The tax code is so long and complicated because it includes every tax law designed to promote a specific cause or benefit a certain constituency. Sometimes Congress uses the tax code to promote social welfare, such as a tax break for low-income housing construction. Congress also alters the tax code to stimulate economic growth, perhaps by making it easier to take business deductions. Other changes to the tax code are strictly political rewards for special interest groups that support congressmen during their election campaigns
Some of my liberal friends take a dim view of Donald Trump because he avoided paying his taxes. Shame on him. The easy answer is that Trump never “avoided” paying federal income tax. In 1995, he didn’t OWE any income tax, so he didn’t pay any. That’s not tax avoidance. It’s compliance with complicated tax laws. If Trump had failed to comply with tax law, that failure would show up on an IRS audit and he’d have paid yuuuge penalties or worse. Remember Leona Helmsley? She went to prison for tax evasion.
In our household, we don’t want to pay one penny more in taxes than we have to, and Trump’s tax team surely has the same goal – just with, er, much bigger numbers.
Ryan Ellis has a more detailed look at the Trump Tax Tempest-in-a-Teapot. From the Forbes website:
Trump Tax Return Story Exposes Policy Ignorance Of Political Reporters
Over the weekend, the New York Times reported that they had obtained a copy of Donald Trump’s 1995 New York state tax return (whoever sent it committed a felony). It showed that he claimed a net operating loss (NOL) of about $900 million that year.
What followed was a collective explosion of talking heads over the weekend, with the theatrics inversely proportional to the pundit’s knowledge of tax policy.
To state the obvious, political reporters don’t know a damned thing about taxes. I know this–believe me (to channel my inner Donald). Part of what I do for a living is prepare people’s taxes in the Washington, DC area. As an Enrolled Agent, I run into all sorts of clients. The most political (that is, horse race/hot take) clients compete with performing artists for the least amount of knowledge when it comes to taxes. I’ve even had some of them forget to bring their W-2s to a tax session.
That ignorance was on display in vivid colors over the weekend. We were told that this tricky NOL was some sort of “loophole” that only super-rich bad guys like Donald Trump got to use. We were told that this relieved him of having to pay taxes for 18 years, a laughably arbitrary, made up number that is the tautological output of simple arithmetic and wild assumptions.
. . .
It’s not difficult to see how political reporters got played like a fiddle here. Most of them have never actually run a business, much less learned about the tax rules surrounding them. Most went from college to a series of simple, W-2 jobs (with the occasional freelance gig) in traditional media organs. . . .