Donald Trump cares about debt — he has lots of it — and taxes — he likely pays little of them. Inspired by the revelation that Trump’s presidential campaign, in its first major television ad buy (?!), just this week, touted a tax plan other than Trump’s own — leaving out the part where he allows continued deductions for interest on debt — I thought it would be fun to lay out some dots.
Readers may connect these dots as they see fit, but at a minimum they show that Trump makes impulsive, last-minute and questionable decisions about tax policy that favor his interests over the public’s, and of which his campaign is not even always aware. And they continue the theme that Trump loves debt and hates paying taxes, both bigly.
• Trump is the self-proclaimed King of Debt. “I love debt,” Trump told CNN’s Wolf Blitzer in May.
• Borrowing — the use of debt — is a wildly attractive tax strategy. By borrowing against assets they hold, the wealthy are able to avoid paying all federal taxes in many cases.
• A recent report in The New York Times shows Trump has more debt, at least $650 million, than previously known. (Trump claims that this debt load is a small percentage of his assets, which he says are worth $10 billion or more, but few people not named Trump believe that. Of course, Trump has had problems with debt before.)
• Particularly striking in the Times article is the statement that Trump borrowed $160 million, just last year, from Ladder Capital, a New York commercial real estate lender that usually lends much smaller sums.
• Trump rolled out his tax plan in an economic speech in Detroit in early August. An article in The New York Times reports: “At the last minute, Mr. Trump interjected to direct his advisers to incorporate a tax deduction for the cost of child care in his economic plan. The issue, which Mr. Trump had not discussed on the campaign trail, is a favorite of his daughter Ivanka.” The proposal as Trump announced it in Detroit strongly favored wealthy working parents — like Ivanka. This is an example of a last-minute questionable policy change benefitting Trumps, plural.
• In the same article reporting Trump’s last-minute directive to add the child care deduction to his tax plan, the Times reports: “Stephen Moore, a Heritage Foundation fellow, said he and Arthur Laffer, the supply-side economist, had tangled over the top tax bracket while Mr. Trump observed from behind his desk, eventually siding with Mr. Moore. Mr. Trump, he said, also expressed strong views about the taxation of interest on business loans, citing his experience as a developer.”
• Trump’s tax plan, as set out in Detroit, was close to the tax ideas advocated by Paul Ryan and other establishment Republicans, with one major exception — Trump’s plan retains business loan interest deductions, and the Republican plan does not. This is a big deal. The change alone will add a whopping $1.2 trillion to the federal deficit over the next decade, according to an analysis in The Washington Post.
• The ad that the Trump campaign began running this week, on the “two economies,” cites the Republican tax plan — which has no interest deduction — not Trump’s, which does. It suggests Trump’s own staff was not aware of the continued interest deduction that Trump had added in the final hour.
• As an aside, the pattern of last-minute specific and questionable policy changes not generally known by the Trump campaign was also present in the stories about changing the Republican party platform to soften a plank on Ukraine.
• Trump is famously refusing to release his tax returns, claiming he is under audit (which ought to be irrelevant.)
• Trump has stated that he tries very hard to pay as little tax as possible.
• As a tax professional, I know that an issue on audit could well be the allocation of interest expenses. Under current tax laws, the interest on personal loans is not deductible, other than limited deductions for home mortgages and home equity loans, around $1 million of borrowing. Interest from business loans is deductible, now and under Trump’s plan. Again, Trump borrowed at least $160 million last year. If he borrowed this for personal reasons — including to finance a presidential election run (which would be nondeductible) — he should not be deducting the interest. Trump may be claiming the loans are business ones, and the IRS may be challenging that fact. If the IRS were correct, Trump could be using an interest tax break to get all taxpayers to help finance his campaign. This is speculative, of course, but we cannot know for sure if Trump’s tax plans are directly relevant to his own situation … until and unless we see his tax returns.
• To summarize, we know that wealthy people can use borrowing plus interest deductions to pay little or no taxes while living large; that Trump is a major borrower, including of at least $160 million last year alone; that Trump showed interest (small pun intended) in few details of his tax plan other than the child care deduction and the continued interest deductibility for business loans; that Trump’s child care deduction would hugely benefit wealthy working parents like Ivanka; that Trump’s ultimate tax plan diverges from the Republican trickle-down tax policy du jour, mainly in its continued deduction for business loan interest; that this deviation alone has a whopping $1.2 trillion dollar budgetary cost; that his campaign seems not generally aware of this fact about Trump’s own tax plan; that Trump’s disclosed tax returns from decades past show little or no tax; and that Trump claims to be under autit now and won’t release his tax returns.
These facts strongly suggest an impulsive leader who never strays too far from his personal self-interest in making public policy decisions, who personally likes debt and uses it aggressively and hates paying taxes himself. Whatever else one thinks of Hillary Clinton, there is no doubt that her own taxes would rise under her own tax plan. Not so for The Donald.
