Leave it to the New York Times to screw up a potential bombshell like the leaked Donald Trump tax return they released over the weekend.
I’m going to add a bit of a throat clearing before I get into this discussion: I am not pleased (put mildly) with our political candidates this year. When the Democrats’ slogan is “We Dared the Republicans to Find a Worse Candidate than Hillary. . .and They Played the Trump Card,” and the Republicans’ slogan is “Better Than a Double Barreled Shotgun Blast to the Face,” it’s pretty clear that we’re not getting the cream of America’s crop. So any comments I make below should be taken with the realization that I want to chose between these two candidates about as much as I want to have my hand chopped off and sewed to the top of my head.
Back to the New York Times. On Saturday, risking legal prosecution for releasing a candidate’s tax return without his permission, the storied news outlet printed three pages from Donald Trump’s tax return, along with an article telling the public what we should think about those three pages. Of all the things they focused on, they decided the most nefarious part of Donald Trump’s tax return is his Net Operating Loss, or NOL:
Donald J. Trump declared a $916 million loss on his 1995 income tax returns, a tax deduction so substantial it could have allowed him to legally avoid paying any federal income taxes for up to 18 years, records obtained by The New York Times show.
What? Donald Trump could have avoided paying income taxes for up to 18 years?! Egads!
In other words, while it’s in the range of possibility that Trump could “legally avoid paying any federal income taxes for up to 18 years,” it’s pure speculation. Apparently that’s what passes as news these days, even with the New York Times.
It’s also totally irrelevant to what the actual story should have been, which is that DONALD TRUMP’S TAX RETURN SHOWS HE LOST $1 BILLION DOLLARS (yes, that is shouting, since someone apparently missed the story at The Times).
Let’s put two and two together and try to figure out The New York Times’ logic.
Fact Basis #1: On Donald Trump’s leaked tax return from 1995, we see that he had a loss of $916 million. In other words, this super rich, wealthy, incredibly fantastic at making money person (I’m paraphrasing, of course), had losses of nearly a billion dollars in 1995. Interesting to note, New York Times. Thank you.
Maybe you could add in a few extra tidbits, like the fact that his interest and dividend income are “only” just above $7 million, which shows he really doesn’t have much invested in standard investment buckets (even if we assume a very low 3% return, we’re talking less than $250 million invested, which isn’t that much compared to his billions and billions of worth claim). Or that his business income was “merely” $3 million.
If you’re trying to show that he’s not as wealthy as he claims, I’d go after those as evidences. Certainly not proof, but evidences.
But instead, The New York Times tried to weld it together with. . .
Fact Basis #2: In 1995, The Net Operating Loss rules said that you could use business losses to offset income for the previous three years, or carry it forward up to 15 years, making a total of 18 years. This is simple, this is logical, this is legal, and this is absolutely, 100% fair. This is what The Times decided to focus on as the real story.
Let me try to explain it in terms that even The Times can understand. If I run a business, I’m going to have revenue and expenses. Those two netted together equals my income. For example, if I run a very low margin restaurant and bring in $1 billion dollars in revenue, but it costs me $999,999,999 in business expenses to make that money, I only have $1 dollar left in my pocket to live on. That, I believe in anyone’s book, would be called poor.
Because better financial minds than the New York Times long ago realized that losing money is bad for business, the IRS allows taxpayers to deduct those business losses against future business income. This doesn’t make someone better off in the next year, it makes them BREAK EVEN.
Let’s flip this around with somewhat more relevant facts. Let’s say I think I’m a super awesome, fantastic, intelligent person who can take a billion dollars given to me from my dad and turn it into billions upon billions. I invest $1 billion into a company called Super Awesome Pens. In year one, they lose all of that $1 billion I gave them. In year two, they somehow make a respectable $3 million in revenue. How much money has Super Awesome Pens made, in total?
Their overall net income is still -997,000,000. Would Super Awesome Pens pay income taxes? On what income? They haven’t made any yet!
Despite the NOL being a fairly simple concept, the New York Times tries to paint it as some mysterious force, jumping in and creating loopholes for those nefarious cheats. My favorite quote is “Do you realize you can create $916 million in income without paying a nickel in taxes?” Well, duh, because you wouldn’t have $916 million in income, you would have a net $0 in income. The quote might as well have said, “Did you know there’s a magical loophole where you can pay no taxes JUST BY MAKING NO MONEY?”
To the writer at the Times who spearheaded this, I have a great deal for you! If you want to avoid taxes, just give me all your money for my new business called Tim Will Lose All Your Money. Sound fair? Good. I’m looking forward to the check.
Pure Fantasy Land
Here is the part I really don’t get about The New York Times reporting. All they had to do was talk about how much money Trump lost. That’s it. “Look, Donald Trump claims he’s super fantastic at making money, but he lost a billion friggin’ dollars!” Would it have moved the needle much on the electoral count? Unlikely, but I doubt any tax return bombshell would do that (as I’ve written for past elections, I don’t think tax returns are as revelatory as we make them out to be).
Instead, they embark on this speculative journey trying to show all the taxes Trump “avoided” by that ginormous loss. This weakens their argument, since all Trump has to say is “I made more than that, so I overcame that NOL and paid taxes.” Since The New York Times didn’t bother to find more than that slightest bit of evidence to support the claim that his loss offset 18 years of income, there’s really nothing they could say to counter his statement.
If they had stuck with the facts instead of trying to simultaneously attack Donald Trump and a totally fair provision in the Tax Code, they would have been on much better standing.
Let me end this with one final example, hoping to make my point clear. Let’s say you were given one of the following two options, which would you take:
Option A: You Lose $1 billion dollars in Year 1, then make $350 million dollars over the next 15 years. You do not have to pay any income tax.
Option B: You don’t lose $1 billion dollars. You still make $350 million dollars over 15 years. You have to pay taxes at the standard tax rates.
For anyone who chose Option A, you have no idea what you’re talking about. The New York Times’ article tried to act like the two scenarios are exactly the same. They aren’t.
Maybe next time The Times will just stick to the facts. I bet it’ll make a much stronger article.