After a meeting with prominent manufacturing CEOs in the White House, President Donald Trump lavished praise on his director of the National Economic Council, former Goldman Sachs President and COO Gary Cohn.
“Gary Cohn just paid $200 million in tax in order to take this job, by the way,” Trump said. “Which is very much unlike Gary.”
Based on the amount and value of shares divested by Cohn, this number is almost certainly incorrect. To alleviate potential conflicts of interest upon taking the position, the 56-year-old Cohn decided to liquidate his Goldman Sachs stock, which was valued at more than $220 million. Additionally, the bank gave him $65 million in payment that was tied to future performance, according to Bloomberg. It appears that Trump mixed up the sum divested with the taxes owed.
It is obvious that Cohn will not pay $200 million in taxes against a $285 million liquidation. The capital gains tax rate maxes out at 20%. In fact, Cohn’s tax situation may actually be advantageous thanks to a special Certificate of Divestiture issued by the Office of Government Ethics.
Like other executive branch appointees who must divest to avoid ethical conflicts, Cohn is eligible to skirt higher taxes by deferring capital gains taxes if the proceeds from the sale go toward buying approved securities like Treasury bonds and diversified index funds. From the date of the sale, Cohn has 60 days to reinvest without paying capital gains.
For the reinvested money, Cohn will still be on the hook to pay taxes on future gains.
This scenario worked very well for former Treasury Secretary Henry Paulson—former Goldman CEO—who avoided a $200 million tax bill.
Meanwhile, Trump has not released his tax returns, making it unclear how much tax he pays and from where he receives income.