Breakingviews: Trump's tax loophole

Published Tue, Oct 4 20165:00 AM EDT

Breakingviews

Gina Chon

Donald Trump may not have paid personal income tax for years because of a $916 million loss in 1995, according to the New York Times . Certain U.S. tax rules could explain it, though one year of records isn't enough to be sure. The implication is that the Republican U.S. presidential candidate is a living "special interest" of the kind he has decried. More from Breakingviews : Trump cold shoulder for TV ads may set the trend During the first presidential debate last week, Democratic nominee Hillary Clinton accused Trump of not paying any taxes. "That makes me smart," he replied. If he has managed not to pay income tax, one possible explanation is a provision that allows so-called net operating losses to offset taxable income in later years. U.S. rules allow real-estate depreciation and operating losses from limited-liability companies, partnerships and what are known as S corporations to be reported on personal returns. In 1991, in the first of his four business bankruptcies, Trump had personally guaranteed $832 million of debt for the Trump Taj Mahal casino in Atlantic City. When it filed for Chapter 11 protection, Trump could have been forced to declare personal bankruptcy. As it turned out, the creditors let him restructure his liabilities, but he did have to sell the "Trump Princess" yacht. Since then, Trump has done more to insulate himself from business losses using structures that are also used by wealthy people to minimize their tax liabilities. In Trump's campaign-finance disclosure, he lists positions at 564 LLCs, corporations and partnerships. Meanwhile, nominee Trump's economic plan pledges to "eliminate special-interest loopholes" and touts a cut in the business tax rate to 15 percent from 35 percent. That break could also apply to individuals who are able to include some of their business income and losses in personal returns. It might alienate some voters if Trump has paid essentially no income tax for two decades, but it could be perfectly legal. It also might not go over well if he's promising tax changes that would benefit him personally. The trouble is, he has refused to open his tax returns to scrutiny so that Americans can decide. Other candidates have been doing so for 40 years. Trump shows why it's necessary. For more independent commentary and analysis from Reuters Breakingviews, visit breakingviews.com

Donald Trump

Jewel Samad | AFP | Getty Images

Donald Trump may not have paid personal income tax for years because of a $916 million loss in 1995, according to the New York Times. Certain U.S. tax rules could explain it, though one year of records isn't enough to be sure. The implication is that the Republican U.S. presidential candidate is a living "special interest" of the kind he has decried.