Trump’s Seventy-Three-Million-Dollar Tax Refund Is the Biggest Outrage of All

By John Cassidy

September 28, 2020

To avoid paying taxes, the President has exploited his many business failures, including losses of more than three hundred million dollars from his fifteen golf courses since 2000.Photograph by David Moir / Reuters

After doggedly pursuing the story of Donald Trump’s taxes (or non-taxes) for years, the New York Times has hit the motherlode with its latest investigation, which revealed that the self-proclaimed billionaire paid a grand total of seven hundred and fifty dollars in federal income taxes in 2016, when he was elected President, and the same sum in 2017, his first year in the White House. In ten of the fifteen years before 2016, he paid no federal income taxes at all. If you haven’t yet read the lengthy Times report, I won’t spoil it by spilling all the juicy bits. Instead, I’ll focus on one that is arguably the most Trumpian of all.

Because of previous reporting, including a couple of significant Times pieces in October, 2016, and May, 2019, as well as contributions by Trump biographers, such as David Cay Johnston, we’ve known for a long time that the President is a serial tax avoider. Between 1984 and 2004, he used actual losses, loss write-downs from previous years, and other accounting dodges to pay virtually nothing in federal income taxes. From 2005 to 2007, this latest Times scoop reveals, he did finally pay about seventy million dollars to the Internal Revenue Service. But then, in 2010, he demanded a full refund for those tax payments. And the I.R.S. acceded to his request: it paid him $72.9 million, including interest. This 2010 refund seems to be at the center of an auditing dispute between Trump and the tax authorities that has dragged on for almost a decade. It also appears to be the money that Michael Cohen, Trump’s former personal lawyer, was referring to in his 2019 testimony to Congress, when he recalled Trump showing him a huge check from the U.S. Treasury and remarked that Trump “could not believe how stupid the government was for giving someone like him that much money back.”

How could a person who doesn’t pay taxes get a big refund? As always with Trump, the details of his financial shenanigans are a bit complicated, but the basic outline is fairly easy to grasp. He hates paying taxes. To avoid doing it, he will resort to virtually anything—and that includes exploiting his many business failures.

In the late nineteen-eighties and early nineteen-nineties, Trump’s businesses, some of which he had greatly overpaid for when he bought them, racked up more than a billion dollars in losses, and four of them ended up filing for bankruptcy: three casinos in Atlantic City and his Plaza Hotel, in New York. In 1995, as he emerged from this wreckage, he declared a tax loss of more than nine hundred million dollars, which the I.R.S. allowed him to use in subsequent years as an offset against any profits his businesses made. So even in years when the Trump Organization did well, his loss carryovers reduced his tax bill to zero.

According to the new Times investigation, this basic pattern of heavy losses in parts of the Trump empire offsetting substantial earnings in other parts of it has continued for the past decade and a half. Since 2000, for example, Trump’s fifteen golf courses have together generated losses of $315.6 million, even as other Trump enterprises—including Trump Tower, overseas licensing deals, and an investment in two office towers operated by Vornado Realty Trust—have generated substantial revenues. In 2011, 2012, 2013, and 2014, Trump paid no federal income taxes at all. In 2016 and 2017 combined, he contributed enough to the U.S. Treasury for it to buy a new love seat from Pottery Barn.

The only notable exceptions to this pattern of minimal tax payments were the years 2005, 2006, and 2007, when “The Apprentice,” which Trump co-produced with NBC, was doing very well, and the big accounting loss that he had carried over from the nineteen-nineties had run out. “With no prior-year losses left to reduce his taxable income, he paid substantial federal income taxes for the first time in his life: a total of $70.1 million,” the Times report says. This money didn’t stay in the coffers of the U.S. government for very long.

In 2010, Trump declared to the I.R.S. that, during 2008 and 2009, his businesses had lost another $1.4 billion. Exploiting a little-noticed clause in a piece of legislation that Barack Obama had signed into law as part of the efforts to stimulate the economy after the Great Recession, Trump claimed that this huge loss entitled him to a full refund of the income taxes he had paid in 2005, 2006, and 2007. The I.R.S. quickly paid out Trump’s claim pending an audit. The refund “would eventually grow to $70.1 million, plus $2,733,184 in interest,” the Times reports. “He also received $21.2 million in state and local refunds, which often piggyback on federal filings.”

Trump has never been short on chutzpah. At some point, though, someone in the auditing department of the I.R.S. seems to have decided that this latest maneuver was over the line. Under tax law, refunds of more than two million dollars require approval from Congress’s Joint Committee on Taxation, which also got involved. In 2014, an agreement between Trump and the I.R.S. appeared to have been reached, “but the audit resumed and grew to include Mr. Trump’s returns for 2010 through 2013,” the Times report says. “In the spring of 2016, with Mr. Trump closing in on the Republican nomination, the case was sent back to the [congressional] committee. It has remained there, unresolved, with the statute of limitations repeatedly pushed forward.”

It isn’t clear why the dispute has dragged on for so long, but the Times highlights one intriguing possibility. In 2009, Trump finally gave up ownership of his financially stricken casinos in Atlantic City, which had filed for bankruptcy again. In the same year, his tax returns included “a declaration of more than $700 million in business losses that he had not been allowed to use in prior years,” the Times says. Proprietors who abandon loss-making businesses are allowed to claim some of the losses they incurred for tax purposes, but they have to give up the businesses entirely and not receive anything of value in return. Trump got something. When Trump Entertainment Resorts was restructured and placed under new ownership, he received five per cent of the stock in the successor company. “The materials reviewed by the Times do not make clear whether Mr. Trump’s refund application reflected his public declaration of abandonment,” the report says. “If it did, that 5 percent could place his entire refund in question.”

Including the interest that has accumulated since 2010, it could cost Trump about a hundred million dollars to repay the I.R.S., the Times calculates. If he were a genuine billionaire, he could raise this sum without very much trouble. But given the evidence that many of his businesses, including the Trump International Hotel in Washington, D.C., seem to make substantial losses, could he even afford to pay out a hundred million dollars?

Trump’s businesses “reported cash on hand of $34.7 million in 2018, down 40 percent from five years earlier,” the Times report says. In theory, he could take out another bank loan to pay a big tax bill. During the past decade, though, he’s already incurred heavy borrowings. He “is personally responsible for loans and other debts totaling $421 million, with most of it coming due within four years,” the Times notes. “Should he win re-election, his lenders could be placed in the unprecedented position of weighing whether to foreclose on a sitting president.”

Should Trump lose the election, which opinion polls suggest is a more likely outcome, he will have to deal with the I.R.S. and his bank creditors as a private citizen. Could this, perhaps, be one reason that he won’t commit to accepting the election result and leaving the White House without protest if it goes against him?

Whatever happens on November 3rd, the Times story confirms that Trump has been playing the I.R.S. for decades. It also shows that, in the U.S. tax framework, there is one set of rules for the majority and another for the very rich. A confidence trickster from the get-go, Trump exploited this setup to denude the U.S. Treasury, enrich himself, and make a mockery of the entire system. If anything good comes out of the whole thing, it’s that the arguments for meaningful reforms of the tax laws and tougher enforcement are now stronger than ever. Of course, Trump will have to be voted out of office for change to happen.

John Cassidy has been a staff writer at The New Yorker since 1995. He also writes a column about politics, economics, and more for newyorker.com.