Trump returns to Washington after spending the weekend at his Bedminster golf resort in July 2019. Credit - MANDEL NGAN/AFP via Getty Images
In 2011, Sandra Diaz was working as a housekeeper at the Trump National Golf Club in Bedminster, New Jersey where she says she was tasked with cleaning the personal residence of Donald and Melania Trump, in addition to that of Ivanka Trump and Jared Kushner. She folded their laundry, mopped their floors, and cleaned their bathrooms. If the Trumps indicated they were headed to their private properties unexpectedly on a weekend, Diaz would drop everything to rush over and make the dwellings spick and span for their arrival. She says she would start work as early as 6 am, finish as late as 10 pm, and sometimes work as often as seven days per week.
Her W2 tax form for that tax year shows she was paid $26,792.90 for her labor, with $413.14 withheld in federal income taxes. In other words, Diaz, then an undocumented immigrant from Costa Rica, contributed more to the federal government in 2011 than the $0 that Trump—who is estimated to be a billionaire—paid in federal income taxes during 10 of the 15 years between 2000-2015, according to the New York Times’ bombshell reporting on the President’s long sought-after tax records.
As an undocumented immigrant at the time, Diaz’s tax dollars were paying for public services from which she couldn’t personally benefit: She had no health insurance, could not vote, and was not eligible for certain government assistance programs that help people in and near her relatively low income bracket.
Diaz says she was happy to do the hard work and contribute to the country she loved, regardless. “I’m really happy. Because [immigrants] do what is needed,” Diaz, now 48, tells TIME. “We want to pay taxes and be part of America.”
Diaz, who has previously spoken to the Washington Post and the New York Times about Trump’s employment of undocumented immigrants, is hardly alone in paying more federal income taxes than Trump in the years before he moved into the White House. The average U.S. household paid $8,831 in federal income taxes in 2019, according to the Bureau of Labor Statistics. That’s $8,081 more than the $750 that the New York Times reported Trump paid in 2017. Even an assistant manager at McDonald’s, who Glassdoor estimates to earn an average of $26,000 per year, will pay about $685 more in federal taxes in 2020 than the President paid the year he won the White House if they claim the standard deduction.
If you want to know how a person who washes bed sheets or makes french fries in exchange for pennies on the dollar ends up paying more in federal tax dollars than a real estate mogul and reality TV star turned President of the United States, look no further than the U.S. tax code.
Wealthy Americans have ways to reduce their tax burden through tax deductions and tools that don’t necessarily make sense for Americans of more modest means to use. Rich people benefit more from being strategic about deducting their stock market losses from their stock market gains in order to be taxed on less of the gains. They can try classifying second or third or fourth or fifth properties as “investments” in order to deduct routine maintenance as business expenses. They can funnel millions of dollars to heirs that won’t be subject to estate taxes until those contributions exceed $11 million. In all, almost 60% of tax benefits from major non-business tax expenditures go to the richest 20% of American households according to an analysis by the Tax Policy Center. Of those, nearly 25% of tax benefits go to the richest 1%.
To be sure, some Americans who make very low wages, are disabled, elderly, or some combination of the above often pay little or no federal income taxes. There are also provisions of the tax code designed to help working- and middle-class earners, such as the earned income tax credit (EITC) and child tax credits, but these deductions and credits are significantly lower in sum than the savings extremely wealthy Americans can take advantage of through itemizing large deductions and writing off sizable business expenses.
Ironically, Americans earning less income often come under greater tax scrutiny than their wealthier neighbors. Because extremely wealthy people have to document a myriad of business expenses, investments, and deductions for the Internal Revenue Service (IRS), it is much more costly and time-intensive for the IRS to sift through their many assets and earnings to ascertain whether tax aversion or tax evasion is transpiring than it would be for the agency to audit an American who has one simple W2 or 1099 form and limited investments. In fact, recipients of the EITC—who make less than $20,000 per year on average—were more likely to face inquiries from the IRS than individuals making twenty times as much, according to a 2018 ProPublica report.
