Richard Connor: Newspaper’s Trump tax exposé raises questions

The New York Times’ Oct. 2 story about Donald Trump’s income taxes raised more questions than it answered, which is never good in journalism.

The central revelation in the story was that in 1995, according to tax returns Trump filed in the states of New York, New Jersey and Connecticut, the billionaire businessman declared a loss of $916 million – a loss that under federal tax law may have shielded him from paying any federal income taxes over a period of 18 years, according to the Times.

The first question asked by millions of Americans was probably similar to one I had when I recently saw a video of a horse jumping rope: “Hey, how do you do that?”

Stories such as this about income and expenses always make me smile as I recall an anecdote about a Fort Worth attorney who was examining a client’s finances.

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The attorney said he was puzzled. The client, a physician, had income of $600,000 a year but expenses of $800,000.

How do you do this? the attorney asked.

“Careful budgeting,” the client replied.

In Trump’s case, he has no doubt continued to live large despite any losses he’s incurred over the years because his businesses consistently generate cash flow and because he and his accountants have mastered a tax code designed to benefit the rich and powerful. As for going tax-free for 18 years, as the Times story speculated he may have – well, that’s the kind of thing that makes hard-working taxpayers receptive to the idea that the system is rigged.

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Because Trump has so far refused to release his federal tax returns to the media, the Times’ story was based mostly on a few pages from state tax returns that landed more or less out of the blue in a reporter’s newsroom mailbox. The reporter’s conclusion that the 1995 loss may have meant Trump paid no federal income tax for 18 years was speculation based on what the law allowed.

Facts are always better than guesswork but Trump’s unwillingness to share the facts has left the press and the public little choice but to speculate. I wish Trump would just open up about his taxes and get it over with. Most people don’t give a hoot about this; they assume the rich don’t pay their fair share and in many cases they are correct.

But if Trump wants to be chief executive of the corporation called America, most voters agree, he ought to let us know how much he and his company contribute directly to the country’s bottom line.

The nagging question for The New York Times is one of ethics. The tax documents they obtained appear to have been released without Trump’s authorization, so was it ethical or even legal for the newspaper to use them? Did the newspaper perform a public service by revealing what they’d learned about Trump’s taxes – or was it unfair to publish a story based largely on speculation with little context or documentation beyond the bare-bones information that came in the mail?

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And what about the question of a double standard by the Times?

According to Forbes magazine, the Times itself paid no federal income tax in 2014 – and in fact got a $3.5 million refund despite recording a pre-tax profit of $29.9 million. Working the tax code is OK for the media but unacceptable for a presidential candidate? Just something to think about.

Whatever it concluded about Trump, the Times’ story clearly exposed the ineffectiveness of the federal tax code. It turns out, according to the Associated Press, that 46 percent of Americans pay no income taxes. So, only half of us are paying and many of those who pay are individuals struggling to get by and owners of small businesses fighting to survive in a challenging economy.

One of the better observations on this subject turned up in a column written for The Washington Post by television talk show host and former congressman Joe Scarborough, who noted that not only Trump but 2012 Republican presidential nominee Mitt Romney and President Barack Obama have used the tax code to lower their tax bills. Scarborough says the problem isn’t the people who are working the system, it’s the system they are working:

“I don’t judge Donald Trump if he did in fact avoid paying income taxes for up to 18 years. Nor do I consider Mitt Romney a man of lesser character for paying a 14 percent tax rate. Nor should anyone attack President Barack Obama for paying a measly 18.7 percent tax rate while his staff members are charged far more. I won’t even bring up the free ride the president is taking on the backs of small-business owners, who pay up to 50 percent of their income in taxes in states such as New York, California or Connecticut while their president sits in the White House with a tax rate 30 percentage points lower.

“But let’s not hate the player. Let’s save our contempt for the game.

“In this confounding game, Congress has pieced together a collection of rules for billionaires that give massive tax breaks to real-estate developers, hedge-fund titans and trust-fund babies who spend their lives moving money from one financial institution to another instead of sweating away in jobs where they pick up paychecks every few weeks for a job well done.

“Trump, Romney and Obama are doing what you and I try to do every year by paying as little legally to the IRS as possible. But a system that allows these powerful leaders to skate past the tax man on April 15 is deeply offensive and even immoral in these times when the wealthiest Americans get richer by the day, the poorest sink deeper into despair and members of the middle class wage a war against technology, globalization and growing debt that they are sure to lose unless Washington wakes up.”

So, during this, the most tedious and juvenile presidential election of modern times, at least two issues are worth pondering. One is to examine how you feel about what The New York Times has done. Good or bad? Fair or unfair?

The other is to ask when our politicians will stop talking about tax reform and actually do something to fix this most flawed of systems.

Richard Connor is president and publisher of the Fort Worth Business Press. Contact him at rconnor@bizpress.net