Given how many years of tax returns Donald Trump has refused to release, there was always a strong possibility that some return would leak. And so it proved on Saturday night, when the New York Times published a story based on three pages of his 1995 tax returns, sent by an anonymous source to the Times. The short version: In 1995, Trump declared a $916 million loss, a deduction “so substantial” that he may have be able to avoid income taxes for 18 years.
The Times scoop will no doubt hurt Trump politically. But the larger problem the Trump tax story reminds us of is that there are two tax systems in this country: one for the super-wealthy and one for the rest of us.
When Bill Clinton began his presidency, the 400 highest-earning taxpayers paid 27 percent of their income in federal taxes. By the time President Obama began his second term, that rate had fallen to 17 percent. A person making $75,000, meanwhile, has an average tax rate of 19.7 percent. Perhaps the best-known feature of tax law abetting this is the carried interest loophole, which allows billionaires to pay a far lower tax rate on investment income than on salary and wage income. Some inequities are not quirks, but features: There is no cap on the mortgage interest deduction, which lets those rich enough to afford larger mortgages strike off more; heirs of wealthy estates get to dodge millions in capital gains taxes. Then there are the many loopholes in the corporate tax system, such as the offshoring of corporate headquarters and allowing companies to claim CEO performance bonuses as deductions, that allow U.S. companies to pay little or no taxes while making billions in profits.
Donald Trump would even make the laws even more generous to taxpayers like him — repealing the estate tax and cutting the tax rate for top earners. (My colleague Ruth Marcus has more on this.) A Trump loss doesn’t mean the system is fixed; any solution to the broader inequality would need to come from Congress. Capitol Hill can’t claim that there are no good solutions: The Congressional Progressive Caucus’s “People’s Budget” closes many of these corporate and income tax loopholes, just to pick one example. It’s just that many representatives and senators — most Republicans, but more than a few Democrats — are more receptive to donors’ pleas to keep the loopholes open.
The 2016 election will be over in five weeks. Whether or not this Trump tax story hurts his pursuit of the White House, the double standard in tax laws will continue to distort equality until lawmakers finally fix it.