Why Trump’s tax returns still matter

Rick Newman
Senior Columnist

You’ve probably tuned out by now. Democrats want to force the publication of President Trump’s tax returns, while Trump resists at every turn. Lawyers are getting rich, while voters learn nothing new.

Yet the Democratic effort to pry loose Trump’s returns creeps forward, and could still produce a bombshell that damages Trump in the 2020 presidential election, assuming he makes it that far.

A federal appeals court has issued a final ruling allowing Congress access to eight years of Trump’s corporate and personal tax returns. The case will now head to the Supreme Court. The court could decline to take the case, which would make Trump’s loss in the appeals court the final ruling. If it does take the case, there’s no guarantee of a speedy outcome. Trump’s lawyers have 90 days to file their appeal, which could coincide with a Trump impeachment trial in the Senate early in 2020.

If Trump’s returns do become public within the next 12 months or so, they could rattle Trump’s reelection bid, for at least three reasons. First, it’s possible Trump pays a very low tax rate compared with ordinary workers. As a real estate developer, he enjoys tax breaks that can sharply lower tax payments. And investment income, which is how wealthy people earn much of their money, is typically taxed at lower rates than income on labor.

Developer tax breaks

The average American worker pays about 14% of his or her earnings in federal income tax, not counting extra payments like the taxes that fund Social Security and Medicare. Joe Biden paid about 33% of his gross earnings in federal income taxes in 2018. Elizabeth Warren paid 27% and Bernie Sanders paid 24%. Trump’s rate is probably way lower, and it’s possible he has paid 0 taxes in some years, since he can claim business losses that slash his tax obligation. The leading Dems don’t run the kind of business Trump does and don’t benefit from those tax breaks.

The Trump International Hotel located at 1100 Pennsylvania Ave, NW, Washington DC. (Photo by Jonathan Newton / The Washington Post via Getty Images)

It’s easy to demagogue a politician like Trump for being a tax evader, even if Trump uses legal loopholes to lower his tax bill. Unlike the Trump Russia investigation or the Ukraine whistleblower complaint, taxes are intuitive to voters and easy to understand. If Trump, who boasts frequently about his wealth, pays a lower tax rate than typical middle-class workers, he’d be more vulnerable to charges of benefiting from a rigged tax system skewed to benefit the wealthy.

There’s also the question of whether Trump and his family benefited from Trump’s own tax-cut law, which passed at the end of 2017. The law sharply lowered the tax rate on the type of business the Trump family operates. And it included other provisions that probably benefited Trump. If so, it would bolster arguments that Trump is more interested in self-dealing than boosting workers.

Trump’s returns might also show how much he personally benefits from low interest rates, through, for example, variable-rate loans that reset periodically. Trump has been hectoring the Federal Reserve to slash rates and blaming the Fed’s reluctance for a slowing economy. If it turns out Trump makes money when rates fall, it would be more evidence of self-serving policies.

It’s also possible, of course, that Trump’s tax returns aren’t as damning as critics contend. Yet he acts like they are, defying tradition by being the only major presidential candidate since the 1970s refusing to release his returns. Voters will make up their own minds, if they ever get to see what’s in them.

Editor’s note: This is an updated version of a story originally published on Oct. 7, 2019.

Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: rickjnewman@yahoo.com. Encrypted communication available. Click here to get Rick’s stories by email.

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