So, how much tax do Democrats think you should pay on your losses?

I know a lot of people don’t like Donald Trump. I don’t care for him, either. But it is unclear to me exactly what they think he should have done differently regarding his income taxes.

By now, you’ve probably read or heard about the New York Times’ story, based on a leak of one portion of one year’s tax return. The Times reports that Trump in 1995 claimed a net operating loss of almost $916 million — and that, because of that loss, he might not have paid federal income taxes for some unknown number of years that followed. No one knows how many years, because only one year’s return was leaked. (The maximum number of years for which a loss could be carried over at the time of Trump’s filing was 18.) No one should be surprised if that one year was chosen intentionally to portray Trump in the worst light possible.

AP Photo / J. Scott Applewhite

AP Photo / J. Scott Applewhite

Trump of course could have avoided this revelation, or at least gotten out front of it, by releasing his returns on his own, as previous candidates have done. But only the specifics here are any kind of revelation. It is after all a well-known provision of tax law that individuals and companies can carry forward losses from one year into succeeding years. As the AJC reports, Delta Air Lines has done this for several years now. Heck, even the Clintons have carried forward capital-gains losses, as their tax returns indicate. This is not some secret loophole that only “the rich” have ever heard about. Heck, President Obama and the Democrat-controlled Congress actually expanded the length of time some net operating losses could be carried over.

The question is: What would you have these individuals and companies do differently?

If you want* companies to pay income taxes on their profits, then why should they also pay taxes on their losses?

If Trump’s loss for 1995 remained at $916 million — and it’s entirely possible the amount was reduced after one of those audits the IRS performed on his returns — it’s not as if it entitled him to wipe out any number of gains for all 18 years. He was entitled to offset the same amount of gains. So the net amount of the losses and gains in question would be zero.

How much in taxes should Trump have paid on that long-term zero? How much should Delta pay for its long-term zero? How about the Clintons for theirs? After all, it’s not as if the ill effects of a $916 million loss simply disappear the next year. If you lose $100 today but make $5 tomorrow, it’s not as if you’re ahead by that $5; you’re still $95 in the hole.

A friend of mine who teaches tax law at a college outside Georgia explained it this way in a message to me:

“I am not a fan of either candidate but as a tax teacher this is driving me nuts! Trump generated a large loss, and the tax code provides for a deductibility of this loss. The reason for the deductibility of losses is clear. Trump took a risk and invested money in a business that was not successful … However, that money he invested into his businesses was ALREADY TAXED. It is not fair to pose the question, ‘Isn’t (it) unfair that we have to pay taxes and he doesn’t?’ He did pay tax on the cash used for his business and then lost all that money which allowed for a tax loss. If I invest … and I incur a loss I can deduct it too! The funniest thing about the whole situation is the reason why business losses are allowed … to promote investors to take a risk on businesses and invest in America! Isn’t that what both parties want to happen?!”

Now, if Democrats wanted to make an issue out of this by saying Trump isn’t as successful a businessman as he claimed, that’d be fair game. (Keep in mind, though, that we already knew Trump lost a lot of money related to his casinos; that’s what the Clintons usually describe, when answering for their own scandals, as “old news.”) But to claim that Trump somehow cheated Uncle Sam by observing tax laws that Democrats helped write and also use to their own benefit is not just preposterous but deeply hypocritical.

If Hillary Clinton believes individuals and companies should pay taxes on their losses as well as their gains, she should come out and say so. Something tells me she won’t.

*Personally, I think corporate income taxes are mostly a way for government to disguise the true burden it places on workers, investors and consumers, since they are the ones who ultimately forgo money in some shape or fashion to cover the corporate tax payment.

Reader Comments 0

285 comments
spaceman109
spaceman109

i totally agree with kyle that businesses should be allowed to write off short-term losses on future returns. i also note that no mention was made about how such a self-proclaimed brilliant businessman got in that much trouble. the answer can be found in the link i am providing. note that the story makes no political points. it simply recounts how trump got in such a tight spot.


https://www.washingtonpost.com/investigations/trumps-bad-bet-how-too-much-debt-drove-his-biggest-casino-aground/2016/01/18/f67cedc2-9ac8-11e5-8917-653b65c809eb_story.html

Wascatlady
Wascatlady

If I lose money, I don't expect the government to bail me out.  trump obviously does.

SupremeGrandPoobah
SupremeGrandPoobah

@Wascatlady Nobody bailed anyone out.  I recommend you try to use your brain instead of being a puppet for CNN reporters who have no clue what they are talking about.

SupremeGrandPoobah
SupremeGrandPoobah

@lvg Too bad the author and apparently the "advisors" he depended on don't even know which Code Section deals with net operating losses.  


