(Bloomberg) Donald Trump was facing renewed pressure to release his personal tax information after a New York Times report that he recorded a $916 million loss on his 1995 income tax return, a deduction that might have allowed him to cut his federal income tax for several ensuing years.
The Times, citing tax analysts, reported on Saturday night that based on Trump’s 1995 income tax documents, he might have been able to reduce his tax bills for as many as 18 years. The newspaper posted to its website three documents, which purported to be from state tax returns in New York, Connecticut and New Jersey. It received the documents in the mail last month, the newspaper said.
Trump’s campaign said in a statement that he “has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes.” It also said the tax documents—which it referred to as an “alleged tax document,” had been “illegally obtained.”
“I know our complex tax laws better than anyone who has ever run for president and am the only one who can fix them,” Trump said Sunday on Twitter.
Departing from roughly 40 years of tradition for presidential nominees, Trump has declined to release his tax returns. He says they are under an Internal Revenue Service audit and that he won’t release them until that audit has concluded. There’s no law preventing people from releasing their tax returns, even if they’re under audit. But tax advisers say that doing so would subject the returns to public scrutiny that might surface issues auditors had missed.
Democrat Hillary Clinton’s campaign, which has repeatedly faulted Trump over the lack of transparency, seized upon the Times report, calling it a “bombshell” that reveals both Trump’s past business failures and his tax avoidance.
Clinton campaign press secretary Brian Fallon tweeted that the story showed “just how lousy a businessman he is AND how long he may have avoided paying any taxes.”
During their debate on Monday, Clinton had speculated that Trump was trying to hide politically embarrassing information by withholding his returns—including that he doesn’t want the public to know “that he’s paid nothing in federal taxes.” She cited previous reports, including one by the Washington Post, which showed that he had paid no federal income taxes in 1978 and 1979.
Trump responded: “That makes me smart.” In its statement Saturday, Trump’s campaign said he “has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required.”
The Post’s report was based on returns Trump had filed with the New Jersey Casino Control Commission in 1981. For 1978 and 1979, Trump took advantage of a tax-code provision popular with developers that allowed him to report negative income, according to the Post. He told the newspaper, “When you’re in the real estate business, you do have certain tax advantages.” Developers can depreciate the value of real estate to reduce their taxable income.
In Saturday’s report, the New York Times cited a $916 million loss and noted “the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan.
Several Republican operatives who worked for Trump’s opponents in the primary elections predicted the news would weigh heavily on the nominee in the Nov. 8 election, arguing that voters will see his tax avoidance as a matter of fairness.
“Most Americans know you can’t avoid two things: death and taxes,” said David Kochel, who was former Florida Governor Jeb Bush’s chief strategist before Bush quit the presidential race.
Trump has in the past criticized people who he says don’t pay their fair share of taxes. In September 2015, he tweeted: “The hedge fund guys (gals) have to pay higher taxes ASAP. They are paying practically nothing. We must reduce classes for the middle class!”
The Times’s story capped one of the most tumultuous weeks yet for Trump, following what was widely perceived as a dismal performance at the first presidential debate. He has faced a barrage of attacks for his continued abrasive rhetoric against former Miss Universe pageant winner Alicia Machado, including a series of early morning tweets suggesting, without any evidence, that she had a sex tape. He has also repeatedly threatened to make Bill Clinton’s past infidelities a central issue of his campaign, to the consternation of several of his closest advisers.
Net Operating Losses
If genuine, the 1995 documents that the Times released Saturday revolve around “net operating losses”—which under federal tax rules allow a business to apply losses from any one year to future years—reducing taxable income in those years.
In 1995, taxpayers could “carry forward” such losses for 15 years, the Times reported, and apply them for three years retroactively. The rules are meant to smooth out fluctuations in taxable income over time.
While the $916 million loss is substantial—and it would have helped cut future taxes to be sure—it’s unclear precisely how such a loss would have affected Trump’s tax liability going forward. That’s because his taxable income in subsequent years is unknown.
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