Originally published on Forbes.com.
The leak of the first two pages of President Trump’s 2005 Form 1040 to investigative reporter David Cay Johnston, with key numbers, later confirmed by the White House, made for high drama on the Rachel Maddow show Tuesday night. While those two pages left many questions unanswered, they vindicated my skepticism last fall that Trump could have avoided paying federal income taxes for 18 years.
There are few things more pleasant than having the New York Times be wrong and me be right. The Times headline for its discussion of the Rachel Maddow release was “Trump Wrote Off $100 Million in Business Losses in 2005″. Peter Baker noted that:
In October, The New York Times published three pages of Mr. Trump’s 1995 returns, which showed a $916 million tax deduction that could have allowed him to legally avoid paying any federal income taxes for up to 18 years.
I didn’t think that was a good inference and as we see it turns out it was not. Twelve years later we see that Donald Trump had $38 million in tax on $150 million in positive income. As alluded to in the Times headline there is a negative $103,201,242 on line 22. We would of course love to see the “Statement 1” that explains this number, but it is very likely a net operating loss carryover, perhaps the tail end of the nearly billion dollar loss the Times noted on the fragments of the 1995 returns.
What Is The Percentage?
A Trump apologist might argue that he really got hosed in 2005 and ended up paying 77% (Total tax on line 63 divided by adjusted gross income). If you really wanted to make it dramatic, you could note that his total tax of $38 million was greater than his taxable income of $32 million which works out to 119%.
The Alternative Minimum Tax
Of course it is mostly explained by the alternative minimum tax (AMT) which shows up on Line 45. Even though the AMT is reflected as an add-on to the regular tax, it is actually a parallel system with fewer deductions and credits, slower depreciation and a lower rate. A reasonable inference from the $36,571,795 on Line 46 is that Trump’s Alternative Minimum Taxable income was in the $130 million neighborhood. He would have had a different net operating loss for AMT purposes than for regular tax purposes and there might be substantial depreciation difference. Form 6251 would explain it.
An item that I find rather interesting is $1,887,596 in self-employment tax. On line 12 we see Schedule C income of over $42 million. Remember Newt Gingrich being criticized for beating the medicare tax on Gingrich Productions back during the 2012 campaign. Apparently Donald Trump was not doing the same thing. There may have been state or city tax issues that prevented it or maybe he was just being a sport. It does seem a little odd, though that Trump passed up a fairly plain vanilla technique that might have save over a million in tax.
Probably Paid A Lot In 2004
The only other inference that I can make that might be of some interest comes from the penalty number on the very bottom of Page 2 – $68,788. We see that there was withholding and estimates totaling around $13.7 million paid for 2005. The penalty implies that the total tax for 2004 was more than that. My back of the envelope on that is a couple of million more, but there is not enough detail to make that certain. Too bad we don’t have Form 2210.
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