POLITICS
03/14/2017 10:37 pm ET Updated Mar 15, 2017

Mitt Romney's Tax Returns Were More Outrageous Than Trump's Partial One

This was not worth freaking out about.

WASHINGTON ― In 2005, Donald Trump paid $38 million in taxes on $150 million in income, according to two pages of a tax return published by investigative financial journalist David Cay Johnston on Tuesday night. The document was the subject of a lengthy segment on Rachel Maddow’s MSNBC show, which hyped it as a major revelation.

But there appears nothing damaging or scandalous in the tax documents. Johnston’s find shows that Trump paid a 25.3-percent effective federal income tax rate that year. The formal top tax rate for the wealthiest Americans then was 35 percent. Trump appears to have secured his lower rate by taking legal tax deductions.

Other wealthy people have been far more effective at dodging liabilities to Uncle Sam. In 2012, GOP presidential candidate Mitt Romney revealed that he paid an effective tax rate of 14.1 percent in 2011, much lower than the rate Trump paid on his 2005 return.

Trump has not disclosed any of his tax returns. Releasing several years of returns has been standard practice for presidential nominees for decades. The documents sent to Johnston by an anonymous source are a rare public look at Trump’s federal tax documents. The New York Times reported last year that it had obtained three pages of Trump’s 1995 return that showed he took a $916 million deduction that year.  

Trump would have paid a much lower tax rate – 4 percent – if he had not been snared by the Alternative Minimum Tax, designed to increase the tax burden on generally wealthy people who otherwise would pay a much lower tax rate due to tricky deductions and other accounting maneuvers.

That isn’t a scandal. In 2005, the AMT worked: it socked it to a rich guy who otherwise would have paid a much lower rate.

Romney, the 2012 Republican presidential nominee, was able to avoid the AMT due to a unique tax arrangement for his Bain Capital retirement package, and by receiving most of his $13.7 million income in capital gains ― passive flows from stocks, bonds and real estate holdings. Romney didn’t just pay a low tax rate, he paid a low tax rate by using the tax code in ways that available to only a few, very wealthy financiers, like stuffing an IRA with $102 million when the maximum annual contribution is just a few thousand.

The huge questions about Trump’s taxes ― a full understanding of who paid him and his company, for what, and where, along with his personal and corporate debts and deductions ― remain unanswered. What we know ― the president’s total income and tax rate for a single year more than a decade ago ― tell us very little.

There may be more than one scandal buried in the thousands of pages of tax returns Trump and his family businesses have filed over the years. But his income and tax rate from 2005 are not among them.

 

CORRECTION: This article previously stated that the income tax rate on the wealthiest Americans was 36 percent in 2005. It was 35 percent.

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