Donald Trump earned US$153 mln in 2005; He paid US$36.6 mln in taxes. Ten years after his casino business failed, he was still writing off 'losses'

Donald Trump earned US$153 mln in 2005; He paid US$36.6 mln in taxes. Ten years after his casino business failed, he was still writing off 'losses'
Trump posing with what he said was a recent tax return (Feb. 25, 2016)

*This article comes from DCReport and is used with permission.

By David Cay Johnston*

In 2005, Donald J. Trump married model Melanija Knavs, his third wife. That year, the real-estate mogul and newly minted TV star earned $153 million dollars, about $3 million a week. That’s far more than all but a tiny sliver of the U.S. population.

The newlyweds paid $36.6 million of that year’s take in federal income taxes, a rate of 24%, putting the Trumps in much the same tax league as any other two-earner professional couple making about $400,000 a year.

Or to put it another way, Donald Trump was paid that year like a member of the 0.001%, but he paid taxes like the 99%. And by at least one measure, he paid like the bottom 50%.

Click to view Donald Trump’s 2005 Form 1040
2005 Form 1040

 

DCReport has obtained Donald Trump’s Form 1040 federal tax return for 2005. There’s no smoking gun there, no obvious evasion, but clearly some bending of the tax laws almost to the breaking point. The document offers a rare glimpse at how a super wealthy couple can manipulate and manage our complex tax laws to reduce their obligations far below rates paid by typical salaried professionals or even blue-collar wage earners.

The White House confirmed the authenticity of the tax returns. “Despite this substantial income figure and tax paid,” the White House said in a statement, “the dishonest media can continue to make this part of their agenda, while the President will focus on his, which includes tax reform that will benefit all Americans.”

Trump’s lawyers have said that any audit of the 2005 tax return is now closed. However, the president has made it clear, since he took office, that he has no intention of making public his tax returns.

What’s not there 

The 1040 shows how Trump obtained money - salary, business profits, dividends and the like. But there is still far more that it doesn’t say. It does not name the sources of his vast income, whether rich golfers playing on his various courses or Russian oligarchs visiting his various hotels. The identities of companies and individuals who paid Trump would be disclosed in the hundreds of pages of schedules, statements and other attachments which a 1040 only summarizes.

Nor does the 1040 distinguish between Trump’s business and personal expenses—money spent traveling in his personal jet between homes and offices in New York and Florida or between hotels and golf courses around the world. There are no specifics on how much he wrote off for business dinners or gifts or even the vast sums he depreciates each year from his buildings.

There is one clear expense, however, that can be discerned because portions of Trump’s 1995 state tax returns became public last fall. Trump got out of repaying nearly $1 billion he borrowed for his failed casino business. When you don’t repay a loan Congress says that money is income and you owe taxes on it immediately.

Instead, Trump made use of an abusive tax shelter that Congress soon closed to newcomers. Like magic, the tax shelter converted what should have been a tax bill of about $360 million into future tax breaks. Ten years later, on his 2005 return, Trump was still saving tax dollars thanks to that tax shelter. Trump has refused to release his tax returns.

A dual-tax system

To understand the Trump tax returns it’s important to realize that America has two income tax systems. The regular income tax was supplemented by a parallel tax system, signed into law by President Ronald Reagan in 1986, called the Alternative Minimum Tax or AMT.

How these two systems interact is central to understanding the Trumps’ taxes.

Viewed in terms of the regular federal income tax system, here is what Trump did:

Trump reported $152.7 million of income. He also reported $103.2 million of negative income, the remainder of the roughly $918 million tax shelter he bought in 1995. That deal was disclosed earlier in three summary pages of his 1995 Connecticut, New York and New Jersey state income-tax returns.

For background on how we got the story, click here.

That Trump had only $103 million of his $918 million tax shelter left in 2005 also tells us something about his past income. Using up the other $815 million of negative income in the tax shelter indicates that he earned an average of $81.5 million annually during the 10 years from 1995 through 2004.

Deducting the negative income lowered Trump’s adjusted gross income or AGI to $48.6 million. AGI is the last figure on the bottom of the front page of a federal tax return.

