Two former tax officials in the George H.W. Bush administration speculated Wednesday that Donald Trump may have avoided paying Medicare taxes through crafty use of the tax code.
By funneling his earnings through more than 200 companies, Trump earned only $14,222 in salary in 2015, according to his disclosure forms, such a small amount that he “avoided paying millions of dollars of Medicare taxes that should have gone to support senior citizens and their families,” the officials wrote in an op-ed published by the New York Times.
One author, Fred Goldberg, was the IRS commissioner. The other, Michael Graetz, is a prominent tax expert at Columbia University and served in the Treasury Department.
The particular loophole they accuse Trump of exploiting has tripped up presidential candidates before. It is known as the Edwards-Gingrich loophole because former Democratic presidential candidate and North Carolina Sen. John Edwards and former Republican presidential candidate and House Speaker — and prominent Trump backer — Newt Gingrich have used it.
The tax dodge works, effectively, by classifying earnings as ownership stakes in a small business, which are not subject to the Medicare tax, rather than as earnings, which are subject to the payroll tax. The authors suggest that Trump’s declared salary is implausibly low, given the earnings of his companies.
Trump has refused to release his tax returns, breaking precedent for major-party nominees. As a result, outside experts have speculated about his tax management practices based on his disclosures, news reports and a leaked copy of his 1995 state tax returns that showed a nearly $1 billion loss.
Without being able to see Trump’s returns, “absent any evidence to the contrary, the inescapable conclusion is that Mr. Trump has failed to pay millions of dollars in Medicare taxes,” Goldberg and Graetz wrote.
In his most recent budget, President Obama proposed rules to close the Edwards-Gingrich loophole. Doing so would raise an additional $270 billion over 10 years for the government.
