My reaction to the revelations about Donald Trump’s carrying forward a $1 billion loss on his federal income tax returns were about the same as Brent Arends’s at MarketWatch:
Donald Trump has done nothing wrong if he has legally used the tax code to minimize his taxes. All private citizens do that. I suspect most politicians do as well.
I take every legal tax deduction I can. So do you. So do your friends. So do reporters at the New York Times. So, I bet, does Times publisher Arthur “Punch†Sulzberger.
A rich guy takes big deductions, where you and I take smaller ones. But that’s because he’s rich.
The real “scandal†of Trump’s tax avoidance isn’t that he did it, but that it’s legal — that loopholes exist that allow very rich people to pay little or no tax. That is really the fault of Congress, not the citizens who use the loopholes.
The emphasis is mine.
So, Mr. and Ms. Perennial Incumbent, what the heck have you been doing about our mystifying, byzantine, and corrupt tax code? Why are we arguing about comprehensive immigration reform when comprehensive tax reform could make the lives of ordinary Americans better by eliminating the deadweight loss of inefficient taxation?
The highest marginal tax rate is a red herring. The real issue is how you determine income.
Update
I see that Ann Althouse basically agrees with me:
The real issue is the tax code. Does it need to be reformed or not? If Trump took deductions, it was because the tax code provided for them. Once the deductions are there in the tax code, he pretty much has to take them and would be a fool not to take them. If it looks wrong, what’s really wrong is the tax code. So, is Hillary proposing to take away this deduction? Is Trump? Presumably, the deduction is there because it’s good policy. Will either candidate defend the policy and, if not, promise to change it?
If politicians complain about something, I assume that they think some change is required. Maybe they just like to complain.
The incumbents know exactly what they’re doing about taxes, and why. It’ what they are bribed (paid) to do.
I don’t know (nor do any commenters) the details of Trumps tax maneuvers. I do know that eliminating tax loss carry forwards would significantly alter the investment dynamics in risky investments like real estate. I’m not sure that’s what we should be focused on in a period of slow growth.
Either eliminate the tax loss carry forward or start defending it as economically necessary. Letting it remain a political football is absurd.
When we subsidize risky investments, we’re lowering the risk. Should we be doing that?
“Presumably, the deduction is there because it’s good policy.”
No. Presumably, because some special interest wanted it. Look, we already knew he is a sleazy real estate guy. He takes advantage of whatever laws exist, and sues like crazy while using his political connections to get marginally legal, or illegal, advantages. The important part here is realizing that there are different rules for the wealthy. Trump is part of the elite taking advantage of that. Also, it demonstrates that he may not be as successful as he would have us believe. His whole narrative is suspect. We just can’t tell and he is not revealing anything. You just have to take him at his word, which should be unsettling.
Steve
“there are different rules for the wealthy. ”
NOL carryforwards are not just for the wealthy. They are used by many small businesses. The wealthy care more about the estate tax.
I have never heard people complain about NOL rules as a big flaw of the tax code before. Interest deductions, personal and business, are more often cited because they encourage people to go deep into debt.
Interesting. The carry forward period was only 7 years up until 1981, when it was increased to 15, then to 20 in 1997.
Steve