Trump and Taxes: The Art of the Dodge
The new question new subject. When are you going to release your tax returns? Well, having the made their extremely complicated. It's gonna take a little while. I thought it from the moment. He entered the race for president. The issue of taxes stuck to Donald Trump, like gum on the sole of his shoe. What's the hold up very well, very big tax returns. The biggest I guarantee of this, the biggest ever in the history of what we're doing. So it's very complicated set, but we'll be releasing eight months after entering the race offering vague excuses. Trump finally gave a concrete reason not to do what every major party presidential nominee has done for decades in a debate. He said he's under audit by the Internal Revenue Service. As far as my return, I wanna file it except for many years. I've been ordered at every year twelve years or something like that. Every year they offered me experts say it doesn't usually work that way. I have friends that are very wealthy people. They never get audited, I get every year. I will absolutely give my return, but I'm being audited now for two or three years. So I can't. Do it until the audit is finished. Obviously, I think people would understand a few days later, Forbes magazine published an opinion piece by Beverly Hills, tax attorney responding to Trump's statement. This lawyer wrote that as a wealthy man Trump was likely the target of a special group within the IRS. The group is informally known as the wealth squad includes highly trained. Examiners who look beyond the single tax return to all the related business entities and examination by the wealth squad can take years. He wrote quote, would any experienced tax lawyer representing Trump in an IRA audit, advise him to publicly release his tax returns during the audit. Absolutely not. The man who wrote this, a respected tax attorney named Charles Rettig, come to order Reading's name was in the news this summer, like to welcome everyone to on the pending nomination of Mr Charles Rettig. The nominated service IRS commissioners very important position in this country. Last month, the Senate approved Charles rags nomination. The man who argued Donald Trump shouldn't show American voters. His tax returns is now America's chief tax collector. Hello and welcome to Trump Inc an open investigation from propublica and dulling on e. I'm Ilya marritz WNYC I'm Jesse Eisenberg from propublica. This season of trumping is all about the ways people around the president are working to profit from his position. And one of the biggest most direct ways is taxes. It says something about the Trump administration's view of taxes that this is the guy Charles Riddick who Trump appointed to head up the IRS recent agency chiefs have been picked for their managerial experience. Given that the IRS is a giant government bureaucracy. They've not been tax lawyers who spent their decades studying how to help rich clients creatively legally work. The system Trump's decision not to release his own taxes, and then his decision to hire the guy who said that was a good idea. It leaves us with a lot of questions about one of Donald Trump's biggest legislative victories. The tax cut. That passed last year. This is the only major legislation signed by this president. And the main aspect of that overhaul said it provides a huge cut for corporations and wealthy people. And there are specific tax cuts aspects of the law that in particular help Donald Trump and his allies and friends, and let's not forget all the ways the Trump family and the people around Trump have thumbed their nose at the IRS years. Before those changes to the tax law sometimes to the point of criminality or other legal violations, there's campaign chairman, Paul Manafort convicted this year for a complex international tax fraud include five counts of filing false tax returns untended of millions of dollars in political consulting income, personal lawyer. Michael Cohen. Pled guilty to eight felony charges convicted of domestic tax fraud. That was extremely simple, which he failed to report approximately four point one million dollars in reported income. Then there's the. Trump's themselves, Donald is thrilled his kids, they're named in a civil suit here in New York. That suit is over the Trump foundation. It violated a legal prohibition against self dealing which allegedly violated a whole slew of IRS rules governing nonprofits families. Again, the opposite of charity. Now the details about the Trump say, they've done nothing wrong. There's a patter to Trump in Texas, and that's what this episode is all about. He didn't pay any federal income tax so that make smart. Here's the pattern and by the way, it applies to both written rules laws and unwritten rules like norms. Number one, he acknowledged them just like we told you by not releasing his tax returns. And number two, he breaks them number three. Now that he's president key changes the rules. In this episode, we're going to show you all three of these things happening. Ignore break change. I have legally used the tax laws to my benefit add to the benefit of my company, my investors and my boys. I mean, honestly, I have brilliantly, I have brilliantly used those long. You'll talk with tax lawyer who specializes in helping rich people get in trouble with the IRS get out of trouble. She says it's a good time to be a wealthy rule breaker, and we'll