Same Scat, Different Campaign
By now, everyone should be familiar with the old standby tactics used by Democrats in every election, for any office above dog catcher–claim tax issues, or claim sex scandals. And sure enough, right on schedule, we have Hillary and company implying that Trump might not have paid taxes for over a decade—she is apparently channeling Harry Reid these days instead of holding imaginary chats with Eleanor Roosevelt— and allegations from a gaggle of aggrieved females that in various places and at various times, they were “groped” or otherwise harassed by Donald Trump.
First Up–Tax Deductions 101
For those who are not billionaires, this deduction of almost a billion dollars carried forward to cover UP TO 15 years may seem ridiculous. But–it isn’t.
IN ANY BUSINESS, YOU SHOULD ONLY BE PAYING TAXES ON PROFITS. So, if you are WALMART, and your Net Profits for the year average 3.1-3.6%, then THAT IS WHAT YOU PAY TAX ON. And by the way–how long would YOU stay in your job if you only got to keep 3 CENTS OF EVERY DOLLAR YOU MAKE?
Let’s take this down to the level of the average Joe. Let’s say that you have the opportunity to buy a duplex for a rental property that is up for sale for back taxes. So, you LEVERAGE the equity in your home, take out a second mortgage for the rest, and buy this duplex.
At the time you purchase it, property values in the neighborhood are on the rise, fueled by a new industrial park being built–so you have every expectation you will be able to rent out these 2 units for twice the mortgage payment–giving you a good profit.
But then, an environmental group discovers an obscure species of beetle living ONLY in this area–and all building stops. Injunctions are filed against further construction, and the companies planning to build abandon the project, and sell the land to the state land fund with a billion dollar LOSS.
In real estate, because you are almost always building using leveraged or borrowed money and it can be years–even decades–before a true profit is shown, you can deduct your losses going forward when something like this happens. And in our example, that is what the development company would do–write off the losses and amortize them over a period of years.
But what about you? Your new duplex’s property value is now less than half what you paid, so you are “under water”–and because the duplex is away from everything else and there will now be no new development in the area, you can’t find decent renters. The only renters you can get are lower income people living on the edge, who routinely avoid paying rent, or college kids who party all the time and trash the property at the end of the school year.
Well–CONGRATULATIONS. As a real estate speculator, YOU CAN NOW TAKE THAT DEDUCTION ALSO, AND PAY NO TAXES. The reason these deductions were created for the real estate industry is simple–their “product” requires a huge up front out of pocket cost that comes from borrowed money. If real estate development firms DIDN’T have this protection against loss–nothing would get built at a reasonable price. PERIOD.
Whether you own a single duplex or 100 resort properties, here are a few of the deductions you can take: upkeep costs, mortgage interest costs under certain circumstances, losses from non-payment of rent, property depreciation, repair and maintenance costs, code compliance costs….
Deductions are for ALL Americans. PERIOD.
There isn’t a single tax deduction in existence that YOU and I are NOT eligible for, if we meet the conditions. I know more than a few middle class Americans right here in Tucson AZ who flipped real estate and got into rental properties big time when things were going well here–only to see the bottom drop out during the epic housing bubble debacle. And ALL of them declared those losses. Just as I declare all my legal deductions on my 1040 (Schedule C), Profit or Loss from a business. There is no difference legally between my 900.00 Loss and Trump’s 900 million dollar loss. We have different deductions, of course, as I am not in real estate. But there have been years when my business didn’t pay taxes. And there will likely be years when that happens again.
IF BUSINESSES WERE NOT ALLOWED TO DECLARE THEIR LOSSES, THEN THEY WOULD NOT BE IN BUSINESS. If you own a home, you can deduct the interest you pay on your mortgage, allowing you to pay less taxes, and in many cases, NO TAXES. That 47% that Romney was talking about were not only low income, or the elderly. There are also quite a few middle class Americans with a ZERO TAX BILL, thanks to mortgage interest deductions, child care tax credits, and medical deductions, and costs of doing business.
has he actually gone over 15 years not paying? Probably NOT. Why? because he typically, from what we know, makes over 500 million a year. So Yes, as the NYT so kindly pointed out, he could technically go 18 years without paying federal income tax. But the odds are against it.
Actually, in my business–the federal income tax is one of the SMALLER taxes and fees I pay. Regulatory compliance burdens add 30 cents to every dollar I pay my employees. Were it not for the excess regulation and paperwork requirements, I could be paying my employees 10-12.00/hour easily, without raising prices.
Then there is the matching Social Security contribution, unemployment compensation insurance, workingman’s compensation insurance. There are the sales taxes on products I can’t get taxes forgiven on. There are the property taxes on the business property. There are the all the other taxes I pay daily as an individual–including my personal income tax. As the link above shows, the average Joe loses a lot more money to ancillary taxes and fees than he loses to the IRS as Federal Income Tax.
So, sorry, Lunatic Leftists–Trump’s deduction was legal. EVEN NPR said so LOL. And given the large scale of his business empire, I would guess he has paid Federal Income Tax most of the years between the Atlantic City Bubble bursting and the present. And if he didn’t–he pays through the nose other ways, as do ALL business people in this country.
P.S.–UNDER CERTAIN CIRCUMSTANCES, IT IS ACTUALLY ILLEGAL NOT TO TAKE DEDUCTIONS YOU ARE ENTITLED TO. THE ORIGINAL RULING APPLIED TO CASES WHERE SELF-EMPLOYED PERSONS CHOSE NOT TO TAKE CERTAIN BUSINESS DEDUCTION BECAUSE DOING SO DECREASED THEIR EARNED INCOME CREDIT. THIS HAS BEEN EXPANDED BY THE IRS UNOFFICIALLY TO INCLUDE ANY CIRCUMSTANCE IN WHICH DEDUCTION MANIPULATION PRODUCES A LOWER NET TAX PAYMENT, OR AN INCREASE IN A TAX CREDIT.
So, In English–If you’re a business person of any kind and you might be entitled to a tax credit or incentive of any kind, and the amount of said incentive would be higher if you failed to declare an expense, and you choose not to declare an expense–you’re screwed. Have a nice day. As a small business owner who DID get whacked by the IRS for not declaring a legitimate expense–ONE I DIDN’T KNOW I WAS ENTITLED TO DECLARE AT THE TIME– I can tell you you do NOT want to go there.
NEXT UP–THE PATHETIC “SEX SCANDALS”…