Relax Everyone, Trump Paid the Taxes That He Owed

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Even diehard socialists know that it’s foolish to pay more taxes than you owe.

During Tuesday night’s debate, moderator Chris Wallace asked President Trump about his taxes based on a story in the Sunday New York Times that claimed that President Trump paid no taxes in 10 of the 15 years ending in 2015 and paid nominal amounts in 2016 and 2017 despite millions in gross revenue. The President responded that he paid millions in taxes in some years but has long admitted there were years when he paid no taxes – because he owed no taxes – as noted in a 2016 Times article titled “Donald Trump Acknowledges Not Paying Federal Income Taxes for Years.”

But the real question isn’t whether the President paid a lot, a little or no taxes. It’s whether he paid what he owed. Even Bernie Sanders has admitted that’s the standard to which one should be held.

In recent years, Sanders’ income from book sales put him in the highest tax bracket. As most people do, he took full advantage of both deductions to reduce his taxable income and the lower tax rates available under the Tax Cuts and Jobs Act of 2017, which he voted against. Asked about his tax liability in an April Fox News town hall, Sanders said “C’mon, I pay the taxes that I owe.”

That’s really all we have a right to expect.

In one of my favorite New Testament stories, Jesus stops the stoning of a woman accused of adultery by telling the accusing crowd, “Let him who is without sin cast the first stone.” There were no takers. While throwing stones at the President for not paying more in taxes, I suspect the authors of the New York Times article, their bosses and the paper’s owners pay only what they owe in taxes -- and not a penny more.

Seriously, who pays more than they owe? Do the Clintons, the Obamas or the Bidens? How about Chris Wallace? The only person I know who pays more than he owes is President Trump who donates his $400,000 government salary back to the U.S. government each year.                

So, has the President paid what he owes? According to Trump’s attorney, the IRS is auditing him for tax years going back to 2009. But that doesn’t mean he has underpaid his taxes.

IRS audits for high net worth individuals are hardly unusual. Any disputes are routinely settled. That is very likely what will happen with the President’s audits. If there were obvious wrongdoing, surely the highly politicized Obama IRS would have asserted as much sometime prior to 2017.

The real problem stems from our tax code which is overly complex because the government uses it to incentivize certain conduct (such as mortgage interest deductions to encourage home ownership) or to discourage other conduct (such as taxes on alcohol and tobacco) rather than simply to raise revenue. If you invest in commercial real estate, as the President did prior to taking office, the tax code provides a number of deductions designed to encourage investment by reducing the taxable income that results from such investments.

For example, the deduction for depreciation allows taxpayers to deduct a percentage of the costs of a commercial property or improvements from the property’s income each year. Because depreciation is a non-cash deduction (the taxpayer doesn’t actually pay anything in the year they take the deduction), a property that produces positive cash flow can nonetheless show a tax loss. So, if you’re just looking at tax return data, as the Times apparently did, it could appear that a profitable business is actually losing money. Such is the reality of our current tax code.

Claiming tax losses is both legitimate and common-place assuming those claims are consistent with the applicable tax laws. If the IRS disagrees with any deductions Trump claimed, he will either come to a settlement with the IRS or contest the finding in court. However, if the deductions he claims were legitimate, as is likely the case, then to paraphrase Senator Sanders -- C’mon, he paid the taxes that he owed.

                 

Andy Puzder was chief executive officer of CKE Restaurants for more than 16 years, following a career as an attorney. He is currently a Senior Fellow at the Pepperdine University School of Public Policy. 


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