David Cay Johnston: New Evidence Donald Trump Didn't Pay Taxes (With Update)
By David B
"I am not a crook?"
Pulitzer Prize winning journalist David Cay Johnston wrote a terrific piece in The Daily Beast yesterday, that there is New Evidence Donald Trump Didn’t Pay Taxes.
As a tax accountant by trade, an Enrolled Agent (EA) licensed to practice before the Internal Revenue Service, Johnston is one of my heroes. He has been ever since I read Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich--and Cheat E verybody Else.
How he discovered this new evidence is telling. As he told Amy Goodman on Democracy Now! this morning, back in the 1920’s, tax returns were public information, and newspapers routinely reported how much prominent citizens earned and how much tax they paid. Today, as an EA, thanks to Internal Revenue Code (IRC) section 7216, I cannot even acknowledge that anyone is even my client , let alone give out any information from a tax return, without having a specific form signed by the client giving me express consent to provide specific information to a specific person or entity, such as a bank looking to approve a mortgage. I can’t do it without the signature. An email isn’t enough. A phone call giving me verbal authorization is not enough. i need the signature.
So how did Johnston find this? Court documents are public record, including tax court. Trump filed two tax appeals in the 1990’s and lost both cases. From these cases, Johnston gleemed some very damaging information.
For example, if you or someone you know is a real estate agent or any salesperson working only on commission, or any kind of independent contractor, and are not incorporated, you file a Schedule C as part of your 1040. You enter your income, you itemize out your expenses, the net profit or loss is calculated on the bottom line of that form, and that profit or loss gets entered as income or loss on line 12 of page 1 of your 1040.
In 1984, Donald Trump used Schedule C, which means that this he had personal income and expenses that was not earned through any corporation or partnership. This was on him.
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Trump listed no income on that form, yet he deducted $626,264 as expenses. His New York City tax return also showed no income, but listed slightly less in expenses: $619,227.No receipts, invoices, or other documentation were provided when Trump was under audit or during his appeal from what he argued was an unfair demand for more tax.“The record does not explain how Petitioner [Trump] had significant expenses without any concomitant income from his consulting business,” wrote H. Gregory Tillman, the city administrative law judge who heard the case on April 29 and May 28 of 1992.[Emphasis mine.]
He had no income, and over $600K in expenses. And no receipts or documentation! I don’t know any Tax Professional who wants to stay in business who could sign his or her name to a return like that!
And that is exactly where this starts to get fun:
Jack Mitnick, the lawyer and accountant who prepared Trump’s tax returns for more than two decades, was Trump’s only witness. Mitnick testified that he was “thoroughly familiar” with the Trump tax returns and all aspects of the finances of Trump Tower, which were central to the appeal.But when shown a photocopy of Trump’s 1984 tax return, Mitnick testified that “we did not” prepare that return, referring to himself and his firm, and he said [he] did not know who did. However, Mitnick did not dispute that it was his signature on the photocopy. [Emphasis mine.]
The accountant’s signature was on the return, but his firm did not prepare that tax return! How does THAT happen????
Among the issues raised by Mitnick’s 1992 testimony is whether Trump or someone acting on his behalf substituted a return that he or someone else prepared and then transferred Mitnick’s signature using a photocopier. [Emphasis mine.]
The judge noted that the original tax return was never found. All they had was the photocopy. Johnston speculated on Democracy Now! that perhaps the photocopy, not the original, was what was submitted to the IRS.
And that was just the first case!
The second case came when New York looked at the same 1984 tax return.
Again the issue was 1984 deductions Trump took without providing any documentation to auditors or when Frank W. Barrie, a state administrative law judge, heard his appeal.It was in this appeal that the record shows Trump paid no income tax in 1984. [Emphasis mine.]
Look, as a Tax Professional, my job is to help people pay less tax, when possible. I get clients who tell me that they want to pay as little as possible, and I joke that they are the only client I have who feels that way, because all my other clients want to pay much more than they have to, and we all have a good laugh. But there is a difference between using tax law to legally reduce tax liability, and tax fraud.
In the city case, Judge Tillman noted that Trump complained of double taxation, but found that claim baseless. Using bold face to emphasize his point, Judge Tillman wrote, “The problem at issue is not one of double taxation, but of no taxation.”
Donald Trump does not want to release his tax returns because he doesn’t want you to know that Donald Trump pays no income taxes.
Trump claims that his returns are under audit, so he can’t release them. This is nonsense. As Johnston notes, tax returns are “filed under penalty of perjury, and releasing a return has no effect on an audit, as many tax authorities (including a former IRS commissioner) have noted.”
In any case, there is a 3 year statute of limitations on audits. The IRS cannot now audit you for 2012 unless the case was opened prior to April 15th, two months ago as I write this. Only 2013, 2014 and 2015 returns are open to a new audit. (If you cheated on your 2010 tax returns, for example, congratulations. You won.)
But, as Johnston also notes:
The tradition of presidential candidates disclosing their tax returns has an august purpose: making sure that another criminal is not a heartbeat from the presidency or in the Oval Office. [Emphasis mine.]The disclosure tradition dates to when Spiro Agnew resigned as vice president in 1973 and then plead guilty to a tax crime. President Richard Nixon was an unindicted conspirator in a felony for which his tax lawyer Edward L. Morgan went to prison for creating a fraudulent $576,000 tax deduction on his behalf—one of the specifications in the impeachment proceedings that never came to a vote because Nixon resigned in August 1974.
So there you have it.
Richard Nixon famously made this statement, on November 17th, 1973, less than 9 months before he was forced to resign:
And I want to say this to the television audience. I made my mistakes. But in all of my years of public life, I have never profited - never profited from public service. I've earned every cent. And in all of my years of public life, I have never obstructed justice. And I think too, that I can say, that in my years of public life, that I welcome this kind of examination,because people have got to know, whether or not their President is a crook.Well I’m not a crook. I’ve earned everything I’ve got.[Emphasis mine]
Donald Trump has learned from Richard Nixon. As Johnston concludes:
The facts in the two appeals could arguably be construed as evidence of calculated tax fraud, a felony. They certainly cry out for disclosure because, as Richard Nixon told us, Americans should know to a certainty that their president is no crook. [Emphasis mine.]
But Donald Trump has decided that the people do NOT have to know, to ANY certainty, “that their President is no crook.”
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