learn the specific tax benefits Trump and his family members are getting. There is a ton. We don't know about Donald Trump and taxes because he's kept his tax return. Secret. One thing is sure if Democrats take one or both houses of congress, this fall, they'll demand receipts, but thanks to some really excellent reporting. We know more than we did on election day twenty sixteen about Trump's taxes. We're gonna start our tour with an exceptionally audacious cr-. Creative tax dodgers the president's late father, Fred Trump. She, we go. Just a simple Canadian working at the New York time. Suzanne, Craig is an investigative reporter. You may have read her recent story reported with two other times, journalists about how Donald Trump's father, Fred Trump built a fortune and passed it on to his children while paying as little in taxes as possible. The story is almost as long as Shakespeare's MacBeth, Andrea read it three times. I went to see Suzanne Craig, the other day at work. She says, Fred, Trump's wealth came from apartment complexes. He built in Brooklyn and queens after World War Two, when demand was high. I don't think we can do to these homes, but veteran certainly should be done. Found this and the WNYC archives often the veteran just married and how small family. But there were no vacancies. Fred Trump put up unlovely brick buildings with lovely names like beach, haven shore, haven park Brier and bell crest hall. We sort of treated each building like a little personality profile. A lot of people are obsessed with Trump's tax. Returns, probably no one more than Suzanne Craig. She's the one who got a great scoop during the twenty sixteen campaign. Someone actually mailed her part of Donald Trump's nineteen ninety-five tax return, which he filed with his then wife Marla Maples. It showed a loss of almost a billion dollars harder up your head around in itself. But what that gave him which was significant was basically a gift card from the IRS in order to shelter, taxable income up to a billion dollars going forward. So in theory, you would think he maybe never would pay taxes again. Craig's curiosity led her to trove of over one hundred thousand pages of Trump family documents. Going back to the nineteen forties more than two hundred talks returns from Fred Trump's empire. Bank statements, financial statements, his own personal Bank records. It was incredible. She didn't tell us who gave it to her. It took Craig and her colleagues, two or three weeks just to scan all the documents into a computer to actually digitize them. And then the reporters spent months reading and interpreting the documents. These numbers told a clear consistent story about Fred Trump and his son Donald. I think they took delight in the talks games that they played any dollar that they could keep away from the tax man victory for them. So let's touch on one of the tax dodges grant her retained annuity trusts or 'grats. This is a way a rich person can avoid inheritance taxes when passing on an asset to their child. This is done with real estate or stocks, things value. You can even put pieces of art in them from one generation to another with paying either very little or no talks. Basically the child pays their parent to buy the asset through a trust. They can save a lot of money by undervaluing that asset. And Craig says, that's what the Trump's did. Hear the toxin gets very little money. Actually. BDO does a commercial on it where there's a father and daughter and vineyard. BDO is an accounting firm. We watched the video together. You can't just inherit for thousand acres. He's proposing to him that she's got this great idea where you can transfer all this stuff to me and put it in and trust, and we won't really owe any taxes which doesn't use the word grab. But that's what they're talking about. There's a. Away. I can buy business. We set up a trust and that's how he transferred to stop the estate tax. There are no estate taxes, and you keep getting paid saying as before run this BDO it was their idea. Thirty second version. This incredible grand. That's interesting though because if you would only know what it was, if you speak the secret language in, obviously a lot of people do according to the times to Trump's weren't just using textile. That's advertised on TV. They were undervaluing the underlying asset which can be illegal all to avoid paying taxes. Some of the maneuvers, the New York Times called quote, outright fraud. And here we get to part two in our framework Trump breaking the rules. It's interesting how it worked. It's not really. It's not complicated anyway. It sort of out of monster on a movie for upkeep on his empire of dowdy, outer borough, permanent buildings. Fred Trump was regularly buying you a quick men and supplies. He would buy boilers fridges and stoves by paint supplies. Nothing too strange about that. He was driving his own bargains building by building, and then one day county shows all county building supply. Now, this is a head scratcher to figure out what this was. One of the reporters from the times went to the Bronx to talk to a guy who used to sell boilers to Fred Trump. His name is Leon Eastman, and he remembers a deal negotiated with Fred Trump in nineteen Ninety-three for sixty boilers a huge deal for him. He remembers the lunch. He remembers the restaurant. They went to. He remembers that he had to pay the tab, and he said, there was no