Democrats release Trump’s tax returns, and accountants have questions: “You have to be super rich to generate such losses. This is not a game for the poor.
The non-partisan committee’s findings also raised several filing-related red flags, namely Trump’s carry-over losses, loans to his children that may or may not count as taxable gifts, and deduction-related tax write-offs.
In the same year that the COVID pandemic hit, the Trumps posted a $4.8 million loss. In 2018 and 2019, the then-president’s reported income increased, and each year they paid about $1.1 million in federal taxes.
The Internal Revenue Service only began reviewing Trump’s 2015 tax returns on April 3, 2019, more than two years after his presidency, which some commentators say is a sign of a lack of resources at the IRS.
“Like any other American, the President of the United States is required to pay his due taxes,” according to an internal IRS memo released earlier this month. “This is the basic duty of our common citizenship: without tax revenue, our government would cease to exist.”
In a statement released Friday by the Trump campaign, the former president said his return shows “how proud I am of success.”
The US tax code, according to experts, works both ways. “Government deliberately passes laws that serve two purposes,” said Charles Renwick, a chartered public accountant and author of the forthcoming book All Presidents’ Taxes. “One goal is to raise money, and the other goal is to stimulate behavior. Real estate investment is clearly stimulated by the tax code.”
Renwick noted that people who lose money and therefore have no income do not pay taxes. “There is another scenario where [Trump] lost money on paper but made money on the mainstream economy. If so, it is the result of incentives in the tax code, and not necessarily the result of any wrongdoing. He probably did it right,” he said.
“Trump is engaged in activities that are very, very stimulated by our current tax code,” he said.
One disclosure includes Trump’s foreign bank accounts in Ireland, the UK, China and St. Maarten. “We already knew that he owns large buildings with Chinese partners (555 California Street in San Francisco),” Renwick told MarketWatch.
“Revelations like this are black and white,” he said. “Remember, former campaign chairman Paul Manafort was convicted of tax fraud for failing to open foreign bank accounts. This is clearly an important disclosure in terms of transparency.”
Jonathan Meadows, a managing member of New York-based Medows CPA PLLC, agrees that — based on what has been revealed about Trump’s 2020 income taxes — the former president’s tax returns indicate how Americans can use tax code to minimize its tax burden.
According to him, business owners and investors can accelerate certain deductions. “By the way, this is usually about real estate,” he said. “You can lose a lot of money on paper and return capital to investors, but still have cash flow. Conclusion: to generate such losses, you need to be very rich. This game is not for the poor.”
Karla Dennis, founder of Karla Dennis and Associates, Inc. in La Palma, California, a registered tax agent and business consultant, said Americans can draw a more general conclusion: “Wealthy people are more aware of the opportunities open to them.”
“Most tax players are focused on tax compliance and fewer taxpayers are looking at what kind of annual tax strategy they can use to cut their tax bills,” she added. “If you study for a test, you get an A+.”
Inequality in the US tax system
How progressive is the progressive tax system? Meadows said the US middle class ends up bearing the brunt of the tax burden, while the wealthy are more able to minimize what they owe the IRS.
He cites the 6.2% Social Security tax as an example. The maximum amount of earnings subject to Social Security tax (taxable maximum) will increase to $160,200 from $147,000 in January. People who earn more than this maximum will pay the same as those who earn $160,200.
“If you are self-employed, if you belong to the middle class, you pay this tax. [on all your earnings]but if you’re very rich and making $3 million, you only pay for the first $160,200 of your earnings,” Meadows told MarketWatch. “You have the biggest earnings that do not pay. Paying people from the middle class. It’s a hidden tax,” he said.
“I don’t know how progressive the US tax system is,” he concluded.
And Donald Trump? “As far as I know, he may have just been a very unlucky businessman whose real losses have eroded his net worth over the past couple of decades,” Gary Burtless, senior fellow at the centrist Brookings Institution, told MarketWatch.
However, Burtless, who does not claim to be an expert on Trump’s taxes, sees an injustice in the US tax system. “If we define the “very rich” as Americans with extremely high pre-tax incomes for the current tax year, I agree with most of my fellow citizens that I think it is shameful for the “very rich” people to pay zero dollars in current income tax. The theory behind our progressive income tax system is that every US citizen’s tax liability should be a growing share of their pre-tax income as their pre-tax income increases,” he said.
“On the other hand,” he continued, “if we define the ‘very rich’ as Americans with extremely high net worth, then it’s easy for me to imagine that some of those ‘very rich’ would quite rightly not pay income tax. in a given year—for example, a year in which their pre-tax income in the current tax year is very low or negative.”
Wealth tax vs income tax
Take, according to Burtless, farmers who own farms worth $2 million or more. “If they reap a terrible harvest, their gross income could be very low or even negative, even though they remain very wealthy by the definition of ‘net worth’. Our progressive income tax is not a wealth tax; it’s income tax.”
Keep in mind, he added, that some states and many localities levy taxes on land, property improvements and certain categories of real estate. In this case, wealthy farmers may still be liable for significant property taxes, even in years when their federal income tax liability is very low or zero.
“In my opinion, if voters want to tax everyone with big net worth, they should consider introducing a comprehensive wealth tax,” Burtless added. “A progressive income tax is not the smartest way to achieve this goal.”
The Tax Policy Center estimates that about 72.5 million U.S. households, or 40%, will pay no federal income tax this year, up from a pandemic record of 100 million households, or 60%, two years ago. In 2021, nearly 56% of households, or 99 million people, paid no federal income tax, according to a non-partisan think tank report released earlier this year.
“I don’t want anyone to be poor,” Meadows said. “I’d rather pay my taxes. My wife works in a public hospital. My father, may he be blessed, was a public defender. He got health insurance. Unless you work for a large company, many middle class people cannot afford health insurance. The system is set against the middle class.”
In terms of presidential tax returns, Renwick said full transparency should also require former presidents to release their tax returns after they leave office to show what foreign business transactions, if any, they did that they could have influenced. their policies and other dealings while in office. .
“Will we see all of his informational earnings, such as his partnerships and trust?” Renwick added. “All of these things are sources of value that create a potential conflict of interest. If the goal is to increase transparency, if the goal is to identify conflicts of interest, if the goal is to make sure they pay their fair share, if the goal is to find out if they have foreign business dealers , more information needs to be provided. released.”
“The individual tax return is just the tip of the iceberg,” he said.
News Press Ohio – Latest News:
Columbus Local News || Cleveland Local News || Ohio State News || National News || Money and Economy News || Entertainment News || Tech News || Environment News