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April 25th, 2017

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Here's Why Trump Tap Dances on Taxes

Larry Elder

By Larry Elder

Published May 19, 2016

Here's Why Trump Tap Dances on Taxes

Donald Trump has reason to be reluctant to release his tax returns. In a New York Times piece about Ben Rhodes, President Obama's deputy national security adviser, Rhodes cynically explains that today's journalism consists of young people whom he flat-out describes as ignorant. "The average reporter we talk to is 27 years old," Rhodes said, "and their only reporting experience consists of being around political campaigns. That's a sea change. They literally know nothing."

What do 27-year-old reporters know about how wealthy big-business people file their taxes? In the real world, moguls like Donald Trump hire accountants and tax attorneys to file what are known as "aggressive" returns — seeking every possible deduction, exclusion, tax break or deferral.

Given this, Donald Trump is likely audited nearly every year, with the IRS settling with him on some of these issues, often for less than the IRS initially claimed he owed. If Trump releases his taxes now, the IRS — to avoid embarrassment or public criticism that they are giving a rich guy a break — might be reluctant to negotiate down from what they initially argued he owes. Therefore, Trump is likely telling the truth that his attorneys advised him not to release his tax returns until after the audit had been settled.

There's another legitimate reason that Trump may be reluctant to release his tax returns: media bias. During the 2012 presidential race, ABC News' Jonathan Karl falsely reported that at 14 percent, Mitt Romney paid a lower effective federal tax rate — the percent of your total gross income paid in taxes after all deductions, exemptions and credits are applied — than a $75,000/year auto mechanic.

This would be true only if the mechanic had zero exemptions, deductions, etc. — which, rich or poor, never happens. The IRS gives you a standard deduction just for breathing. Assume Mr. Auto Mechanic is married, with two children. After offsetting gross income with exemptions, deductions for things like mortgage interest and assorted tax credits, Mr. Mechanic's effective federal income tax rate — the percentage of income actually paid in taxes — is much lower than Romney's rate.

At that time, the liberal Tax Policy Center reported that 91.4 percent of individual taxpayers with adjusted gross incomes (AGI) between $50,000 and $100,000 paid less than 15 percent in taxes. And 43.9 percent of the $50,000-$100,000 AGI taxpayers paid an effective rate between 5 and 9.99 percent, while 4.6 percent of this group paid no federal income tax at all.

Also not lost on Trump is how then-Senate Majority Leader Harry Reid, D-Nev., flat-out lied about Romney's taxes on the floor of the Senate. Reid said, "The word's out that (Romney) hasn't paid any taxes for 10 years."

Later, post-election, Harry Reid admitted he said this without any evidence. Asked whether it was fair or if he had regrets at the lowball tactic, he said, "Romney didn't win, did he?" His admission generated no condemnation — not even fake condemnation — from fellow Democrats. The blatant lie does not seem to have affected his reputation or stature. Bygones were bygones. The end justified the means.

Republicans seem to have learned little about how dirty the Democrats play. Mitt Romney, having been victimized by Reid, even used a Reid-like tactic to criticize Trump. About Trump's refusal to release his tax returns, Romney said, "It is disqualifying for a modern-day presidential nominee to refuse to release tax returns to the voters," and suggested Trump was hiding a "bombshell." With Republican friends like these ...

And then there's the usual selective outrage. No law requires a presidential candidate to disclose his tax returns, although it is certainly true that all recent presidents have done so. Similarly, there is no law that requires a candidate to release his grades or test scores. Most have done so or had them disclosed by the media. In Obama's case, it's now seven years into his presidency and he's not turned over his grades and test scores, nor has the media demand that he do so. In fact, the media long ago lost interest in the matter.

Warren Buffet is not running for president. But in making the case for higher taxes, he claims to pay a lower tax rate than does his secretary. He has never released his returns or those of his secretary to verify this assertion or to allow for an examination as to why he pays a lower rate — assuming he does.

For all these reasons, Trump drags his feet on releasing his tax returns. Eventually, media pressure and criticism will force him to do so.

When he releases them, no matter what percentage he pays or the amount he pays, rest assured he will be accused of "not paying his fair share." As Trump puts it, "That I can tell you."

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Larry Elder is a best-selling author and radio talk-show host.

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