From that, the Trumps took $17 million in itemized deductions, which are not specified. That left  $31.6 million of taxable income.

The Trumps paid just $5.3 million of regular federal income tax. Measured against their cash income of almost $153 million their federal income tax rate was 3.48%.

That figure is slightly lower than the tax rate paid by the poorest half of Americans. The half of taxpayers whose income was less than $33,485 that year paid 3.51% of their money in federal income taxes.

Caught by the AMT

Trump’s total federal tax bill was larger, though, because of the Alternative Minimum Tax or AMT.

The President, in writing, has called for eliminating the Alternative Minimum Tax. Now we know one reason why - he lives like a king, but wants to pay taxes like a Walmart cashier.

All high-income Americans must calculate both their regular income tax and their AMT income tax and pay whichever is larger.

Most of that $103 million of negative income was ignored under the AMT, which meant that for tax purposes Trump’s income was larger than under the regular system.

The Trump income subject to AMT was $111.7 million, according to Daniel Shaviro, a New York University law professor who as a Congressional staffer helped draft the AMT three decades ago.

The Trumps paid $31.3 million in AMT which, together with the regular tax, made their total federal income tax $36.6 million.

Viewed in terms of their positive income of almost $153 million the total Trump tax bill came to 24%. That’s in the range paid by two-income career couples who both work all year to earn about $400,000. The Trumps income was $418,460 per day.


*David Cay Johnston is a Pulitzer Prize winning US investigative journalist. He featured in this interest.co.nz video interview last year. This article is here with permission.

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Yup. Trump is really fighting for the common man!

I cannot stand Johnston , who in my view is nothing but a hardcore left -wing rabble-rouser .

Who cares how much tax Trump paid , as long as he paid what was due.

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I've one word for you Boatman; Greece! Why do you think they're financially in dire straights, it's because the wealthy got away with paying little to no tax for too long!

If the very wealthy do not pay their fair share, then the rest of us have to pay their taxes for them. Do you think that's fair? I mean REALLY??

Everyone must pay their fair share , and there is no evidence the Trump did not pay what was required .

We have the same issue here in NZ where people like Gareth Morgan who is very wealthy pays little tax in relation to his wealth , and has openly said its unfair

Greece, a country I have visited , is an unproductive disaster of a country , where the tax collection system is dysfunctional, it can never be compared to the US where the IRS is pretty ruthless

And Trump wants to remove those tax safe guards, so he can get away with paying a lot less taxes on his millions of dollars business. Bit of a conflict of interest there.

Does he ?

What did he actually say about the minimum tax? .............. not what the fake news story implies

Strongly suspect that this "leak" is engineered by the Republicans, as yet another smokescreen to divert attention from all the other tax returns; the Russian issues, Trump lies and massive conflicts of interest etc.
But when even the "leak " is expertly analysed it is revealing for the cognoscenti, but not for the average Trump voter of limited vocab.

Mate , you have been reading far too much fake news, you probably also dont believe a man landed on the moon , and you believe the JFK assassination and the twin towers were a conspiracy .

Now you believe in the Russian conspiracy theory it seems .

Trumps 12 year-old tax return is the biggest non-story this year so far .

Some irony there Boatman given Trump is one of the biggest conspiracy theorists going around. Did you see that apparently that ex-President who was born in Africa wire-tapped him?

I did , and must admit even I am confused about the stories of widespread hacking , phone monitoring and things that go on over there .

I think most people know Obama was born in Hawaii to a Kenyan father and an American mother , who subsequently divorced the man and married someone else , taking Barack to Indonesia where the second husband worked .

Its quite a convoluted story , and little wonder Trump was able to distort the facts , and sow seeds of doubt among people who dont read newspapers

Yes, Trump is such an upstanding citizen isn't he?

"Fake News" = anything that contradicts Trump, or shows "The Great Environmentalist" in a bad light; fact checkers indicate about 85% of his oral emissions are lies or grossly misleading at best.
You are forgetting Trump rode to power on a tidal wave of self generated fake news.

Fake News is nothing new, has been perpetrated by the media colluding with politicians for centuries .