Next time, try finding articles written by people who understand what they are talking about.  Sec. 108 explains how assets (such as a net operating loss) are reduced to the extent debt is forgiven.  Sec. 1231 covers gains/losses from the sale of assets.


Code sec. 172 is the code section that deals with net operating losses. If Sec. 108 applied in this instance, it would have reduced the amount of NOL available to Trump.


I guess they let any clueless moron be a college instructor nowadays.  Or perhaps their degree is in basket weaving or something along those lines.

DerekGator
DerekGator

Wow, was Tim Kaine not the worst last night? Comes across as a whiny little beatch, he proved tonight that he is clearly not presidential.  

paperman25
paperman25

Since Trump has been running there are a few things that have come up that we have known about but no one really talked about. When Trump was doing the debates with the other Republicans he bragged how he wasn't bought off like the other Republicans on the stage were. He told how rich people gave them money to get things done for them. He even bragged that he too has given money to them to get things done. Now we all know it's against the law to bribe an elected official but yet here he is saying that it happens all the time and that he has done it too. Where was the outcry over this? Where are the investigations? Where are the arrests? Now we have this thing with the taxes. Now we all know that the tax system favors the rich but now we're seeing just how much. What a lot of people don't realize is that the tax code is written by the rich, for the rich. As much as I don't want to see Trump in the white house I can't blame him for this. It's the system that I blame. The thing is what can we do about it? NOTHING. The rich are in control and they control Congress and Congress writes the laws. We're screwed.

TomGaff
TomGaff

It is too bad for us CONS that Mike Pence is not running against Hillary Clinton? Seems like the type of person people can relate to without cringing?

Bruno2
Bruno2

One takeaway from tonight's debate:  So much has been made about Trump's insults, yet Hillary has likely insulted just as many people.

Bruno2
Bruno2

I missed the first hour + of the debate, hope to catch it on a replay.  Kaine came across as a rude Aho from what I saw. 

Infraredguy
Infraredguy

Kaine is just another Hillary sril, he has no credibility just like Hillary and the Moderator is giving him free rain to do as he wishes as she plays to the Democratic talking points

IReportYouWhine
IReportYouWhine

Everybody needs to watch this debate, if you didn't see it live, go find it on Youtube. The democrats disgraced America, totally and completely. They, the moderator and their vp candidate, worked in unison to silence their opposition. Is this how we want our country to be run, where those representing the government establishment can silence those who disagree with them? Trump could be a mass murderer of Mexicans, it would pale in comparison to what happened to DEMOCRACY tonight. I'm sickened by this. 


We are going to take things into our own hands if this doesn't stop and stop right now.

IReportYouWhine
IReportYouWhine

Has the "moderator" interrupted kaine yet? She won't even let Pence finish his thoughts. The democrats are disgracing this country and it's political process tonight.

IReportYouWhine
IReportYouWhine

This is a debate? Where are the little punk republicans at, defending their candidates? The democrats have this whole thing rigged, all we can do is whimper about it? The most sorry display of American politics ever, ever.

IReportYouWhine
IReportYouWhine

Interrupt the other candidate to tell me that I have to answer to the mexicans in my own country? Who do these people think they are?

IReportYouWhine
IReportYouWhine

They won't even let Pence talk. I never seen anything like this in my entire lifetime. 

IReportYouWhine
IReportYouWhine

Just give the microphone to tim kaine, what a fiasco. Total disrespect of the American people, drown out the other side in a debate.


Sick.

ATLAquarius
ATLAquarius

I have no issue with carryover losses....I think the greater question about tax reform in general is why doesn't the average person get a tax code that will truly reduce their burden.

DerekGator
DerekGator

@ATLAquarius :  The average person pays very little or nothing in federal income taxes.  Middle class tax relief is a myth, most middle class families are paying less than 10%. 

RafeHollister
RafeHollister

Bill Slick Clinton says Obamacare is the craziest thing in the world. People's premiums go way up and the hours they work go down. That was on Monday when he told the truth.


On Tuesday, Obamacare is a great start and a good bill.  That is when he was told to follow the narrative and forget the truth.  


Obamacare and Slick, two gifts that just keep on giving. 

quickdigits
quickdigits

Anyone who has ever Done their taxes Knows that you Do Pay Income Tax on Taxable Income, but You Do Not Pay Tax On Losses!! On the Contrary, Losses are Deductions!!

Deborah
Deborah

What a completely stupid statement.

RafeHollister
RafeHollister

@quickdigits "Losses are Deductions"


Except when they are gambling losses.  They have a Revenuer in every casino to collect your winnings, even though all the risk is on you.  You win, they win, you lose, tuff luck - loser.  I don't gamble, so I don't know why that bothers me, but it doesn't seem fair.

