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Explained: Paying just $750 a year, how President Donald Trump avoided, evaded taxes

Trump is the wealthiest US President in history but his income tax payment is up to 140 times lower than some of his most recent predecessors, like George W Bush and Barack Obama.

Donald Trump, Donald Trump tax evasion, tax evasion by Donald Trump, Trump tax evasion, Trump tax payment, Explained Global, Express Explained, Indian ExpressThe NYT has found that Trump, despite enjoying the lifestyle of a billionaire, paid no federal income taxes in 11 of 18 years the newspaper examined. (File Photo/AP)

The New York Times has obtained US President Donald Trump’s tax information extending over more than two decades, “revealing struggling properties, vast write-offs, an audit battle and hundreds of millions in debt coming due”.

The NYT report says Trump paid as little as $750 a year as federal income tax in the first two years of his presidency (2016 and 2017). That is just over Rs 50,000 a year. It has also revealed that he managed to evade paying any income tax in 10 of the previous 15 years.

Trump’s tax payments were a hot-button issue when he contested for the presidency in 2016. However, he has successfully avoided revealing his tax details — the first for any US President — even after becoming President.

Ahead of the election on November 3 — Trump is seeking re-election — his tax records had become possibly the most sought after documents in recent times.

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What is the scale of tax evasion?

According to the NYT calculations, over the past two decades, Trump has paid about $400 million less in combined federal income taxes than a very wealthy person who paid the average for the highest-earning 0.001% of tax filers in the US. While the tax rates applicable for the richest Americans have declined over the decades, with the wealthy exploiting several “loopholes” to bring down their liabilities, The NYT notes that “most affluent people still pay a lot of federal income tax”.

The NYT has found that Trump, despite enjoying the lifestyle of a billionaire, paid no federal income taxes in 11 of 18 years the newspaper examined. Trump is the wealthiest US President in history but his income tax payment is lower than some of his most recent predecessors such as George W Bush (2000-09) and Barack Obama (2009-17), who routinely paid federal income taxes in excess of $100,000 a year — roughly 140 times what Trump paid.

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How did Trump manage to do it?

He seems to have used various ways to either reduce his tax liability or get a refund on tax paid. Towards reducing his liability, he reportedly did the following things:

Classifying personal expenses as the cost of business: Doing so brings down the taxable income. Trump has categorised everything from his residence to his golf course to his aircraft as business expenses. Even his hairstyling expenses — $70,000 (roughly 50 lakh) — as well as those of his daughter Ivanka Trump — $100,000 (roughly Rs 70 lakh) — have been shown as business expense, The NYT said.

The NYT said the treatment of Seven Springs, Trump’s estate in New York, “typifies his aggressive definition of business expenses”. The over 200-acre estate, bought in 1996, is openly called “a retreat for the Trump family”, yet for tax purposes, it is an “investment property” and not a personal residence. As a result, Trump “has been able to write off $2.2 million in property taxes since 2014,” The NYT wrote.


Paying high consultation fees: The NYT found that across nearly all of his projects, Trump’s companies set aside about 20% of income for unexplained “consulting fees”. For instance, when he collected $5 million on a hotel deal in Azerbaijan, he reported paying $1.1 million in consulting fees — bringing down the final profit before being subjected to taxation.

Also, the report said, this fee is collected by Ivanka or an organisation that he heads.

Showing businesses make heavy losses: Some of Trump’s most high-profile business ventures make heavy losses on paper. For instance, his golf courses, the centre of his business empire, have lost more than $315 million (over Rs 2,000 crore) in the last two decades.

“The Trump Organization — a collection of more than 500 entities, virtually all of them wholly owned by Mr Trump — has used the losses to offset the rich profits from the licensing of the Trump brand and other profitable pieces of its business,” The NYT wrote.

What about refunds?

Trump sought massive refunds. As a result, while he paid almost $95 million in taxes over the 18 years, he managed to “recoup most of that money, with interest, by applying for and receiving a $72.9 million tax refund, starting in 2010”. This refund is the subject of a long-running battle with the tax authorities.

First published on: 29-09-2020 at 04:41:53 am
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