Republican nominee Donald Trump exploited a tax loophole narrow tax loophole so unfair, that Democratic nominee Hillary Clinton voted to close it while in the Senate in 2004, and it passed.
The entire scheme is detailed in an infographic at the bottom of this article.
Trump used a now-illegal scheme to swap worthless partnership shares in his failed companies for the more than a billion dollars in debt he couldn’t pay, which let him cancel his debts without incurring a tax liability and also to cancel his future tax liabilities, literally as a reward for losing other people’s money.
Trump avoided all taxes for years, handed his creditors losses without tax relief and still got to evade repaying millions in loans.
Additionally, Trump managed to retaining some ownership rights, and all of the lucrative management rights to his synonymous Atlantic City casinos, which have all since failed, but paid him $45 million dollars after collapsing into bankrupcy in the early 90s.
Experts called Trump’s dubious tax scheme double dipping, but it’s really more like triple dipping with taxes, which is why then Democratic Senator from New York Hillary Clinton voted successfully to ban the practice:.
Mr. Trump can no longer benefit from the same maneuver. Just as Congress acted in 1993 to ban stock-for-debt swaps by corporations, it acted in 2004 to ban equity-for-debt swaps by partnerships. Among the members of Congress who voted to finally close the loophole: Senator Hillary Clinton of New York.
It’s a quintessential contrast between the presidential candidates, which the Republican tycoon consistently raised on the debate stage asking, “What has Hillary been doing for 30 years?”
Now we know: Hillary Clinton was busy closing the very loopholes Donald trump was exploiting to rake in tax free income, as a reward for royally screwing his investors and creditors.
However, in the early 1990s, we know what Donald Trump was doing as well.
Trump used lobbyists to push a major tax break, which would then setup his entire scheme to skip federal income taxes on hundreds of millions of dollars he earned:
Mr. Trump also was part of a determined and successful lobbying campaign in 1991 to change several tax rules, including one that would allow him use his N.O.L. to offset all personal income, and not just real estate income.
Experts at The New York Times uncovered that effort and also used documents discovered in an archive of the Republican’s many bankruptcies.
New documents showed how Trump broke the basic fairness of the tax code by executing a paperwork maneuver to claim those immense tax benefits from his business failures, while simultaneously robbing the investors whose money he lost of even the ability to write off their own losses against future income.
It took a team of Times reporters weeks to unravel the complicated mystery, which also explains how Trump wrote off nearly a billion dollars worth of losses in 1995 to nullify up to 18 years worth of federal income tax liabilities owed by the billionaire.
But Mr. Trump’s audacious tax-avoidance maneuver gave him a way to simply avoid reporting any of that canceled debt to the I.R.S. “He’s getting something for absolutely nothing,” John L. Buckley, who served as the chief of staff for Congress’s Joint Committee on Taxation in 1993 and 1994, said in an interview. Regardless of whether the I.R.S. objected, Mr. Trump’s tax avoidance in this case violated a central principle of American tax law, said Mr. Buckley, the former chief of staff for Congress’s Joint Committee on Taxation, who later served as chief tax counsel for Democrats on the House Ways and Means Committee.
The unfairness of the maneuver is highlighted by comments that The New York Times obtained from IRS officials whose basic point is that fictional transactions break the basic fairness of the tax code, which ultimately increases the tax burden on everyone else by “double dipping.”
The I.R.S. and Congress had clearly signaled their disapproval of the basic concept. Fred T. Goldberg, who was the I.R.S. commissioner under George Bush, recalled in an interview that the I.R.S. frowned on partnership equity-for-debt swaps for the same reason it objected to corporate stock-for-debt swaps. “The fiction is that the partnership interest has the same value as the debt,” he said. Lee A. Sheppard, a contributing editor to Tax Notes, wrote in 1991 that trying to find a legal justification for this tactic was akin to proving “the existence of the Loch Ness monster.” “He deducted somebody else’s losses,” Mr. Buckley said. By that, Mr. Buckley meant that only the bondholders who forgave Mr. Trump’s unpaid casino debts should have been allowed to use those losses to offset future income and reduce their taxes. That Mr. Trump used the same losses to reduce his taxes ultimately increases the tax burden on everyone else, Mr. Buckley explained. “He is double dipping big time.”
According to a financial disclosure statement prepared by Mr. Trump’s accountants, he was under audit by the tax authorities as of 1993, only a year after he avoided reporting hundreds of millions of dollars in taxable income because of this legally suspect tactic. But the results of that audit are unknown, and the agency declined to comment on Monday.
On the campaign trail, the Republican nominee refers to this as using “other people’s money,” which is Trump-speak for stealing from his own charitable foundation.
But in this case also means losing hundreds of millions of dollars from investors and bondholders, then turning around and robbing taxpayers too.
Voter should be extra weary about choosing the Republican nominee, who refuses to release any of his tax information.
If there weren’t enough reasons to reject a ranting racist as President, choosing someone who has spent over 15 months in the public spotlight while hiding the very most important information about their personal finances is a bad idea for any voter.
When it comes to taxes, we also do actually know what Democratic nominee Hillary Clinton has been doing for 30 years.
Why?
Because both she and her husband the former President Clinton have both released over 30 years worth of taxes to the public.