Is Donald Trump a smart businessman or did he commit tax fraud? | The Tylt
Contrary to stories he has told throughout his life, Donald Trump's rise as a real estate mogul was not based on his deal-making abilities, but rather on copious wealth and assistance provided by his father. The New York Times uncovered the myriad ways the Trump family has sheltered their money, hiding it from the public and the IRS. Many tax experts say the methods the Trump family used to shelter their wealth are widely utilized by America's wealthiest citizens. Others claim Trump has committed outright tax fraud. What do you think?
Is Donald Trump a smart businessman or did he commit tax fraud?
The Times' piece—14,000 words analyzing thousands of documents and written over the course of 18 months—lists the myriad methods the Trump family used to move their money around, protecting it from taxation. Many of the methods are based on loopholes and allowances well known to tax experts. Some, however, appear more nefarious. The accusation that has garnered the most attention as potential fraud involves the Trump family's creation and utilization of All County.
The most overt fraud was All County Building Supply & Maintenance, a company formed by the Trump family in 1992. All County’s ostensible purpose was to be the purchasing agent for Fred Trump’s buildings, buying everything from boilers to cleaning supplies. It did no such thing, records and interviews show. Instead All County siphoned millions of dollars from Fred Trump’s empire by simply marking up purchases already made by his employees. Those millions, effectively untaxed gifts, then flowed to All County’s owners — Donald Trump, his siblings and a cousin. Fred Trump then used the padded All County receipts to justify bigger rent increases for thousands of tenants.
...Each year Fred Trump spent millions of dollars maintaining and improving his properties. Some of the vendors who supplied his building superintendents and maintenance crews had been cashing Fred Trump’s checks for decades. Starting in August 1992, though, a different name began to appear on their checks — All County Building Supply & Maintenance.
...All County’s invoices were padded, marked up by 20 percent, or 50 percent, or even more, records show.
The Trump siblings split the markup...
Beach Haven Apartments illustrates how this happened: In 1991 and 1992, Fred Trump bought 78 refrigerator-stove combinations for Beach Haven from Long Island Appliance Wholesalers. The average price was $642.69. But in 1993, when he began paying All County for refrigerator-stove combinations, the price jumped by 46 percent. Likewise, the price he paid for trash-compacting services at Beach Haven increased 64 percent. Janitorial supplies went up more than 100 percent. Plumbing repairs and supplies rose 122 percent. And on it went in building after building. The more Fred Trump paid, the more All County made, which was precisely the plan.
Vox reporter Gaby Del Valle talked to Lee-Ford Tritt, a tax law professor at the University of Florida, to better understand some of the techniques used by the Trump family. Tritt claimed while many of the Trump family's activities may seem criminal to an outside observer, they are actually well-known methods of tax avoidance legally used by wealthy Americans.
A lot of this, a lot of the wealthy clients do. I think Americans don’t know what they do, and they’re shocked. I think the New York Times reporters were shocked by some of this, and I was like, “No, that’s not illegal.” Probably all uber-rich Americans do this. It’s in the statutes, the courts have approved it, they just do it.
...I would say 80 percent of this, 85 percent of this, would be a yawn for the uber-wealthy estate planners. Like, all my friends who are estate planners are calling me up and going, “What’s the big deal? We do this for all our clients.” And once again, that’s a different story — that’s, “Should we allow this or not? Look at what the uber-wealthy are doing.”
...It’s funny because people talk about them being loopholes, but they’re technically not. These are literally the statutes and what the courts have said are fine. GRATS are so commonly used by the uber-wealthy, and they’re so effective. They can wipe out gifts and estate taxes, hundreds of millions of dollars.
After the story broke, Senate Democrats were much less understanding than Tritt. Politico reports that many Senators called for a full investigation into Trump, accusing him of criminal fraud.
Sen. Cory Booker accused Donald Trump of “criminal behavior.” Sen. Elizabeth Warren said it’s more evidence of the president’s corruption. And Washington Gov. Jay Inslee cracked: “The Emperor did have clothes, but it turns out it was his dad’s.”
Booker told reporters Wednesday that he believes Trump should pay back “millions of dollars in taxes,” and he poked at Republicans for not calling for an investigation.
“It’s stunning. It indicates fraud. It indicates criminal behavior. And a significant tax cheat, ” Booker said. “There’s enough evidence there that would indicate that the president of the United States owes taxpayers who don’t cheat.”
Esquire pointed out that many of the loopholes the Trump family used were created and maintained by Republican and Democratic lawmakers alike.
This is certainly a product of the longtime Republican commitment to ensuring there are a different set of rules for the rich, who can afford the kind of accountants who specialize in this highly intricate work and the lawyers to fight any charges in the unlikely event they come. (To be clear, recent Democratic administrations—including Bill Clinton's, when the Trumps were doing their business, and Barack Obama's—were little better at getting corporations and the wealthy to pay their share.) But it is particularly galling to see a man we now know benefited hugely from dubious tax schemes helping to make it so much easier for others to do the same.
The Washington Post collected several other instances of Trump's potential criminal wrongdoing, creating a compelling portrait of a man who is constantly toeing the line of criminality.
On Capitol Hill, some Democrats renewed calls for Trump to release his tax returns — which he has repeatedly declined to do, unlike his predecessors.
“I knew there had to be a compelling reason why this president departed from previous presidents in not disclosing his income tax returns,” said Sen. Richard J. Durbin (Ill.), the Senate’s second-ranking Democrat. Asked whether it merited a new push to reveal Trump’s personal financial records, Durbin said: “Yes.”
...The New York attorney general sued him in June, saying Trump allowed “persistently illegal conduct” at his charitable foundation. Democratic attorneys general and congressional lawmakers are prying for details about the Trump Organization’s transactions with foreign governments as part of two separate civil suits. Special counsel Robert S. Mueller III has delved into the Trump Organization’s business dealings with Russia. And the U.S. attorney in Manhattan is investigating Trump’s involvement in hush-money payments made to adult-film star Stormy Daniels.
The Times story could spark a new line of investigations from state authorities in New York and possibly from Congress, if Democrats take control of either chamber in November’s elections.
“We must see Trump’s tax returns to know just how far and how deep the crimes go,” Rep. Bill Pascrell Jr. (D-N.J.), a member of the House Ways and Means Committee, said in a statement. “This Trump exposé paints a portrait of a man whose entire professional life was built on his father’s money, skirting accountability, and ‘outright fraud.’ ”
Ultimately, though, many of these methods are legal, and that fact will only be changed by legislators reforming tax law, as Lily Batchelder, a law professor at New York University, explained in an op-ed for The New York Times.
The tax advantages for heirs are partly due to fundamental problems in the law. Income from wealth is taxed very lightly and sometimes not at all. Moreover, our income and payroll taxes allow heirs to exclude everything they inherit from their tax returns, no matter how vast. The estate and gift taxes were meant to partly address this omission, but they have been cut relentlessly over time, falling from 2.6 percent of federal revenues in 1972 to less than 1 percent today, even while the share of wealth and income held by those at the very top soared.
Just last December, the president and Republicans in Congress doubled the estate tax exemption from $11.2 million to $22.4 million per couple. It now affects less than one in 1,000 estates.
The estate tax is also riddled with loopholes, which the 2017 law did nothing to address. For example, the Times article details how the Trumps used valuation discounts and something called a grantor-retained annuity trust to sharply reduce their gift and estate tax bill. The Obama administration proposed regulations to address abuses of valuation discounts, and legislation to address abuses of grantor-retained annuity trusts. Unsurprisingly, the Trump administration quickly withdrew both proposals.