The other day, after the New York Times reported that Donald Trump had sustained enormous financial losses from 1985 to 1994, allowing him to pay no taxes for many years, Trump lashed out. He claimed that this was S.O.P. for real estate titans like himself, adding that they were “entitled to massive write offs” that would show “tax losses." Such tax chicanery, he said, was “sport.”
In saying this, Trump may have inadvertently undercut his administration’s defense for keeping his tax returns concealed from House Democrats.
Daniel Hemel, a professor at the University of Chicago, has a great piece explaining the deeper civic significance of Trump’s response to the Times piece.
As Hemel notes, the types of chicanery Trump admitted to varies in its nefariousness — but the bottom line is that Trump was publicly boasting about his ability to game the tax code to vastly minimize his tax burden. As we already know from a separate Times investigation, Trump and his father committed epic tax fraud, to the tune of hundreds of millions of dollars, inflating the very fortune that has long fraudulently sustained his public image as a brilliant self-made businessman.
But beyond what all this did for Trump’s image, Hemel notes that this type of gloating is pernicious, as it sends a signal to American taxpayers that the head of the executive branch thinks that skirting the tax code is a virtue:
The perception that the president is a tax cheat, a perception perpetuated by the president’s own words, presents a genuine difficulty for the federal tax system. Our system relies on voluntary compliance — on the idea that individuals and firms will report their income honestly and pay their taxes promptly without the IRS having to track them down. It’s a system that ultimately rests on the faith of the citizenry. When the man on top boasts that taxpaying is beneath him, that essential faith is frayed.
For this reason, and to assure Americans that taxes aren’t just for the little people, the IRS has established a special procedure to audit the returns of the president and vice president — a procedure designed to reduce the risk that enforcement will be skewed to favor our leaders. But this procedure does not, according to the IRS’s internal manual, apply to returns filed by the president’s business enterprises. That might have seemed like a minor omission with respect to past presidents, who placed their assets into blind trusts beyond their control. But for Trump, who reportedly receives regular updates on his businesses and retains authority over them, it’s a gaping hole.
Which brings us to the battle over Trump’s tax returns. In saying these things, Trump may have accidentally strengthened the case House Democrats are making for getting them.
In requesting the past six years of Trump’s personal and business returns, Rep. Richard E. Neal (D-Mass.), the chair of Ways and Means, argued that Congress needs them to scrutinize whether the IRS is enforcing tax laws against the president. The case for getting Trump’s returns is already strong — the law says the Treasury Department “shall” furnish any individual’s returns upon the request of a tax-writing committee — but Neal added a legislative rationale.
Trump, by boasting before the country that he thinks tax-dodging is cool, strengthened the public rationale for making sure that the IRS is indeed enforcing tax laws against the president. To be sure, Trump has boasted of this before — during the 2016 campaign, he said that minimizing his tax burden “makes me smart” — but the difference now is that Trump made this boast as president.
As Hemel notes, this increases the need to ensure that the IRS is enforcing the tax laws against the president, for the civic purpose of reassuring American taxpayers that this is the case. But one additional question is whether Trump’s boast gives Democrats another legal tool in the coming court battles.
Treasury Secretary Steven Mnuchin has refused to release Trump’s tax returns, arguing that Democrats are not requesting them for any legitimate legislative purpose. But Trump may have now strengthened the argument that there actually is such a legitimate legislative purpose.
As Steven Rosenthal, a senior fellow at the nonpartisan Tax Policy Center, points out, the president of the United States has publicly confirmed that he thinks skirting the tax code is something to wear as a badge of honor, which raises questions as to whether the IRS is making sure he isn’t taking this too far.
“Neal requested Trump’s returns to ensure that the IRS enforces the tax laws in ‘a fair and impartial manner,’” Rosenthal told me. “Mnuchin questioned whether Neal’s request could ‘reasonably serve a legitimate legislative purpose.’ Trump announced that he treats tax laws as a sport, which effectively validates Neal’s request, because the public must know the IRS is calling fouls on taxpayers that treat the tax laws as a sport."
To be clear, there are numerous other legitimate legislative purposes for House Democrats to request Trump’s tax returns. The one that Neal invoked, however, now may have an even stronger basis than it already did.
All this points to an interesting tension. On the one hand, Trump loves to boast about how he has successfully gamed the system on his own behalf. Trump didn’t just claim during the campaign that not paying taxes “makes me smart"; he also openly boasted about his ability to buy politicians. The message was that his ability to milk the system equipped him with an inside knowledge of how other economic elites “rigged” it that he’d put to work on behalf of regular Americans.
That all turned out to be fraudulent, of course. If anything, he further rigged the system on behalf of those elites. And now, despite all that boasting, Trump is desperate to prevent the details of all his gaming of the system to be revealed before the public. In a way, the con is complete. But the battle to get those details is far from over, and Trump may have weakened his own hand.