Auditing the taxes of a low-income earner who claims the EITC to ensure they qualify for the tax credit is quite easy and may even use simple computer algorithms, says Mark Mazur, director of the Urban-Brookings Tax Policy Center. “You contrast that with an audit of a very complicated set of businesses held by individuals with various forms of interlocking entities, and [the IRS needs] a whole team of auditors who are highly paid, highly skilled to work their way through and then probably wind up with the taxpayer appealing the audit results, and maybe even litigating it,” he says. “It’s just way more costly.
Signing a recent tax return- isn't this ridiculous? pic.twitter.com/UdwqF4iZIZ
— Donald J. Trump (@realDonaldTrump) February 25, 2016
Practically speaking, the loss of revenue from wealthy Americans’ averting tax payments hurts everyone: When top earners avert paying taxes and get away with it, there are less federal funds to cover the military, roads, Social Security, welfare programs, Medicaid, disability and emergency economic relief efforts like the stimulus checks sent out earlier this year.
But the New York Times’ reporting also underscores another long-debated question about the intersection of morality and the economy: Should the U.S. have a tax code that rewards businesses and wealthy individuals for making investments and profiting off them in order to stimulate trickle-down economics? Or should the tax system make stronger efforts not to cast heavy tax burdens on those just barely making ends meet and work to reduce America’s substantial wealth gap, in which three men possess more wealth than the poorest 50% of Americans?
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As he himself has indicated in the past, Trump’s avoidance of large tax payments is intentional. “I fight like hell not to pay a lot of tax,” he said in 2016.
In practice, some of his efforts to do that have been unusually “aggressive,” as Mazur puts it. As the New York Times reports, he wrote off more than $70,000 for hair care services during the years that the television show The Apprentice ran—despite the fact that a U.S. Tax Court has ruled vanity expenses such as teeth-whitening, haircuts and office attire aren’t generally valid deductions, even among news anchors and celebrities.
The Times’ reporting that Trump also claimed deductions for $109,433 worth of linen and silver and $197,829 for landscaping in 2017 at his Mar-A-Lago resort points to yet another systemic inequity in the tax code. While big business owners can claim sizable deductions, not every individual is as fortunate: A school teacher in the United States can legally only claim $250 per year in deductions for personal purchases of classroom supplies, despite teachers reporting they pay almost $500 on average out of their own pockets, according to a National Center for Education Statistics report.
Another way Trump has averted significant tax debts is by offsetting business gains with businesses losses: An individual can do this by cashing in on one investment that decreased in value to reduce the taxes on another investment that increased in value so the investor doesn’t have to pay as much in capital gains taxes—which are generally already less than federal income taxes. This isn’t abnormal for people who have built substantial investment portfolios, nor is it illegal. But the strategy does underscore the discrepancy between the relatively low tax rates on capital gains versus the higher tax rates on ordinary income; those with wealth who tend to have investment assets and can benefit from those rates.
Unlike millions of Americans who are priced out of owning even one home, Trump’s large real estate empire has also helped him avoid some tax debts. According to the Times’ reporting, Trump claimed his Seven Springs estate, a 50,000-square-foot mansion sitting on more than 200 acres of land outside New York City, as an investment property in 2014, allowing him to write off more than $2.2 million in property taxes as a business expense in the years since. A middle-class family who owns a small second home on a lake in Michigan or Minnesota would have a hard time classifying it as a business expense without significant proof that it was primarily used as an investment, rather than a personal dwelling, says Mazur. But Trump’s family seems to make use of the New York mega-property for rest and relaxation rather than to turn a profit. “Today, Seven Springs is used as a retreat for the Trump family,” reads the Trump Organization website.
Back in New Jersey, Sandra Diaz isn’t visiting any luxe mansions—nor is she claiming business expenses on them to skirt taxes—though she’s no longer folding laundry for the Trump family either. The COVID-19 pandemic temporarily resulted in her losing some hours and income at a new housekeeping job, but she is about to go back to work full-time.
And even though her tax burdens have gone up significantly as she has found jobs that pay her higher wages than the Trump National Golf Club did, she says she doesn’t mind contributing her fair share to keep the country running. “Poor people follow the rules [and] pay the taxes,” she says. She just wishes Trump would, too.