The nature of Trump’s paltry taxes revealed

Experts interviewed by Bloomberg revealed the nature of the income tax of US President Donald Trump, the amount of which is called scanty by many financiers. According to the interlocutors of the agency, the information indicated in the declarations of the policy of the last decades does not negate the fact that during this time he was an extremely wealthy person.

According to Trump declarations published in late September by the American media, the incumbent president has not paid federal income tax for at least 10 out of 15 years prior to his election. In 2016, which accounted for most of the election campaign, and in the first year of the presidency in 2017, only $750 was received in the budget. Many poor Americans pay much more each year, economists say.

Trump’s fortune is currently estimated at $2.7 billion. Its main assets are commercial and luxury residential properties with a combined value of 1.9 billion. The president owns some of them together with investment funds. At the same time, Trump’s share in the liabilities raised for construction is $670 million.

Over the past year, Trump’s fortune has decreased by $300 million, mainly due to the fallout from the  pandemic, which has brought down the demand for real estate. Nevertheless, he remains a multi-billionaire, and the companies owned or transferred to trust management show profits that are reflected in the financial statements.

At the same time, losses appear in the tax reports for most of the time. This became possible thanks to the numerous deductions that the president likes to resort to, including for consulting services to his daughter Ivanka. Another significant factor is depreciation, which is often used by rentiers and real estate developers.

Depreciation is the gradual depreciation of fixed assets (whose service life exceeds a year), as a result of which their cost is transferred to the finished product of the enterprise and is taken into account in its expenses. The acquisition or creation of such fixed assets does not lead to an increase in expenses and a decrease in profits, since some assets (cash) on the company’s balance sheet are replaced by others.

However, real estate objects are out of the ordinary. Over time, their cost decreases much less and depends mainly on the balance of supply and demand in the market. However, general rules allow me to include depreciation in expenses. And although this approach is largely fair, since it leads to recognition of the funds actually spent, they are reflected in the final financial indicators differently than in other sectors of the economy. The company is able to continue to make a profit regardless of the degree of depreciation of real estate objects and is not forced to set aside part of the proceeds in a special reserve for the restoration of fixed assets.

Trump’s structures over the past decades have often shown losses in tax returns, which did not prevent them from paying dividends. The income reflected in the president’s declarations was almost entirely attributable to his royalties for his participation in the show The Apprentice, in which he was the host from 2004 to 2015.

Trump himself denies claims against him about possible tax evasion and promises to publish declarations in the near future. At the same time, he is the first head of state in the past 40 years who has refused to do this until now.

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