Imagine great news exposes like the Pentagon Papers (1971) or the Panama Papers (2016), but without either the papers or much news to expose. Now you have The New York Times’ recent diatribe about President Donald Trump’s taxes.
These days I try to avoid blogging about chronic bias and occasional cluelessness in that news outlet, to which I first subscribed as a fifth-grader in 1968. Writing about Times journalism is boring, and reading it is depressing because of what has become of a once trustworthy institution. I especially regret that this is the second time this week I have mentioned the Times. I apologize to regular readers and promise to do my best to refrain in the near future.
A few days ago, I addressed a nasty anti-Catholic passage that appeared in the Opinion section last weekend, anticipating Trump’s nomination of Amy Coney Barrett to the Supreme Court. The Times followed on Sunday evening with a 10,000-word “overview” of what the Times called “tax-return data extending over more than two decades for Mr. Trump and the hundreds of companies that make up his business organization, including detailed information from his first two years in office.”
The gaps, contradictions and synthetic urgency of the Times piece were plain in its all-caps headline: “LONG-CONCEALED RECORDS SHOW TRUMP’S CHRONIC LOSSES AND YEARS OF TAX AVOIDANCE.”
The article itself did not hint that anything at all was concealed, at least not from anyone entitled to have access. As far as we know, Trump’s tax returns were all filed in full and on time. If “concealment” means not handing over private information to journalists, political opponents and the Twitterverse, we all might want to post our browsing histories and medical records for scribes to digest at their leisure. Trump has broken with the tradition of recent decades in refusing to release his tax returns publicly, and his claims that an ongoing tax audit is the reason why are nonsense. Neither fact qualifies as news.
Income tax liabilities require income. So “chronic losses” and “tax avoidance” are a contradiction in terms. If you only lose money, you have no income taxes to avoid.
Then again, “tax avoidance” as used by the Times is a sneaky, loaded term. Professionals, and honest journalists too, take pains to distinguish legal “tax avoidance” from the crime of “tax evasion.” The Times made no such distinction. If you ever deducted a charitable contribution or refinanced a personal debt with a tax-deductible home equity line of credit, you have engaged in tax avoidance. As Judge Learned Hand wrote in the 1947 case Commissioner v. Newman, “Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible.” No one has to pay more than the law says they owe.
The gist of the Times’ exclusive is that, over an extended period of years, mainly before he was in public service but continuing during his presidency, Trump has: paid millions of dollars in taxes when that was required; claimed millions in refunds to which he was seemingly entitled; paid little to no tax in most years due to careful matching of expenses and credits generated by his diverse businesses with taxable income generated elsewhere in his portfolio; and engaged in a large ongoing, if somewhat arcane, dispute with the Internal Revenue Service that may or may not stem from the disposition of his Atlantic City casino holdings in 2009.
Maybe there is more to the story. Maybe there is even less. We can’t tell, because the Times refuses to publish any of the extensive documentation it claims to have reviewed. It would not share such information even with Trump’s lawyers when they asked to see it before responding to what the reporters said it said. This refusal, the Times said, is to protect its sources.
That is likely true. The unauthorized disclosure of federal tax information is a crime – a misdemeanor when committed by a tax preparer (Section 7216 of the Internal Revenue Code), but a felony when committed by an employee of the IRS or other government agencies (Section 7213). Historically, journalists and their sources have weighed such legal risks against the perceived merits of public disclosure. The New York Times and The Washington Post both published extensive excerpts directly from the Pentagon Papers, a then-classified history of the Vietnam War, even though they and their source, Daniel Ellsberg, knew it would lead back to him. Ellsberg was eventually charged under the Espionage Act. Those charges were later dropped due to government misconduct, including break-ins at his psychiatrist’s office. (The Times subsequently published its material in book form; the complete history was not declassified and published by the National Archives until 2011.)
The Times’ failure to provide direct access to any of the material from which it draws its conclusions on Trump leaves readers to trust that the reporters involved are presenting the president’s tax picture fairly and in context. Unfortunately, the writing leads to the opposite conclusion. A couple of examples will illustrate.
The Times asserts that the president “is personally responsible for loans and other debts totaling $421 million, with most of it coming due within four years. Should he win re-election, his lenders could be placed in the unprecedented position of weighing whether to foreclose on a sitting president.”
Lenders do not foreclose when a loan comes due; they foreclose when a loan is in default. In the world of commercial real estate – the world where Trump the business mogul operates – loans are regularly taken out for periods of five to 15 years, then refinanced when they come due. Usually the refinancing is a vehicle for the owners to take cash out of property that has appreciated. The principle is the same as the way you and I might take cash out of our own homes’ value by refinancing. As long as the underlying property has been well maintained and generates steady or increasing rents, it tends to rise in value, especially in low interest rate environments.
Could Trump run into trouble? Sure. So could any other commercial real estate operator. Trump would have the same options as anyone else: refinance his loans, restructure his debts or sell enough property to meet his obligations. None would call for foreclosure. The reported figure for his debts is of little use unless we have an idea of the value of the assets that those debts secure.