all county at this lunch was Fred Trump and Fred Trump's people, and the first thing you ever heard about. County. It was when the checks started willing 'cause they were cutting the checks for you. Got this. The middleman company, all county building supply is paying the price Fred Trump negotiated, and here's the trick. All county would then Bill Fred Trump a higher price, a markup of twenty percent or fifty percent maybe more. Why? Well, it turns out all county was owned by Donald Trump and his siblings and a cousin. So the markup on those boilers went straight from Fred, Trump's pockets to the next generation and all county shareholders companies, siblings split the difference that is simply a gift from Fred disguised as a business transaction, whatever taxes they're paying here are certainly less than the gift tax or the estate tax. Craig says, all toll, Fred Trump was able to steer at least one point, six billion dollars of his wealth through his kids, and they all paid minimal taxes. The president's press secretary. Sarah Huckabee. Sanders says Donald Trump only got a one million dollar loan from his dad. That's it. A lawyer for Trump called the times is reporting one hundred percent false and highly defamatory. Is there a nickname for what they did with all counties assure hand. But in the business, people know for like, that is not that I. I know of, no, there maybe. Have you heard of one middle, Anna. Yeah, it's something out of. We wanted to know how the Trump's maneuvers look to someone who's day to day job is helping rich people with taxes. So we call Jenny Jonsson wear. I am a AXA Turney and specializes in defending high net worth taxpayers in criminal and civil matters with the IRS. We're basically does the same kind of work, Charles Rettig did. He's the guy who Trump picked for Commissioner of the beleaguered IRS. She thinks highly, I think he actually understands tax enforcement and we'll do his part to turn agency around anyway where red Suzanne Craig's article. She was not entirely surprised, but the all county middle manning thing. It did catch her attention because it was perfectly designed to disappear in the blind spot of iris auditors. The fact that there was a disguised gift going out of the fathers state and into his children's state. Without getting taxed would fall through the cracks. You would never notice to catch text dogs like this. You would need to look at the big picture. She says, but typically the IRS doesn't do that. It takes a lot of resources. So let's say an examiner scrutinizing a business partnership today would pull one partnership return and take a look at it. Well, if that partnership is solely owned by an individual who owns forty three other partnerships, twenty seven as corporations and five trusts, and it's doing business with those other entities than the IRS is going to miss a lot. You have to understand how that entity functions within the unit of all of the other different entities owned by that family and how their business relationships actually completed a gift to another generation g you say the IRS ought to do something about that. Guess what less than a decade ago they did. They created the global high wealth industry group also known as the well squad. We talked about this right at the beginning of the episode. If Donald Trump is indeed under audit, this is the group that might be doing it. I heard of it in two thousand nine when Commissioner showman announced it, and really to great fanfare talking about how this was a game changing strategy for the IRS. We have a new global high will operating unit. Here's iris Commissioner, Doug Schulman the following year, we're, we're taking a unified look at the entire web of business and economic entities controlled by high wealth individuals. So we can better assess all of a sudden lots of financial planners and trusts and estates. Lawyers wanted to hear from me about how this is going to play out and how this is going to affect their clients took a while to figure this out. But the answer at least for where's clients is not so much. It's not a major stressor. For high wealth taxpayers the way it used to be largely because those of us who've done a lot of audits have found that this didn't turn out to be as effective as we all feared. The IRS doesn't make it civil cases public. So our knowledge of the group is limited. So in the beginning you had a bunch of these and then they've tapered off and in the last few years you've hardly had any. Is that right? Right. I think I closed the most recent one about eighteen months ago and I haven't had any new ones come in. Partly this is because of bad planning. She says, the wealth squad just never found its place within the IRS. The leaders kept changing, but a big part of it was budget cuts pushed by the Republican congress. Michael league. Paul Callan I have been looking at this for months and it's really astonishing. The IRS budget has been cut steadily since two thousand eleven. It's two point. Five billion dollars less than it was back. Then the number of auditors at the IRS is below ten thousand. You know, when it was last that low nineteen fifty three the year Stalin died. The economy was a tenth of the size. It is today the rate it which the agency audits tax returns. That's the bread and butter business of the IRS. Well, that's plummeted forty, two percent since the budget cuts, it's basically a million