Select Page

What Trumps Tax Returns Really Tell Us About His Rate

The clearest example yet of Media abuse of Donald Trump has surfaced in connection with the recently released excerpts from Pres. Trump’s 2005 federal income tax return. The return shows clearly and unambiguously that he paid an effective federal tax rate of 78.2%. Yet the press twisted the truth- outright lied – in reporting a tax rate of 25%, or even less.

It is outrageous that the media is distorting the true tax rate that Donald Trump paid for the 2005 tax year. His 1040 that was released last week showed that he paid an effective tax rate of 78.2% — not the 25% that some outlets are reporting (or the 5.3% figure that even other uninformed pundits have tried to peddle).

Let’s break this down: Trump’s Adjusted Gross Income (AGI) was reported to be $48.6 million. The AGI is an important number for all taxpayers, because it is derived from a taxpayer’s gross income net of allowable, rational, and legal adjustments to it. Every taxpayer reports an AGI and is the base figure from which taxable income amounts are calculated. Trump’s tax was $38million. Trump’s tax rate was effectively 78.2%: 38 million in federal taxes/48.6 million AGI = 78.2% tax rate.

In a clear attempt to avoid admitting that Trump paid such a high rate of tax, the pundits began manipulating and distorting the data.  AGI was raised from $48.6 million to $152 million by arbitrarily – and inappropriately – adding back what appeared to be a $103 million perfectly legal carryover loss. Carryover loss provisions are necessary in that prevent people from paying taxes on profits that just restore losses that were actually incurred in a prior year.

Because Trump is a high income earner, he must calculate his taxes both by the regular tax rate and the Alternative Minimum Tax (AMT). The AMT is a parallel tax rate used by the IRS that disallows some or all legal deductions and credits that other taxpayers enjoy to ensure that such taxpayers pay “at least their fair share.” The AMT has been used for decades to collect more taxes by denying or minimizing income-reducing tax benefits that lower income-earners use. In Trump’s case, most of his deductions, including the carryover loss, were disallowed or reduced, resulting in his federal tax liability ultimately rising to $38 million.  

That means on Trump’s AGI of $48.6 million, he paid $38 million in federal taxes.

It is always standard procedure to calculate one’s tax rate using the AGI as the starting point — not the gross income amount. No other politician (Romney, Obama, Clinton, etc.) has had tax rates calculated and published with other than their adjusted gross income as the base. Applying the standard used by the media for all other important figures, Trump’s tax rate was effectively 78.2%: 38 million in federal taxes/48.6 million AGI = 78.2% tax rate.

Continuing to focus on the $153 million as the starting point serves the media two purposes: 1) it makes Trump sound like a greedy capitalist who earned gobs of money and is out-of-touch with the average American; and 2) they want to highlight his $103 carryover loss as something that is unethical or wrong or a  “sneaky loophole” that Trump should not have been allowed to do — even though virtually every business and investor makes uses of such tax provisions. Carryover losses are a necessary tax tool that is used as a means to continue to encourage investors who put up capital for long-term investments in the economy and deal with the ebb and flow of the market.

The real story here is this glaring example of the AMT creating yet another unfair and irrational burden on a taxpayer by siphoning extra tax revenue through the elimination and reduction of basic tax law provisions that other taxpayers enjoy. A 78.2% tax rate is extremely outrageous — about as outrageous as the media who ignores basic tax calculations in an effort to sensationalize and demonize Trump.

Middlebury Mayhem

Daniel Henninger was spot on in his assessment of the Middlebury College in his article, “McCarthyism at Middlebury” in the Wall Street Journal. Students shockingly felt justified to attack Charles Murray, a conservative pundit, because he had a viewpoint that differed from their own. Henninger puts this incident into perspective; this display of recklessness might actually be a turning point in the madness that has infected liberals and college campuses under the guise of “correct speech.

We’ve seen this for several years now; in 2015, two Yale professors had to resign after encouraging adult students to stand up for the right to wear whatever Halloween costume he or she chose, even if it might offend another person; it was a response to a Yale policy trying to police Halloween costumes on campus. As Henninger pointed out in his article, “Numerous professors, including those at Yale’s top-rated law school, contacted [them] personally to say that it was too risky to speak their minds.” When even the faculty in higher education are afraid to speak their minds, we have a problem.

Even before that, in Spring 2013, a group of Swarthmore students outrageously violated the rights of the campus community. After being allowed to attend a board of trustees meeting to express their views, they then disrupted the meeting, preventing the duly elected Board from responding to their points  and continuing the meeting. In their words, it was an effort “to smash ‘hegemonic power structures’ and silence other students”. Yet no action was taken against any of the students or faculty who participated in the abusive, illegal actions.

It is outrageous that the Middlebury incident occurred, but at this point, not entirely surprising anymore. What’s more, faculty and students at Middlebury participated in agitating the community before Charles Murray even arrived; they circulated a petition saying that Murray shouldn’t even be allowed to speak because his voice didn’t represent all people. In one sense, you can somewhat excuse the students who signed it, because they don’t always know better. But faculty? How can faculty at an institute of higher education believe and advocate that a different point of view is wrong in a college/university setting? What have we come to?

Middlebury can indeed serve as a turning point — but only if action is taken. These reckless participants need to be called out and reprimanded, or else such incidents will continue to occur.