You’ve probably tuned out by now. Democrats want to force the publication of President Trump’s tax returns, while Trump resists at every turn. Lawyers are getting rich, while voters learn nothing new.
Yet the Democratic effort to pry loose Trump’s returns creeps forward, and could still produce a bombshell that damages Trump in the 2020 presidential election, assuming he makes it that far.
A federal judge ruled in Democrats’ favor on Oct. 7, ordering Trump’s accounting firm to turn over 8 years of corporate and personal returns to the Manhattan district attorney. The D.A. is investigating whether Trump broke the law by making the now notorious hush money payments to two women, and whether he may have falsified business records to cover up those payments.
Immediately after that ruling, an appeals court reversed the finding, granting the accounting firm a temporary reprieve. So Trump’s returns aren’t coming just yet. More court action is likely and it could very well be the Supreme Court that decides. Yet Trump’s defenses are weakening, with the federal judge who ordered the returns released chastising Trump for putting himself above the law. A House committee is also suing to get Trump’s tax returns.
If those returns do become public, they could rattle Trump’s reelection bid, for at least three reasons. First, it’s possible Trump pays a very low tax rate compared with ordinary workers. As a developer, he enjoys tax breaks that can sharply lower tax payments. And investment income, which is how wealthy people earn much of their money, is typically taxed at lower rates than income on labor.
Developer tax breaks
The average American worker pays about 14% of his or her earnings in federal income tax, not counting extra payments like the taxes that fund Social Security and Medicare. Joe Biden paid about 33% of his gross earnings in federal income taxes in 2018. Elizabeth Warren paid 27% and Bernie Sanders paid 24%. Trump’s rate is probably way lower, and it’s possible he has paid 0 taxes in some years, since he can claim business losses that slash his tax obligation. The leading Dems don’t run the kind of business Trump does and don’t benefit from those tax breaks.
It’s easy to demagogue a politician like Trump for being a tax evader, even if Trump uses legal loopholes to lower his tax bill. Unlike the Trump Russia investigation or the Ukraine whistleblower complaint, taxes are intuitive to voters and easy to understand. If Trump, who boasts frequently about his wealth, pays a lower tax rate than typical middle-class workers, he’d be more vulnerable to charges of benefiting from a rigged tax system skewed to benefit the wealthy.
There’s also the question of whether Trump and his family benefited from Trump’s own tax-cut law, which passed at the end of 2017. The law sharply lowered the tax rate on the type of business the Trump family operates. And it included other provisions that probably benefited Trump. If so, it would bolster arguments that Trump is more interested in self-dealing than boosting workers.
Trump’s returns might also show how much he personally benefits from low interest rates, through, for example, variable-rate loans that reset periodically. Trump has been hectoring the Federal Reserve to slash rates and blaming the Fed’s reluctance for a slowing economy. If it turns out Trump makes money when rates fall, it would be more evidence of self-serving policies.
It’s also possible, of course, that Trump’s tax returns aren’t as damning as critics contend. Yet he acts like they are, defying tradition by being the only major presidential candidate since the 1970s refusing to release his returns. Voters will make up their own minds, if they ever get to see what’s in them.
Rick Newman is the author of four books, including “Rebounders: How Winners Pivot from Setback to Success.” Follow him on Twitter: @rickjnewman. Confidential tip line: firstname.lastname@example.org. Encrypted communication available. Click here to get Rick’s stories by email.