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Trump’s 2005 tax return: I’m more worried about his tax reform than his tax return

Summary:
Just a quick note on the Trump tax return from 2005, the first few pages of which were released by the White House last night in advance of the much touted release on MSNBC. To me, the thing smells like the dangle-the-key move–“look over here, not over there!”–I’ve come to expect from the Trump admin when things aren’t going their way. The House Republican’s health plan, which Trump was aggressively backing, is looking like a real dud (a “trap,” according to some fellow R’s), and I can see why the White House would like to quickly change the subject, as is their wont. But isn’t his tax return a politically dangerous subject for President Trump to point at? Not in this case, because the pages he released do not appear to incriminate him much at all. He reportedly paid million on income of 0 million (5 million in today’s dollars), for an effective rate of 25%. As is typical of returns from people at these income levels, there’s a lot of steps to get to that AGI, including a claim of 0 million in real estate losses (likely a carryover from an earlier loss), along with reported income from business sources, capital gains, royalties, etc. But the reason this smells funny to me is that most people will surely find “nothing to see here, so move along, folks.

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Just a quick note on the Trump tax return from 2005, the first few pages of which were released by the White House last night in advance of the much touted release on MSNBC.

To me, the thing smells like the dangle-the-key move–“look over here, not over there!”–I’ve come to expect from the Trump admin when things aren’t going their way. The House Republican’s health plan, which Trump was aggressively backing, is looking like a real dud (a “trap,” according to some fellow R’s), and I can see why the White House would like to quickly change the subject, as is their wont.

But isn’t his tax return a politically dangerous subject for President Trump to point at? Not in this case, because the pages he released do not appear to incriminate him much at all. He reportedly paid $38 million on income of $150 million ($185 million in today’s dollars), for an effective rate of 25%. As is typical of returns from people at these income levels, there’s a lot of steps to get to that AGI, including a claim of $100 million in real estate losses (likely a carryover from an earlier loss), along with reported income from business sources, capital gains, royalties, etc.

But the reason this smells funny to me is that most people will surely find “nothing to see here, so move along, folks.” No zero tax rate, no Russian loans/investments, and while 25 percent is below the effective rate paid by those in the top 1%–31% for families with kids in 2005, according to CBO–it’s not far below, and most people who hear he paid almost $40 million in taxes will not see anything like a smoking gun here.

In fact, the most salient part of this episode so far is the point that Trump’s return shows the importance of the Alternative Minimum Taxes for complex returns like his that claim large losses.

The AMT snagged him for $31 million that year; without it, he would have paid a 5% effective rate. The punchline: the president’s tax reform plan gets rid of the AMT. Unless they’re willing to also get rid of all the special privileges that enable wealthy taxpayers to write off much of their liabilities, which they’re not (they may get rid of some, but they’ve also proposed others), that’s a very bad idea.

Anyway, I don’t see why he wouldn’t have released this information to the public a long time ago. I was frankly surprised to see the 25% effective rate, and assumed that he was hiding a much lower rate. I guess the return suggests he’s not the multi-billionaire he claims to be, but various leaks already led me to believe that to be the case. And surely there’s more “interesting” information on the many more pages we’re not seeing.

David Cay Johnston, the tax expert who anonymously received the document and then presented it on the Rachel Maddow show, apparently wondered if it had been leaked to him by the White House in the first place. That sounds plausible to me.

What I’m left with here is something I’ve thought for a long time but haven’t said. Sure, I’d like to see a full release of Trump’s recent returns–I suspect there’s a lot more incriminating stuff in there then we learned about today. But I’m far less worried about Trump’s tax returns than Trump’s proposed tax reforms.

Jared Bernstein
Jared Bernstein joined the Center on Budget and Policy Priorities in May 2011 as a Senior Fellow. From 2009 to 2011, Bernstein was the Chief Economist and Economic Adviser to Vice President Joe Biden, Executive Director of the White House Task Force on the Middle Class, and a member of President Obama’s economic team. Prior to joining the Obama administration, Bernstein was a senior economist and the director of the Living Standards Program at the Economic Policy Institute, and between 1995 and 1996, he held the post of Deputy Chief Economist at the U.S. Department of Labor.

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