Five things to know about Trump’s leaked tax return – Politico
Tuesday night’s leak of President Donald Trump’s 2005 tax return provides the best glimpse yet of his finances.
It shows he was to have paid about $38 million in taxes that year on $153 million in income. But the documents, released by journalist David Cay Johnston on MSNBC’s “The Rachel Maddow Show,” also reveal less than it may appear.
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Here are five things to know about this return:
1. Trump paid taxes
Remember all the speculation about how maybe he never paid taxes? Well, that was wrong, at least for 2005.
His leaked return shows he was to have paid $38.4 million in taxes that year, something that’s sure to disappoint Democrats and that had Donald Trump Jr. cheering the MSNBC report. “Thank you Rachel Maddow,” he tweeted.
The president paid $36.5 million in individual income tax and $1.9 million in Social Security and Medicare payroll taxes.
Of course, we don’t know whether he’s paid taxes since then — 2005 could have been an anomaly.
But the fact that he ponied up to the IRS, according to these documents, suggests there now may be less pressure for Trump to release his entire returns.
“We have a fragmentary leak that shows that the president did pay a lot of taxes, and I’m not sure that leaves him with much incentive to make a complete release,” said Joe Thorndike, a tax historian.
2. He paid more than many of his peers
Experts calculate tax burdens by dividing the levies people pay into their earnings, which produces their effective tax rate. Trump appears to have paid a 24 percent rate, which isn’t out of line with what other wealthy people paid then. (Trump’s rate creeps up to 25 percent when you include payroll taxes.)
The average effective income tax rate in 2005 for the top 1 percent was 19.7 percent, according to the Tax Policy Center. Overall, the rate for everyone that year, regardless of income, was 8.8 percent. (Many people exaggerate how much in taxes they actually pay.) So Trump paid more than a lot of other wealthy people, and certainly more than most Americans.
3. The alternative minimum tax just got a lot more popular
Trump and House Republicans want to junk the alternative minimum tax, a parallel tax system set up in the 1960s to ensure the wealthy couldn’t use legal deductions and credits to eliminate their tax bills. Republicans say the AMT makes the code overly complicated, because it requires people to do their taxes twice — once under the regular system, and a second time under the AMT.
But the AMT was the main driver behind Trump’s tax bill. Of the $38 million he paid in taxes for 2005, about $31.2 million was because of the alternative minimum.
That’s an eye-popping AMT bill, and the fact that Trump would so obviously benefit from its elimination is sure to make what had been Republicans’ boilerplate proposals to eliminate it suddenly a lot more controversial.
“Without the alternative minimum tax, Donald Trump would have paid a lower tax rate in 2005 than the poorest half of Americans,” said Frank Clemente, head of the liberal Americans for Tax Fairness. “Trump wants to abolish the AMT. Now we know why.”
4. Claimed losses remain a mystery
Trump reported a loss of $103 million, which he was able to use to slash his tax bill, likely by millions. Remember, people can subtract their losses from their earnings when calculating their taxable incomes. That loss is the main reason Trump was also able to turn $152.7 million in earnings to just $48.9 million in adjusted gross income.
So did he actually lose $103 million? It’s impossible to tell from the return. It could just be a paper loss created by taking lots of deductions.
It’s not even clear when Trump took those losses. They could have been accrued in previous years, and then rolled into 2005. They might be the remnant of the $916 million loss Trump reported taking on his 1995 state income tax return that was leaked last year to The New York Times.
In a statement on the MSNBC report, the Trump administration said he took “large scale” depreciation writeoffs for “construction.”
5. This is far from the whole story
Rachel Maddow’s hype notwithstanding, these are just the first two summary pages of Trump’s return.
While they demonstrate that he was to have paid taxes, and show how much, good luck trying to divine any conflicts of interest or connections to Russian oligarchs. The summary pages don’t explain how Trump made his money, what itemized deductions he took (though they do show those totaled $17 million) or even whether he gave to charity. For that, we’d need Trump’s entire tax return, which would likely run to hundreds or maybe even thousands of pages.
“What we learn from this is distinctly limited,” Thorndike said. “It raises a lot more questions than it answers.”
Interestingly, Johnston said the forms were mailed anonymously to him — as did The New York Times when it released Trump’s 1995 state return last fall.
It’s one thing to drop a two-page 1040 in the mail, and another to leak a return that could dwarf the New York City phone book.
“Chances are he has a pretty big return, and not the kind of thing that’s so easy to mail to someone,” Thorndike said. “It might be pretty hard to leak a complete return.”