audits year of those million audits. Do you know how many cases they bring criminally for tax evasion when you have legal income, but you've cheated under taxes. I have no idea about eight hundred. This is a country of three hundred thirty million people. If I were good at whistling whistle. This all means that the IRS has a resource crisis in huge pressing business, and a lot falls by the wayside. We requested an interview with the IRS. We submitted a list of questions. The agency did not respond. So this is what was already happening when the man who bragged about not paying taxes who hit his tax returns from the American people who might himself be under audit by the wealth squad was sworn in as president. And since then morale is also really, really down among the enforcement units within the IRS and they've been distracted doing other things. What other things big things. Most Americans will be able to file taxes on a single sheet of paper. What do you think about that? Kevin? You still they're going to be a Trump made it clear when he became president, that one of his top priorities was rewriting the tax code and within months. He and the Republican congress succeeded h official. The house has passed the tax Bill president expected to sign at the only question is when and where and where we do expect to hear from President Trump once again this after. So this is the Bill right here, and we're very proud of it. It's a tremendous thing for the American people that's going to be fantastic for the economy, a wholesale rewrite of the tax code on a scale that hasn't been seen since the time of Ronald Reagan, we're going to sign this. Little picture of it. It fits nicely. The bucks. Jimmy Johnson wear concede at its put the IRS under enormous strain. The IRS is not putting out guidance. They're not telling people how they intend to interpret the new law. So many things are so very different in the new law, and we can't get any guidance about how it's supposed to work from an IRA that doesn't have an employee's or budget to give us guidance. What's the overall picture for the wealthy in the United States when it comes to taxes is a good time to be wealthy in the United States. If you are about your tax planning. Probably so for tax payers who want play the audit lottery and be very aggressive in their positions and just hope they never get chosen or hope that if they do get shows and they can hire me to navigate them through that process, it's a great time for those taxpayers because all the enforcement personnel across the board are way down. People are retiring and they're not being replaced and the IRS can only do so much with so little. Will the right back. We've seen how Trump ignores rules norms on taxes, how he breaks them. Now how he's changing them president. So Donald Trump and the Republican, congress passed a giant tax overhaul. It was sold as tax reform and it was sold as a tax simplification. Was it? No, absolutely. Not. I mean, I mean, it's it any where to begin. This is Jesse Drucker. He's a reporter at the New York Times who has spent years reporting on the intricacies of our tax system. The tax overhaul, both introduced kind of new, not just complexity, but also sort of incomprehensible complexity Drucker who by the way is a friend of mine, says the entire process of drafting legislation was rushed. There were no hearings to kind of explain why this industry should be favored in that wind shouldn't be. I mean, that was kind of like a massive tax cut for certain segments with no discussion of why it was happening. The tax code was already friendly to real estate investors in the new code. Some of these friendly provisions have been expand. Let's have a look. One of them is called depreciation. The way it works is when you basically the tax code has long recognized that certain kinds of property like factory Queant encounter wear and tear in the course of a year. The owners take a deduction on their taxes based on the value equipments lost. This applies to commercial building owners, even though their property often gains in value. How generous is this spell? They called depreciation. Jesse Drucker reported based on documents reviewed that over an eight year period President Trump's son-in-law Jared Kushner, probably paid little or no federal income tax in five of those years. He could avoid taxes because he owns a lot of real estate and on paper. He could report a lot of depreciation. You can have in the real world, lots of real world profit and free cash for you and your business. But you're getting this deduction essentially for expenses that you don't really pay in the real world. Now, can I do this? If I have my my cabinets. Need replacing, haven't they lost value? Appreciate your cabinets. Actually look pretty good, but I think that no, so so the issue is that this is something that applies to someone's business investment, right? You as a as a homeowner or an apartment owner, you don't get to take advantage of this. So that's a big tax perk for the real estate industry and the Jared Kushner's of the world. It's existed for years. A spokesman told the times that Kushner quote, paid all taxes do. Now let's move to inauguration day twenty seventeen. The Trump administration comes into office and they're in office for less than a year. And the president signed this massive overhaul of the country's tax laws that the specifically made