A New York Times story based on Donald Trump’s long-sought-after tax data shows he avoided paying income taxes for most of the past two decades and paid only $750 the year he was elected president.
That doesn’t mean he isn’t a billionaire.
By pairing moneymaking businesses with spectacular money-losers, the Trump Organization has been able to shield profits generated by office properties and “The Apprentice” from tax collectors. It’s a souped-up version of the formula deployed by America’s landlord class for decades. But tax losses are different from operating losses, and the new data don’t necessarily show his business empire is heading into crisis, even if it’s carrying sizable debts.
“Your tax return at the end of the day shows income and whatever deductions are claimed against that income. That’s it,” said Thorne Perkin, president at Papamarkou Wellner Asset Management. “It doesn’t necessarily show net worth.”
The newspaper’s report described the extent of Trump’s tax-cutting strategies, such as taking deductions for consulting fees to his daughter and for hairstyling, which resulted in paying far less than poorer Americans. Although the report raises questions about the legality of some of the maneuvers, the new details don’t affect the Bloomberg Billionaires Index estimate of his wealth. His net worth is based chiefly on the value of his office and commercial property holdings, minus debts that were already known. The index estimated his net worth at $2.7 billion as of August, down $300 million from mid-2019, hurt by declining prices for certain types of real estate holdings.
Trump’s office properties include commercial spaces at Trump Tower, a leasehold on 40 Wall Street in downtown Manhattan and a 30% interest in two office towers co-owned with Vornado Realty Trust. Collectively, the assets are valued at about $1.9 billion, and Trump’s share of the debt that encumbers them is about $670 million -- meaning they constitute almost half of his net worth.
Financial records for his golf courses in Europe have long shown that, after including items such as depreciation, they run in the red. The tax data obtained by the Times reveal Trump’s American golf courses operate similarly.
Depreciation is crucial for real estate investors. Depending on the type of property at hand, they can write off a portion of its value over a useful lifetime pre-determined by the Internal Revenue Service. That allows investors to claim tax losses on the property even when they’re putting money in their pockets.
“You want to show as much losses as you possibly can for your deductions,” said Papamarkou’s Perkin. “That’s a big part of the advantages of real estate investing.”
The president’s son, Donald Trump Jr., disputed the Times’s reporting on Tuesday while acknowledging that Trump exploited depreciation, tax credits and other provisions of the tax code.