Republican presidential candidate Donald Trump had another early morning on Twitter Sunday, but rather than raging against a former beauty queen, this time, he was responding to a New York Times story that broke Saturday night, which disclosed that he declared a $916 million loss on his personal income tax return in 1995.
The story, based on three pages of tax returns the paper received from an anonymous source, pointed out that with a loss of that magnitude, Trump would have been able to use the federal tax code’s provisions for “net operating losses” to offset taxes on the same amount of income over the span of 18 years.
That means that Trump could have paid no federal income tax over those years, at least until he racked up another $916 million in income. (Notably, the Times had no information as to whether or not Trump did or did not pay federal income taxes in the years following 1995.)
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You might have thought that publicizing his loss of nearly $1 billion in a single year would be what stung the prickly billionaire the most, but you’d have been wrong. It was a former accountant’s description of him suggesting that the billionaire “lacked a sophisticated understanding of the tax code, and rarely showed any interest in the details behind various tax strategies” that really got under his skin.
“I know our complex tax laws better than anyone who has ever run for president and I'm the only one who can fix them,” Trump tweeted at 7:22 a.m.
Shortly thereafter, Trump’s surrogates appeared on the Sunday talk shows armed with talking points testifying to Trump’s knowledge of tax code arcana.
They also, apparently, had instructions to refer to the GOP nominee as a “genius” as many times as they possibly could.
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“The man’s a genius,” said former New York mayor and close Trump advisor Rudy Giuliani. “He knows how to operate our tax code for the benefit of the people he’s serving.”
“What it shows is what an absolute mess the federal tax code is and that’s why Donald Trump is the person best positioned to fix it,” said New Jersey Gov. Chris Christie, who is running Trump’s presidential transition team. “There’s no one who’s shown more genius in their way to maneuver around the tax code, as he rightfully used the laws to do that.”
Christie also insisted that the loss of $916 million is “actually a very, very good story for Donald Trump” because it shows that he was able to make a comeback after a major reversal.
However, the storyline that Giuliani kept repeating -- that Trump had to take the $916 million loss so that his investors wouldn’t sue him -- is inconsistent with actual tax law, according to one prominent expert.
Giuliani, in appearances on NBC’s Meet the Press and CNN’s State of the Union, insisted that Trump’s hands were tied.
“If he didn’t take advantage of it, he would have been sued,” Giuliani said on Meet the Press. “And that’s why, maybe, somebody doesn’t want to put out their tax returns because somebody will distort it that way. The reality is, he’s a genius. What he did was he took advantage of something that could save his enterprise and he did something we admire in America: he came back.”
On CNN, he said, “He has an obligation, as the head of a business, to take advantage of and to use the lawful deductions and tax advantages that are available to you. I advise my clients to do that, because if they don’t do it they get sued by their co-investors, by their investors, lose jobs for their employees...The reality is, this is part of our tax code. The man’s a genius. He knows how to operate our tax code for the benefit of the people he’s serving."
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Setting aside the fact that it’s hard to see how taking action to avoid a lawsuit translates into “genius” level manipulation of the tax code, Giuliani appears to be wrong on the facts.
According to Leonard Burman, director of the Urban-Brookings Tax Policy Center, the idea that investors in Trump’s companies could sue him over a claim made (or not made) on his personal income tax return is wrong.
“It's not true,” Burman said by email Sunday. “Investors have no stake in what Trump reports on his personal income tax return.”
However, with Trump engaged in an increasingly fact-free campaign -- his surrogates seemingly feel no obligation to speak the truth, either.