the provision that Jared Kushner uses even more generous. They basically opened up the opportunity to take much bigger, much faster deductions related to depreciation. There's one more perk you need to know that's benefiting the Kushner's. It has a classic IRS name, ten thirty one like kind exchanges. There's nothing unusual or nefarious about this. It just says, if you sell a thing of value, you can avoid paying capital gains tax by buying something similar within a given timeframe. Ten thirty one's been used in lots of industries, livestock coins, aircraft all kinds of insects when people want to swap one cow one Cessna for another or an impressionist painting. It's very popular in the art field. And this is one techs vantage actually was removed in the new law. Well, it was removed for some investors in the tax law overhaul signed by the president last year, a limited ten thirty one for every industry in America except one real estate. Polling shows that the tax rewrite is not popular with the American people. They're even things the real estate industry doesn't like like a reduced tax deduction for mortgage interest payments on expensive homes. But overall, this industry did strikingly. Well. The reason this is important is kind of looking at Jared Kushner's taxes to the prism of his ability to take advantage of things that are in the tax law. And the two things that were aware of that drove his tax Bill. So low were made more generous in the law. Did he have any hand in writing the law? You know, it's a really interesting question. I mean, we asked his spokesman what role he had in some of the provisions that were made more generous that he took advantage of and they wouldn't answer and I was a little surprised. They definitely didn't say he had no role in. Humankind has not always pay taxes before the dawn of agriculture people foraged and hunted, their food. There was no government and nothing for the government to take. It was only when people started growing grain historians believe that the first states came into existence and the first taxes at the end of the season, the farmers needed to protect the grain. They had grown so they paid the prince a portion of their around this time that cats were domesticated as another way to guard your grain anyway, this social contract, pay your taxes, get government protection. It's been with us ever since in ever more complicated forms, taxes predate democracy there, a necessary condition for the functioning of society. Okay. So that's pretty high falutin. Thank you for the history lesson Ilia. Oh, you're very welcome. But let's think about what has actually happened with Fred and Donald. And Jared, they have as we all know, commercial real estate businesses that's not a piece of breakthrough intellectual property or some disruptive business model success in commercial, real estate is much more dependent on having a solid tax base in their local area, which means real estate appreciates when a city functions when there's low crime because the police are funded when their job opportunities because people want live there and create businesses, and they have a customer base, the parks are beautiful, the roads and bridges and subways function when the schools are adequately funded and providing education when people get subsidies to afford the rent that all takes tax dollars. So what it Fred and Donald and Jared do well, they took those tax dollars going. Into New York City and New Jersey, which thrived as New York did and privatized a portion of the public gain, they owed their wealth in large part. It can be said to our collective payments and there's more they game the Techsystems so they would pay even less. Then they get into power and they gave themselves huge techs cuts effectively. They were finalizing their transfer of public spending to their private purse. We are starting to see the consequences of tax overhaul this month. The treasury department reported that corporate tax revenue is down thirty. One percent President Trump promised economic growth and that is happening. But the US federal deficits biking seventeen percent a year ago bringing the deficit to seven hundred seventy nine billion dollars highest. The deficit has been in six years. The publican leaders are warning there may have to be cuts social programs. Remember this overhaul is the first true rewrite of the tax code since Ronald Reagan. And if history is a guide, it will be with us. Long after Trump has exited the stage. Coming up on trumping the president's part time, unpaid lawyer, Rudy Giuliani. What does he make money. Theron. By the way we love tips right now, we're looking to hear from people who've had experience owning property in Trump branded buildings that leader failed. If that's you or someone, you know, we wanna hear about it. Go to trumping podcast dot org to find out how to get in touch. This episode was produced by Meghan treat. The senior producer is made Kramer the associated producers, Alice wilder Bill Moss's the technical director with additional help from James Coyle Charlie, Herman Nicobar, Chavarria and Eric Manzke, or the editors, Robin fields propublica managing editor. Jim Schachter is the vice president for news at WNYC. Steve Engelberg is the editor in chief at propublica. We sincerely thank palled. He'll Andre Andre, comet and being for their help. In making this episode. The music is my Hannah's Brown.