trumps, or at least there wasn’t until Trump himself released the identical forms.
That’s another interesting point. How did Trump know which copy of the tax return was actually released when it had not yet been published online? Well, partly, that’s because David Johnston may have already published the copy of the return on his website, or it may be because Trump knew which copy had been sent. To be clear about this, a signed version of Trump’s tax return must exist somewhere. At the very least, there must be at least one version that was signed by his accountant, but Trump knew which version had been released and released the same version himself.
There is also no evidence that the version of the tax return that was published by Trump last night, which is exactly the same as the one on the MSNBC website, was the same as the one submitted to the Internal Revenue Service. It would take a signed Form 4506 to get that information released by the IRS but, since that form has to be signed by the tax payer, we can assume that isn’t going to happen either.
In other words, even more “much ado about nothing.”