It has caused and prolonged wars , even Joseph Pulitzer used fake news to inflame the the Spanish -American war

It was used by the Romans , by the Germans ( in 2 world wars) the English , Russians , ( remember Pravda which means 'truth") , the Chinese and more recently the North Koreans .

It was used by Tony Blair and George Bush assisted by the media as a pretext for a war that should never have happened .

Its used by the Palestinians and the Israelis to incite violence and retaliation , its used by the Lebanese and Hezbolla , the Syrian regime and the Iranians .

Now its being used by Trump , MSNBC , The Washington Post and the New York Times

The only way out of this mess is for the media to be more ethical , and stop slanting hings to suit their own skewed views of the world

Here's a snippet from the BBC article on the subject: BBC http://www.bbc.com/news/world-us-canada-39275838

BBC Article quote:-

The tax release showed Mr Trump paid the Internal Revenue Service $38m in 2005, an effective tax rate of 24%.

This is higher than the average American citizen would pay but below the 27.4% averaged by higher-earning taxpayers.

The bill comprises $5.3m in federal income tax and an extra $31m in what is called alternative minimum tax (AMT).

AMT was set up nearly 50 years ago to stop the wealthiest people from using deductions and loopholes to avoid paying taxes. Mr Trump has called for it to be abolished. !!!

Abolishing AMT so the Rich can get Richer, and we all know what happens to the Poor people!

Sadly, not much journalism in this opinion piece.

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Actually, I disagree. It is a rare piece of actual investigative journalism coming from a country where it is suddenly harder to find, and too many readers there have shifted to made-up stories, believing their echo chamber is the new 'journalism'. 

Good term that "echo chamber" , there is a real need for the media everywhere to get back to actual reporting in an impartial manner and leave their often skewed interpretation of the facts out of the story .

Regrettably MSNBC , Fox News , the New York Times and the Washington Post are all seemingly responsible for this echo of the views I assume are widely held in the newsroom and feed into their newsreels , stories and editorials .

This outcome could be a result of Americans who dont like to think and make their own assessment , and will mindlessly and without question believe the nonsense they see on newsreels .

It may be cultural or part of the American psyche or caused by not being taught critical thinking and question things .

For example why are American films often mindless , while the British are able to make films that are thought provoking and make you think about he story-line for days afterwards.

Maybe the Fourth Estate needs some introspection .

Donald, is that you? Tone it down a bit - you're going to give yourself away.

The following quote is the genesis of my comment: "The Trumps paid just $5.3 million of regular federal income tax. Measured against their cash income of almost $153 million their federal income tax rate was 3.48%"

The total tax paid was a bit more than $5.3M... Their federal tax rate was 24% as the federal tax rate includes AMT.

There is much to dislike about Trump and I am not a fan of him or his rather primitive logic (or illogic). I've not been a fan of either party in the US for quite some time, as neither party is doing much for the general public, and this election had two people vying for the position that were both eminently unsuitable IMO.

I *strongly* dislike opinion pieces that twist fact, regardless of whether I like the final conclusion. This is one of those opinion pieces.

@ David, You may like this radio article from the BBC; Is Donald Trump Good for Journalism?
http://www.bbc.co.uk/programmes/p04s45sg
and this: http://www.bbc.co.uk/programmes/p04w19xk#play

So the big story is that Trump paid about what he should have... There gets a certain point when lack of evidence is evidence.

No the big story is Trump trying to abolish regulations, so he and the very wealthy in general can AVOID paying their fair share of tax (Way more than any of us will ever earn).

The US tax code is complete mess and needs to be reformed (dumped and started over again). The less exceptions the better. "Fair share" of tax is a rather subjective concept.

An AMT like tax would be awesome on all rental property income, and houses that are sitting empty for speculation purposes (need to assume an income - based on value or similar) regardless of debt and depreciation. Kinda sounds like a partial tax on capital though which is being proposed....

Nobody has asked the big question , why 2005???. I f trump leaked it , why just that one year ?
If somebody else leaked it , why just 2005 , hard to believe it was the only year available.

That would appear to be the case. Next thing to get stuck into where the orange one goes is maybe this https://www.businessinsider.com.au/donald-trumps-azerbaijan-hotel-linked...