Or consider the consulting fees that the Times report concludes the president may have paid his daughter Ivanka Trump, who was also an employee of his businesses during some of the years at issue. “If the payments to his daughter were compensation for work, it is not clear why Mr. Trump would do it in this form, other than to reduce his own tax liability,” the writers marveled. “Another, more legally perilous possibility is that the fees were a way to transfer assets to his children without incurring a gift tax.”
Besides being sexist – why would anyone assume that Ivanka Trump, herself an accomplished business owner, would not be getting compensated for valuable services rendered to her father’s sprawling enterprises? – this assertion is actually stupid. In the middle of an article bemoaning Donald Trump’s ability to use write-offs to shelter his own income, the writers overlook the fact that Ivanka Trump pays taxes, too. She probably pays them in the top federal and New York tax bracket, just like her father in his highest-income years (before he abandoned his New York domicile). So, to the Trump family as a whole, moving income from Donald to Ivanka would likely have been at best a wash, and could easily have generated higher taxes. As for gift taxes, there are far more tax-efficient mechanisms available to move wealth between generations than taxable consulting payments.
Possibly the most damning critique of the Times piece comes from the way the rest of the copycat media has reported on it. By now you have heard endless regurgitations of the point that Trump paid just $750 in federal income tax for 2016 and 2017, and none at all in 10 of – variously reported – 15 or 17 years. (The Times’ actual claim was 15.) Left out is the nugget slipped into the middle of the Times salvo that, between 2005 and 2007, Trump paid some $70 million. Spread over a decade, $70 million is a decent amount of money, even for someone of Trump’s financial swagger.
But apart from how much the president did or did not pay, the question remains: Is a propensity to take aggressive but legal positions with expert advice the worst thing voters have ever heard about Trump? Does it come in second, or fifth, or ninth? Beyond the partisans and pundits, do enough people actually care to make it worth giving such short shrift to a fair, dispassionate and transparent reporting of the known facts?
I deeply miss The New York Times with which I grew up, the one in which I first read about the Pentagon Papers. I miss it for two reasons. One is that the old Times reported real news. The second is that because I received it on paper, I could (and did) use it as a birdcage liner after I read it.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
Looking Ahead: Life, Family, Wealth and Business After 55. His contributions include Chapter 1, “Looking Ahead When Youth Is Behind Us,” and Chapter 4, “The Family Business.” Larry was also among the authors of the firm’s book
The High Achiever’s Guide To Wealth.
Posted by Larry M. Elkin, CPA, CFP®
Trump Tower, New York City. Photo by Flickr user nhadatvideo, licensed under CC BY.
Imagine great news exposes like the Pentagon Papers (1971) or the Panama Papers (2016), but without either the papers or much news to expose. Now you have The New York Times’ recent diatribe about President Donald Trump’s taxes.
These days I try to avoid blogging about chronic bias and occasional cluelessness in that news outlet, to which I first subscribed as a fifth-grader in 1968. Writing about Times journalism is boring, and reading it is depressing because of what has become of a once trustworthy institution. I especially regret that this is the second time this week I have mentioned the Times. I apologize to regular readers and promise to do my best to refrain in the near future.
A few days ago, I addressed a nasty anti-Catholic passage that appeared in the Opinion section last weekend, anticipating Trump’s nomination of Amy Coney Barrett to the Supreme Court. The Times followed on Sunday evening with a 10,000-word “overview” of what the Times called “tax-return data extending over more than two decades for Mr. Trump and the hundreds of companies that make up his business organization, including detailed information from his first two years in office.”
The gaps, contradictions and synthetic urgency of the Times piece were plain in its all-caps headline: “LONG-CONCEALED RECORDS SHOW TRUMP’S CHRONIC LOSSES AND YEARS OF TAX AVOIDANCE.”
The article itself did not hint that anything at all was concealed, at least not from anyone entitled to have access. As far as we know, Trump’s tax returns were all filed in full and on time. If “concealment” means not handing over private information to journalists, political opponents and the Twitterverse, we all might want to post our browsing histories and medical records for scribes to digest at their leisure. Trump has broken with the tradition of recent decades in refusing to release his tax returns publicly, and his claims that an ongoing tax audit is the reason why are nonsense. Neither fact qualifies as news.
Income tax liabilities require income. So “chronic losses” and “tax avoidance” are a contradiction in terms. If you only lose money, you have no income taxes to avoid.
Then again, “tax avoidance” as used by the Times is a sneaky, loaded term. Professionals, and honest journalists too, take pains to distinguish legal “tax avoidance” from the crime of “tax evasion.” The Times made no such distinction. If you ever deducted a charitable contribution or refinanced a personal debt with a tax-deductible home equity line of credit, you have engaged in tax avoidance. As Judge Learned Hand wrote in the 1947 case Commissioner v. Newman, “Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible.” No one has to pay more than the law says they owe.
