Friday, March 18, 2016

U.S. tax system lets Trump (and others) delay IRS payments, invest the money and make a killing

The real Trump tax scandal

David Cay Johnston, USA Today, March 8, 2016

There’s a big story in the tax returns that Donald Trump claims he cannot release because of what he describes as a routine audit. The big story is not the true size of his wealth, but about how Congress has turned the income tax into a source of massive wealth for many of the richest Americans, including Trump.

That may seem hard to believe because the income tax burdens most of us. But the riches to be mined from the tax code are well known to America’s top tax lawyers and their clients.

Since 1986, Congress has accomplished what medieval alchemists and Sir Isaac Newton could not in their quest for a philosophers' stone that they believed would transform lead into gold. Our lawmakers have magically transformed income taxes into a source of wealth for many in the donor class by adding just a few lines to the nearly 6,500-page Internal Revenue Code.

It's all about tax rules that require you to depreciate, or reduce, the value of buildings over time, even if the market value of the structures is going up. If your depreciation is greater than your traditional income from work and businesses, Congress lets you report negative income. If these paper losses are just a dollar more than traditional income, it wipes out your income taxes for the year.

If Trump's returns show he has paid no income taxes in some years, that could be a reason he has not yet released details.

(Continued here.)


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