The bombshell leak of portions of Donald Trump’s 1995 tax returns show that he declared a minuscule wage income that year for a man of his wealth and corporate responsibilities.
The New York Times published a report late Saturday based on three leaked pages of Trump’s 1995 state tax returns that showed a $916 million reported loss. It would have allowed him to perhaps avoid paying any federal income tax for up to 18 years. This overshadowed another revelation on the same returns: That he had reported just $6,108 in wage income. In 1995, the highest wages were taxed at 39.6 percent.
“It does look pretty shocking that he is showing that little salary,” said Daniel N. Shaviro, a tax professor at New York University, blogger and former legislative aide to the Joint Committee on Taxation during the 1986 overhaul of the tax code. “Six thousand dollars of compensation does look pretty shocking.”
Without the 1995 full federal tax return, he warned, it’s impossible to know how Trump was able to declare so little wage income for the 1995 calendar year. Numerous tax specialists consulted by McClatchy declined to comment for the record because of the incomplete nature of the leaked returns, but all said there were multiple ways Trump could have been compensated without having it called wage income, which is subject to payroll taxes and higher tax rates. It’s another way that accountants and tax specialists can help wealthy Americans decrease their tax burden.
An analysis of Trump’s campaign financial disclosure report shows that he was the president, director or chairman of 28 companies in 1995, including the Trump Organization Inc.; DJ Aerospace (Bermuda) Limited, in the tax haven of Bermuda; a partner in six partnerships; and a trustee of three trusts. He did not appear to serve on the boards of publicly traded companies.
The $6,108 wage income raises questions of whether Trump avoided something the rest of us pay – payroll taxes. When a worker earns a paycheck, so-called FICA taxes are levied to contribute to the Social Security and Medicare programs.
Social Security currently takes 6.2 percent of the first $118,500 of earned wage income. Medicare takes 1.45 percent of all earned income per year, a fraction that would still add up if Trump declared significant wage income. Employers pay an equal amount into both programs. Americans who are self-employed pay both portions – 12.4 percent on the first $118,500 of income for Social Security and 2.9 percent on all taxable income for Medicare.
“There is no way you can make an argument that this ($6,108) is reasonable compensation, even back then,” said Dylan McKeon, the director of tax compliance for Singer, Weisberg & Associates, a New York tax law firm. “To have such a ridiculously low amount just isn’t appropriate. The IRS expects that you take wages or some kind of self-employment income for personal services.”
Trump’s companies, however, could be single-member limited liability companies, with earnings that would be treated as business income rather than wage income. Trump could have treated his income as self-employment income that passed through his businesses and would show up elsewhere on his complete federal return, which was not leaked.
“That would be my guess there,” said Robert Willens, president of his own tax and accounting firm, which works with big Wall Street investors. He added that “it is not surprising” that Trump would declare so little wage income.
Trump’s federal 1040 tax form for that year would clarify these questions, he said, including how Trump declares income from partnerships and investments, both likely subjected to lower rates of taxation than the rates that apply to the wage income of ordinary Americans.
In the 2012 presidential campaign, GOP candidate Mitt Romney released his 2011 tax returns, showing on his 1040 form that he had declared no wage income. However, he paid more than $23,000 in self-employment taxes. If you earn wages from your employer, this contribution is done automatically for you. The self-employed must estimate their own contributions.
Trump has said he is frequently audited, but neither he nor the IRS has disclosed what, if any, penalties he might have paid. Trump served as a director or officer on his own company boards, so McKeon reasoned there would be some compensation involved. But because Trump’s companies are private, there is little he has to disclose publicly.
That’s different from, say, David Weinreb, the president of the Howard Hughes Corp., like Trump a national commercial real estate developer. Weinreb’s compensation is reported to the Securities and Exchange Commission, and investors can easily learn he was paid $1 million in salary for 2015 and offered $3.75 million in bonuses and incentives. His tax returns, however, are not public.
The leaked tax returns show that in the calendar year covered by his 1995 tax documents, Trump declared on his New York state tax form business income of more than $3.4 million. That could be the category where his compensation may be accounted for, said Willens. Or since the tax returns were classified as married, filing jointly, it could also have reflected his then-wife Marla Maples’ income as an actress and model.
The Internet Movie Database, a searchable website that serves as a repository for movies and television, shows that in 1995 Trump appeared in the movie “Across the Sea of Time.” Maples is not listed as appearing in a movie or TV show in 1995.
Honestly, I have brilliantly used those laws.
Donald Trump at a campaign rally Monday in Pueblo, Colo
The three Trump tax documents published by The New York Times comprised the first page of a New York state income-tax return and the first pages of nonresident tax returns in New Jersey and Connecticut. State tax returns are based off the information provided to the IRS on federal income-tax returns. The three leaked documents did not include lines where self-employment taxes could be claimed.
“You have to look at the entire tax return, and the related returns, to determine the source of the income and the taxes he paid,” cautioned Betty J. Williams, managing shareholder in Williams & Associates, a prominent tax-law firm in Sacramento, California.
The Trump campaign did not answer a request for comment, nor did Elissa Buchter, Maples’ publicist. Her agent Mark Turner declined to comment through a colleague.
There is no evidence Trump was aware of this level of detail in his tax return, said Shaviro, the NYU professor.
“It would be stupid for him to spend time on that. . . . You hire lawyers to do that,” Shaviro said.
During last month’s presidential debate, Trump pointed to his disclosure form as akin to a financial statement. It’s not, because it is not audited. Without his tax returns, it’s impossible to know whether he avoided income-tax liability for years, and how he accounted for payroll taxes.
With 515 companies, 378 of them registered in Delaware, a state that’s considered the equivalent of a tax haven by some research organizations because of so little public disclosure, Trump’s tax returns would be complex.
His longtime accountant Jack Mitnick told The New York Times that Trump had actively sought real estate write-offs through the tax code.
“Here the guy was building incredible net worth and not paying tax on it,” Mitnick told the newspaper.
In a brief interview with McClatchy from his retirement home in Florida, Mitnick declined to comment further.
CORRECTION: An earlier version of this article had the wrong year for the leaked tax returns. They were for 1995. The change of year also changes the number of companies Trump had listed to 28 and the films that he and Marla Maples appeared in that year.
Kevin G. Hall: 202-383-6038, @KevinGHall