The gist of the Times’ exclusive is that, over an extended period of years, mainly before he was in public service but continuing during his presidency, Trump has: paid millions of dollars in taxes when that was required; claimed millions in refunds to which he was seemingly entitled; paid little to no tax in most years due to careful matching of expenses and credits generated by his diverse businesses with taxable income generated elsewhere in his portfolio; and engaged in a large ongoing, if somewhat arcane, dispute with the Internal Revenue Service that may or may not stem from the disposition of his Atlantic City casino holdings in 2009.
Maybe there is more to the story. Maybe there is even less. We can’t tell, because the Times refuses to publish any of the extensive documentation it claims to have reviewed. It would not share such information even with Trump’s lawyers when they asked to see it before responding to what the reporters said it said. This refusal, the Times said, is to protect its sources.
That is likely true. The unauthorized disclosure of federal tax information is a crime – a misdemeanor when committed by a tax preparer (Section 7216 of the Internal Revenue Code), but a felony when committed by an employee of the IRS or other government agencies (Section 7213). Historically, journalists and their sources have weighed such legal risks against the perceived merits of public disclosure. The New York Times and The Washington Post both published extensive excerpts directly from the Pentagon Papers, a then-classified history of the Vietnam War, even though they and their source, Daniel Ellsberg, knew it would lead back to him. Ellsberg was eventually charged under the Espionage Act. Those charges were later dropped due to government misconduct, including break-ins at his psychiatrist’s office. (The Times subsequently published its material in book form; the complete history was not declassified and published by the National Archives until 2011.)
The Times’ failure to provide direct access to any of the material from which it draws its conclusions on Trump leaves readers to trust that the reporters involved are presenting the president’s tax picture fairly and in context. Unfortunately, the writing leads to the opposite conclusion. A couple of examples will illustrate.
The Times asserts that the president “is personally responsible for loans and other debts totaling $421 million, with most of it coming due within four years. Should he win re-election, his lenders could be placed in the unprecedented position of weighing whether to foreclose on a sitting president.”
Lenders do not foreclose when a loan comes due; they foreclose when a loan is in default. In the world of commercial real estate – the world where Trump the business mogul operates – loans are regularly taken out for periods of five to 15 years, then refinanced when they come due. Usually the refinancing is a vehicle for the owners to take cash out of property that has appreciated. The principle is the same as the way you and I might take cash out of our own homes’ value by refinancing. As long as the underlying property has been well maintained and generates steady or increasing rents, it tends to rise in value, especially in low interest rate environments.
Could Trump run into trouble? Sure. So could any other commercial real estate operator. Trump would have the same options as anyone else: refinance his loans, restructure his debts or sell enough property to meet his obligations. None would call for foreclosure. The reported figure for his debts is of little use unless we have an idea of the value of the assets that those debts secure.
Or consider the consulting fees that the Times report concludes the president may have paid his daughter Ivanka Trump, who was also an employee of his businesses during some of the years at issue. “If the payments to his daughter were compensation for work, it is not clear why Mr. Trump would do it in this form, other than to reduce his own tax liability,” the writers marveled. “Another, more legally perilous possibility is that the fees were a way to transfer assets to his children without incurring a gift tax.”
Besides being sexist – why would anyone assume that Ivanka Trump, herself an accomplished business owner, would not be getting compensated for valuable services rendered to her father’s sprawling enterprises? – this assertion is actually stupid. In the middle of an article bemoaning Donald Trump’s ability to use write-offs to shelter his own income, the writers overlook the fact that Ivanka Trump pays taxes, too. She probably pays them in the top federal and New York tax bracket, just like her father in his highest-income years (before he abandoned his New York domicile). So, to the Trump family as a whole, moving income from Donald to Ivanka would likely have been at best a wash, and could easily have generated higher taxes. As for gift taxes, there are far more tax-efficient mechanisms available to move wealth between generations than taxable consulting payments.
Possibly the most damning critique of the Times piece comes from the way the rest of the copycat media has reported on it. By now you have heard endless regurgitations of the point that Trump paid just $750 in federal income tax for 2016 and 2017, and none at all in 10 of – variously reported – 15 or 17 years. (The Times’ actual claim was 15.) Left out is the nugget slipped into the middle of the Times salvo that, between 2005 and 2007, Trump paid some $70 million. Spread over a decade, $70 million is a decent amount of money, even for someone of Trump’s financial swagger.
But apart from how much the president did or did not pay, the question remains: Is a propensity to take aggressive but legal positions with expert advice the worst thing voters have ever heard about Trump? Does it come in second, or fifth, or ninth? Beyond the partisans and pundits, do enough people actually care to make it worth giving such short shrift to a fair, dispassionate and transparent reporting of the known facts?
I deeply miss The New York Times with which I grew up, the one in which I first read about the Pentagon Papers. I miss it for two reasons. One is that the old Times reported real news. The second is that because I received it on paper, I could (and did) use it as a birdcage liner after I read it.
Related posts:
No related posts.
The views expressed in this post are solely those of the author. We welcome additional perspectives in our comments section as long as they are on topic, civil in tone and signed with the writer's full name. All comments will be reviewed by our moderator prior to publication.