Trump paid $38m tax on $150m income

Republican presidential candidate, businessman Donald Trump speaks during the Fox Business Network Republican presidential debate at the North Charleston. (Chuck Burton, AP)
Republican presidential candidate, businessman Donald Trump speaks during the Fox Business Network Republican presidential debate at the North Charleston. (Chuck Burton, AP)

Washington - President Donald Trump made more than $152.7m and paid $38.4m in federal taxes in 2005, according to two pages of his federal income tax return for that year that were broadcast by MSNBC and posted online.

The White House confirmed those amounts in an emailed statement after the network said it planned to release the returns. The amounts reported on MSNBC suggested Trump paid an effective tax rate of roughly 24% to 25% in 2005. Trump has refused to make his tax returns public.

During an appearance on “The Rachel Maddow Show,” veteran tax journalist David Cay Johnston said he got the returns when they “came in the mail over the transom” but doesn’t know who sent them. The tax returns that Maddow displayed on air revealed a stamp that read “Client Copy.”

The documents show that Trump and his wife, Melania, paid roughly $5.3m in federal income tax along with more than $31m in alternative minimum tax. Trump has proposed to abolish that tax in the official tax overhaul blueprint he released during the campaign. He also paid self employment taxes of about $1.9m that brought his effective tax rate to about 25%.

‘Negative Income’

Trump also reported “negative income” of roughly $103m that year, Johnston said - though that amount isn’t explained on the 1040 form that MSNBC posted online. Johnston said it was related to a tax loss of $916m from 1995 that the New York Times first reported on last year. The White House said in a statement that in 2005, Trump had taken “large scale depreciation for construction.”

By comparison, former Massachusetts Governor Mitt Romney disclosed an effective tax rate of 13.9% on a 2010 tax return that he released during his 2012 presidential campaign. Last year, billionaire investor Warren Buffett said he paid an effective tax rate of 16% in 2015: $1.85 in federal income taxes on adjusted gross income of $11.6m.

“Frankly, I think this disclosure may take the wind out of the sails of many of the critics who have been insisting on disclosure of the tax returns,” said John Klotsche, a former chairperson of the executive committee of law firm Baker & McKenzie and a former senior adviser to the Internal Revenue Service commissioner from 2003-2008.

“While the information is very sketchy, it does show that he paid significant income taxes, albeit as a result of the alternative minimum tax.”

The two pages that MSNBC posted online don’t reveal anything about Trump’s actual sources of income. They do reflect the types of income he received: almost $1m in wages; $9.5m in taxable interest; $42.4m in business income; $32.2m in capital gains and $67.4m from “rental real estate, royalties, partnerships, S corporations, trusts, etc.”

Trump’s response

The White House statement called MSNBC “desperate for ratings” for being willing to risk violating the law by releasing Trump’s returns. In a tweet on Wednesday morning, the president added, “Does anybody really believe that a reporter, who nobody ever heard of, ‘went to his mailbox’ and found my tax returns? @NBCNews FAKE NEWS!” Trump didn’t immediately explain how he does believe Johnston obtained the documents.

While federal law appears to make the unauthorised publication of a US tax return a felony punishable by up to five years in prison and a $5,000 fine, specialists said the network won’t face any legal issues.

“It would be illegal for the IRS or an IRS employee to release the tax return, as there are criminal laws that prohibit any disclosure by the IRS,” said Jeffrey Neiman, a former federal prosecutor now in private practice as a white-collar criminal defense lawyer focused on tax.

“But it is not a crime for a private citizen to publicly disclose a tax return.” Asked if there were criminal rules surrounding the publication of the document, Neiman said it’s “perfectly OK.”

Added Klotsche: “The fact that the return is stamped ‘client copy’ dispels any notion that it came from the IRS.”

First amendment

Maddow said the First Amendment’s guarantee of a free press “gives us a right to publish this return.” Johnston said “there is absolutely nothing improper” about journalists publishing the documents if they haven’t solicited them.

Trump has also paid tens of millions of dollars in other taxes such as sales and excise taxes and employment taxes, the White House statement said.

During his campaign, Trump departed from roughly 40 years of tradition for major-party presidential nominees by keeping his returns secret, saying his lawyers advised him not to release returns while he’s under audit.

He said last February that he had been under continuous audit for the past 12 years. His lawyers released an unusual letter in March that said the years 2009 forward remained under review. There’s no law or rule that prevents people under audit from making their returns public.

Trump and his aides have argued that the general public doesn’t care about seeing his tax returns. A Washington Post-ABC News poll released in January showed that 74% of Americans - including 53% of Republicans - say Trump should make his tax records public.

Questioned timing

The timing of the leak left some Democrats urging their peers not to be distracted from the Obamacare debate, which has left Republicans fighting among themselves as they seek to quickly approve legislation to unwind the Affordable Care Act.

“Dems should return focus to Trumpcare tomorrow & the millions it will leave uninsured, not get distracted by two pages from ’05 tax return,” Brian Fallon, a former national spokesperson for Hillary Clinton’s presidential campaign, wrote on Twitter.

Read Fin24's top stories trending on Twitter:

Brent Crude
All Share
Top 40
Financial 15
Industrial 25
Resource 10
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Do you think it was a good idea for the government to approach the IMF for a $4.3 billion loan to fight Covid-19?
Please select an option Oops! Something went wrong, please try again later.
Yes. We need the money.
11% - 990 votes
It depends on how the funds are used.
74% - 6620 votes
No. We should have gotten the loan elsewhere.
15% - 1391 votes