Here's the exchange:
CLINTON: Or maybe he doesn't want the American people, all of you watching tonight, to know that he's paid nothing in federal taxes, because the only years that anybody's ever seen were a couple of years when he had to turn them over to state authorities when he was trying to get a casino license, and they showed he didn't pay any federal income tax.TRUMP: That makes me smart.CLINTON: So if he's paid zero, that means zero for troops, zero for vets, zero for schools or health. And I think probably he's not all that enthusiastic about having the rest of our country see what the real reasons are, because it must be something really important, even terrible, that he's trying to hide.
CLINTON: And maybe because you haven't paid any federal income tax for a lot of years. [APPLAUSE]And the other thing I think is important ...TRUMP: It would be squandered, too, believe me.
For good measure, NBC's Katy Tur asked Trump about the issue after the debate. He deflected.
TUR: Do you pay federal income tax now?TRUMP: My current returns will be released as soon as they [UNINTELLIGIBLE]TUR: Do you pay federal income tax now?[TRUMP WALKS AWAY]
Trump had three chances to combat this charge; all three times, he opted not to dispute it. In fact, in the debate, he made it sound as though he was defending it, saying, "That makes me smart," if he gets out of paying taxes and adding, "It would be squandered," if the government got its hand on his money.
He did not say, it bears noting, "that would make me smart." And "it would be squandered" is also the kind of thing he might say if he disclosed that he paid no taxes and were forced to defend it.
Everyone except Trump, his attorneys and the Internal Revenue Service are in the dark about what's on his tax returns (and unless he decides otherwise, it is likely to stay that way.) But from what we know about Trump and his taxes, it's not terribly far-fetched to think that he might not pay taxes.
As The Washington Post's Drew Harwell wrote in May, a 1981 disclosure in a report by New Jersey gambling regulators showed Trump paid zero income taxes for two years in the late 1970s.
There is indeed a well-established way for real estate moguls such as Trump to avoid doing so, through a complicated system of property valuation. The Fix's Philip Bump explained it all here.
And lastly, it would actually be in keeping with his entire campaign persona. He has pitched himself as a guy who has gamed the system throughout his life, often through his political donations, which are meant to curry favor with corrupt politicians. But he paints it as an asset — a credit to how smart and savvy a businessman he is. His strongest supporters seem to agree.
Clinton tried to turn the tables on this count Monday night, arguing that paying no taxes would amount to hurting average Americans who are deprived of the tax dollars the billionaire might otherwise have contributed to valuable federal programs.
Again, we may never know whether Trump paid income taxes. He says he will not release his returns until he's no longer under audit. That's highly unlikely to happen in the next 40 or so days.
But for now, he's breathing plenty of life into the idea that those return show no income taxes paid.