So yesterday, as I was innocently enjoying a snow day at home (and to a degree getting things done, as I was prepared for it), this Trump tax story broke. I heard about it early on, and ended up saying a few words on the Lawrence O'Donnell show after 10 pm.
I was then invited to appear on more TV shows today at 6:30 am and 10 am. The latter I turned down because enough is enough and I do have other things to do, but the former I accepted, despite the 5:30 am car service pickup. Then they called me at 5:15 am, while I was getting dressed, to tell me the gig was cancelled. Ah, the joys of live TV.
I suspect they cancelled because it turned out not to be that big a story, in reality / substance. The released information was too limited and anodyne to tell us much. So I am open to the view that is being widely expressed that Trump may have leaked this himself. (In support of that theory, note how promptly and indeed efficiently the White House responded to word of the leak, essentially by confirming the numbers – is that how this White House typically operates?)
There's not a vast ocean of things that we learn from the leaked 1040, but here are a few quick thoughts:
–He seems to have used up the OPM (other people's money) $900 million NOL that he got in the 1990s, even assuming, as seems reasonable but not certain, that the $100 million loss on the return is the last dregs of that.
–Since he did pay some federal income tax in this year, his reason for hiding his tax returns isn't that they would show he never paid any federal income tax. So the secrecy theories about his business dealings, associates, etc. gain relative force. But of course we don't know if 2005 was a typical tax year for him.
–The AMT liability ($31M out of the $36M total liability) potentially triggered an AMT credit against the regular tax in subsequent tax years. Insofar as AMT liability is attributable to timing differences (e.g,. the rate of depreciation) rather than permanent differences (e.g., an income exclusion) betweeen the two tax bases, such liability generates a tax credit that in later years can be used to reduce regular tax liability to AMT liability. So this may have been mainly a timing thing, albeit without contradicting that he was paying something at some point in time.
–Probably not much by way of charitable deductions (which comes as no surprise). His $17M of itemized deductions might be expected to include significant state and local income tax liability, especially if he was meaningfully subject to the NYS and NYC income tax.
–$31 million of AMT liability, 28% AMT rate (after full phase-in) suggests that he might have had, say, $112 million or so of AMT income. That is less than his pre-NOL regular taxable income for 2005, although we don't know if there was an NOL used in the AMT part as well. (It would have been a separately computed AMT NOL – the two systems run on separate tracks.) Unclear why the AMTI would have been less than the regular taxable income in 2005, although who knows given multiple timing differences between the systems (e.g., you get higher AMT than regular tax depreciation deductions in the later years of an asset's useful life). But maybe the last dregs of AMT NOL were also used in 2005.
–Even so, it seems as if he must have used up the AMT NOL, assuming he got it in roughly the same amount, faster than the regular tax NOL. Again, it's unclear why. Note that the AMT NOL generally can only offset 90% of AMTI, whereas the regular tax AMT can actually be used faster, all else equal, since it can be used to offset 100% of regular taxable income.
–Only $5 million of regular tax liability on $31 million of regular taxable income, presumably reflecting that what was left after the NOLs was mainly capital gain.
–If really interesting tax return stuff from Trump comes out, it won't be the tax people (like me) who get the main insights from it. Rather, the main value will come from investigative reporters who can trace the information about business associates, etc.