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The Times Pulls Back the Covers on the Unrepentant Tax Cheat
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The Times Pulls Back the Covers on the Unrepentant Tax Cheat

A Damning Expose Lays Bare Decades of Deception, Fraud and Scheming—by Trump and Congress

David Cay Johnston

David Cay Johnston

The richly detailed examination of Donald Trump’s taxes in today’s New York Times carries two crucial but unstated messages. One is about Trump. The other about what chumps we Americans are when it comes to our own income taxes.

Trump paid no income taxes in 10 of the last 17 years while raking in as much as $153 million in a single year.

The year he ran for president he paid just $750. He paid the same sum during his first year in the Oval Office. That’s less than the average monthly rent paid by Americans, which was $1,023 in 2018.

That Trump is a serious tax cheat is no surprise to DCReport readers. Four years ago, I revealed that Trump lost two income tax fraud trials. He fabricated a consulting business in 1984. It showed no revenue, yet Trump claimed more than $600,000 in deductions. He could not produce a single receipt.

Getting caught cheating, again and again, didn’t make Trump into anything even vaguely resembling an honest taxpayer.

Trump’s longtime tax lawyer and accountant, Jack Mitnick, testified during one of the two civil fraud trials that Trump forged the tax return. Mitnick was Trump’s witness, by the way, showing just how much chutzpah Trump has.

The forgery testimony would have justified a criminal charge. It was also part of a pattern. In 1983, New York City Mayor Ed Koch took note of Trump’s multiple sales tax frauds. The mayor said Trump belonged behind bars. One city audit of his first big project, the Grand Hyatt in Manhattan, showed Trump hid and destroyed records so he could cheat the city out of $3 million a year.

Learning Only How to Fight

But Trump learned nothing. Getting caught cheating, again and again, didn’t make him into anything even vaguely resembling an honest taxpayer.

What Trump did learn long ago from his mentor and “second father,” the notoriously corrupt lawyer Roy Cohn, was to lie, cheat, steal and never ever apologize or concede any fact. Just tie the authorities up for years and make them pour their limited resources into a case so they will give up and cry uncle – that’s the Roy Cohn way.

The New York Times report makes clear Trump continued into this century making up tax deductions out of thin air. That’s criminal and should be prosecuted, but our federal government has a policy of not indicting presidents no matter what crimes they may commit, leaving the task up to Cy Vance, the Manhattan district attorney.

In just two years, 2008 and 2009, Trump took $1.4 Billion in tax deductions. Note that B. Nothing in The Times report suggests he had assets and income that would justify such huge write-offs.

Deducting Personal Expenses

The paper also showed  Trump took deductions for his oldest son’s personal legal bills, a definite no-no. He deducted more than $70,000 for his hair styling. And he gave daughter Ivanka more than $700,000. The president called the money Ivanka got a fee, but it looks like a disguised gift in which Trump both evaded the gift tax and deducted it as a business expense. That’s also a no-no.

In tax matters our federal government never prosecutes over a single act of tax cheating. Instead, it goes after repeated misconduct. People have been sent to prison for cheating the government out of less than $1,000 because of a policy that is intended to intimidate people of every economic level into voluntarily complying with our tax laws.

Where the Blame Belongs

But Donald doesn’t learn. That’s the unstated message in The Times’ news account. Even being excoriated by a judge for making up tax deductions didn’t change Trump’s behavior.

The newspaper’s other unstated message is aimed at the rest of us. We are chumps.

We elected representatives, senators and presidents who have created two income tax systems, separate and unequal. One is for most of us – workers, pensioners, students on scholarship and stock market investors. In that system all our income is reported to the IRS and taxes are taken out before we get our money.

We can’t cheat. The computers will catch us if what the IRS has been told by our employers and others differs by as little as $10 from what we report on our tax returns.

But Donald Trump operates in the other tax system. It’s for people who control privately held businesses. Donald has more than 500 of them.

A Toothless IRS

Trump and his like tell the IRS how much they took in. There is little or no verification, nothing like how our employers file W-2 wage reports on us. These rich taxpayers pay whatever they want, which you can be sure is never more than the legal minimum, subject to audit.

This is a system designed to enable cheating. IRS studies, court cases, experiments by state tax agencies and official reports to Congress all show, as I have been reporting for decades, that this system is utterly corrupt.

Think about this for a moment. Congress doesn’t trust you, but it trusts the Donald Trumps of the country to pay what the law requires. If that doesn’t offend you, it should.

Fewer Audits of the Super-Rich

Audits have become rare and are moving in the direction of extinction. That’s because Congress has cut and cut and cut the IRS staff. The number of IRS revenue agents, as auditors are called, has been cut from almost 14,000 in 2010 to fewer than 9,000 in 2018. Trump is cutting their ranks even more.

In 2012 the IRS audited almost 41,000 taxpayers with incomes of $1 million or more. By 2018 that number was down to just 16,300.

This decline took place while the number of people making millions and billions of annual income has been growing fast, almost doubling since 2010 to more than 504,000 households.

In 2018, fewer than three out of every 100 millionaires were audited, down from eight out of 100 in 2010. Even then, the audit rate was tiny, especially compared to the opportunity to cheat.

Uncollected Taxes

In 2010, audits identified $5.1 billion of income taxes owed by millionaires and billionaires. But in 2018, only $1.9 billion of unpaid taxes were found, according to data that a federal court ordered the IRS to give to the Transactional Access Clearinghouse at Syracuse University.

“Few audits mean many millionaires escape paying billions of dollars owed the U.S. Treasury,” the Clearinghouse says.

You’re Stuck with the Tab

Every dollar not paid by Trump and those like him is a dollar you must make up for through higher taxes, fewer government services or more federal debt. It’s a system in which you must pay one way or another while rich tax cheats enjoy personal jets, yachts and golf.

Many IRS audits are cursory. When I was The Times tax reporter, I reported on the trend toward what disgusted revenue agents called “audit lite,” a term intended to foster an image of thin and tasteless low-calorie beer. So even the audits now underway may not catch the cheats.

We must pay our income taxes like it or not while rich business owners like Trump decide what they want to pay. And their risk of getting caught cheating is tiny and shrinking each year.

The politicians who have supported ever tighter rules on verifying the income of most Americans and stripping away most of their ability to deduct charitable gifts, state and local taxes or mortgage interest are conservative Republicans. Some Democrats have gone along while other Democrats have fought for a bigger IRS to pursue business owners who cheat on their income taxes.

We keep electing people who make us pay whole while letting those best able to pay slip away. We are chumps.

 

September 28, 2020