The New York Times really needs to get its complaint straight. Apparently, President Trump is a no-good businessman who never makes any money, and so he aggressively avoids tax payments, paying just $750 in income taxes in 2016 and 2017 (if the report is true, which Trump has unsurprisingly called “fake news“). No doubt, he has to be aggressive to ensure he doesn’t pay taxes on money he hasn’t made. Or maybe it’s all just another reason to stand in Midtown Manhattan shrieking about Trump.
Because there’s nothing in Trump’s tax information that would frighten a tax accountant — just take a quick look at the New York Times’s own accounts. They save up losses ($500 million in 2006! $70 million in 2008!) which they then put against future profits — as every company and business has the right to do, and every reasonable, sensible, tax system allows. They take depreciation on buildings, $8 million a quarter on their new one apparently. They pay consultants, as consultants tend not to do the work if they think they won’t be paid. There’s simply nothing at all in Trump’s taxes that is even odd or out of line.
There are two logical problems to what is being said against Trump, though. Trump can’t be both making no money and also illegally dodging taxes. That just can’t happen — if you’re not making money, then you don’t owe taxes, that should be simple enough to understand. Or, the other way around: You cannot be illegally dodging taxes that aren’t owed. So, people complaining need to make a decision about what it is they’re going to complain about.
The second is this very idea of tax avoidance. It’s not a thing. It doesn’t actually exist. Avoidance is the Schrodinger’s Cat of taxes. The original thought experiment was meant, when concocted, to show how silly quantum was. Stick a cat in a box with some poison and a radioactive atom. When the atom decays, it releases the poison and kills the cat. We cannot know when or if the atom decays from outside the box. Therefore we don’t know whether that cat is dead or not. Until we open the box, that is. The cat, being quantum now, exists in some indeterminate state of being both dead and alive until we do.
It is possible to make an attempt to avoid taxes, sure. We all do that every time we claim a deduction. The thing is, once the IRS has signed off on that declaration, then the attempt collapses out of that quantum state into being allowed (in which case it is simply obeying the law as it is written) or not allowed, in which case it is illegal tax evasion. Tax avoidance isn’t a thing at all. It’s an indeterminate state until decided. And these returns being examined, except for the one we’ll come to, have been signed off on from the IRS. It’s all, therefore, obeying the law.
As to whether Trump is actually rich or not, tax returns won’t tell anyone that. While loans against assets are discussed, by the very nature of the documents, the value of the assets won’t be. Wealth is assets minus debts, something that just cannot be calculated with what’s in tax returns.
There is something truly interesting in here, though: the long-running claim that Trump can’t release his tax returns because there’s an audit going on. Which there is, about a refund he received in 2010. This has been sitting at the congressional Joint Committee on Taxation since 2011.
Thus, as always, wherever there’s a screwup or inefficiency in the system, Congress is at the bottom of it. After all, they’re also responsible for all the other parts of the tax system.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at the Continental Telegraph.
