IN FEBRUARY 2016, then-presidential candidate Donald Trump denied an opponent’s assertion that he owed his business success to a $200 million subsidy from his father, Fred Trump, a wealthy New York developer. “I wish. I wish,” Mr. Trump said. “I got a very, very small loan from my father many years ago. I built that into a massive empire and I paid my father back that loan.”
Anyone who still believes that tale should read the New York Times’s exhaustive investigation documenting the massive transfers of family wealth from which Mr. Trump benefited starting during his early childhood. The narrative of business brilliance upon which President Trump has based his political appeal now stands definitively debunked, like so many of the other myths he has woven about himself.
Much more stunning — and disturbing — is the newspaper’s detailed portrait of the legerdemain through which the Trump family managed to transfer income and wealth from a rich father to his son (and other children) without paying gift taxes and other taxes that might otherwise have been owed. During the 1960s, Trump père awarded his children shares in highly profitable buildings but grossly undervalued the gifts on his tax returns. In 1992, the Trump family set up a shell company to send inflated bills to Fred Trump’s apartment buildings for maintenance and equipment, with the Trump children pocketing the markup.
The Times reports this avoided federal taxes that would have applied if the elder Mr. Trump had simply given the cash to his children as a gift. As such, it may have crossed the line between tax avoidance, which is legal, and tax evasion, which is not. As Donald Trump’s father’s death neared, the family made use of a common form of trust to transfer ownership of his real estate to Mr. Trump and other heirs; however, the property’s values were systematically lowballed to reduce tax liability. When an Internal Revenue Service audit exposed the maneuver in 1995, the Trumps negotiated a settlement that still left them many millions of dollars richer than they would have been if their initial statements to the government had been valid, according to the Times.
And so on. Many wealthy families employ aggressive tax-planning strategies. The practices described in the Times article appear to go well beyond that into methods that are, at best, unethical and, at worst, unlawful. In addition to Treasury, victims included tenants whose rents were jacked up to offset the padded maintenance bills. The White House and Mr. Trump’s lawyer denied any fraud or tax evasion; a lawyer for the president noted that all the relevant paperwork was prepared by professionals who vouched for its propriety. Mr. Trump’s brother, Robert, who handled the estates of Fred Trump and his wife, noted that the IRS closed the books on both more than a decade ago. For his part, the president denounced the Times piece as a “very old, boring and often told hit piece.”
The president’s tweet is consistent with past utterances suggesting he is not terribly worried about the appearance of impropriety. When Hillary Clinton took him on during a 2016 debate for refusing to release his individual tax returns, suggesting that he had “paid nothing in federal taxes,” Mr. Trump interjected, “That makes me smart.”
Beating the system, by fair means or foul, has always been his ethos. And now he runs the system.