SGTGrit
SGTGrit

@quickdigits 

After taxed income reinvested where there's a loss should be written off as the current tax code allows. Come on people understand that the those who prepared Trumps, tax return did nothing against the law.

Dunk13
Dunk13

Quick digits. The problem is the people who criticize Trump have never worked and paid taxes, They are members of the modern Democratic Plantation System! Keep them in poverty and we can control them and how they vote!

TomGaff
TomGaff

@Deborah Sorry Deborah, may sound unpleasant to you what Dunk13 said,  but is completely true!

DerekGator
DerekGator

@Deborah :  The statement is very true, think about it before you speak. 

Dunk13
Dunk13

I agree with you completely Kyle!

STHornet1990
STHornet1990

So much for American's thinking he will make it great again:

"Some 67 percent of Americans said it is "selfish" for a presidential candidate to pay no taxes, while 61 percent said it is "unpatriotic," according to the poll, which allowed respondents to pick more than one adjective to describe paying no taxes."

Dunk13
Dunk13

STHornet1990. Are you better off now than you were 8 years ago when Obummer took office?

RafeHollister
RafeHollister

@STHornet1990 65% of Americans don't even know who the VP candidates are, so how are they qualified to determine what's patriotic or selfish.

IReportYouWhine
IReportYouWhine

Crowning the Comeback King



By BRETT PULLEY



Published: October 25, 1995

Though there are still four years to go in the 90's, business and government leaders in New York honored Donald J. Trump yesterday for pulling off what they called "the comeback of the decade."


Mr. Trump, the developer who came to epitomize opulent wealth during the 80's before tumbling into deep financial trouble, has managed to erase much of his debt and is moving ahead with major projects at a time other developers are idling.


http://www.nytimes.com/1995/10/25/nyregion/crowning-the-comeback-king.html


LOL

Allenman
Allenman

He stiffed all the little workers and made off like a bandit.  He pays nothing to build roads, pay police and fireman, and utilize all the other government paid for infrastructure he uses to make himself wealthy. He claims to be such a great businessman, but has had nothing but failure after failure and the everyday little people subsidize his failings.  It is absurd that a retiree like myelf pays the government 20 times or more taxes than billionaire Donald Trump -- there is nothing at all fair or equitable about that.  Way too many loopholes in our tax system for the wealthy and he will DO ABSOLUTELY NOTHING TO FIX IT just like he will NOT BUILD A WALL AND MAKE MEXICO PAY FOR IT.


teddymonds
teddymonds

cherry picking and selective complaining! In fact, the Dems did say he was not as good a bizman as he boasted. Nobody said he should pay taxes on losses, except you, Kyle Wingnut.

RafeHollister
RafeHollister

@Hedley_Lammar So, time to invest in hi-jab manufacturers huh?  Be the first to buy one for your loved one.  550% increase in Syrian refugees and wanna be terrorists.

dex1629
dex1629

From an accounting deficient newby, please explain these questions:


Did Trump actually have over 900mm to lose? Were the losses generated with borrowed funds, not his own?  Is he being allowed to write-off losses that he personally did not sustain and thereby shelter future income on a massive scale above the money he actually risked?  Does tax law allow for this?  Does he need to declare as income any borrowed monies that were forgiven thru bankruptcy? I know, as far as capital gains and losses go, I'm only allowed to write off money I actually risked. I'm confused.

Hedley_Lammar
Hedley_Lammar

@dex1629 Did Trump actually have over 900mm to lose? 


A: No


Were the losses generated with borrowed funds, not his own?


A: Yes

dex1629
dex1629

@RafeHollister @dex1629 @Hedley_Lammar We are all sxhmucks....he gets a free pass and doesn't contribute to financing our country.  I felt this way with Romney and the 15% tax rate on carried interest. But I'll bet real estate operators outnumber private equity hedge fund managers.


Mr Wingfield...I'd like you to explain how writing off many times your investment correlates with your contention that, if curtailed, would result in paying tax on losses...it doesn't compute.

SupremeGrandPoobah
SupremeGrandPoobah

@dex1629 @Hedley_Lammar  Most companies that are losing money are in debt.  Is this surprising to you?  Doesn't change the fact that he incurred a loss, nor does it prohibit him from claiming the loss.  Why should it?

dex1629
dex1629

@Hedley_Lammar @dex1629 So let's say he lost 100mm of his own money..where is the logic that lets him shelter 900mm in income? Explain.  Mr Wingfield?

SupremeGrandPoobah
SupremeGrandPoobah

@dex1629 @SupremeGrandPoobah @Hedley_Lammar So any company that loses money that was invested in them or loaned to them should not be able to deduct the loss?  Wow, that makes so much sense.  Not.  The only way this argument has any basis is, well, when the shareholder does not have tax basis in their company.