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--:-- Host (Sean Rameswaram): Andrew Prokop, you're a senior correspondent covering politics here at Vox. The New York Times published a trove of information on President Trump's taxes. Is this it? Are these the tax returns the country's been waiting four years for?
--:-- Andrew Prokop: Basically, yes. The Times did not publish the documents themselves that they obtained because they didn't want to jeopardize their sources. But they basically got to look at tax return data extending over more than two decades related to President Trump, including his complete returns as prepared by his accountants through the year 2017.
--:-- Andrew Prokop: And there's been a lot of focus, of course, on the president's taxes through court proceedings, through congressional hearings. What exactly has the country been waiting to learn this whole time?
--:-- Andrew Prokop: So it was very unusual that Trump refused to release his tax returns while running for president in 2016. It went against decades of recent precedent. And he continued his unconvincing excuses about why he wasn't doing this ever since he's been elected.
--:-- Andrew Prokop: And as far as the tax returns, as soon as the audit's complete, like any lawyer would tell you, And Greta Van Susteren, she was going over it a while ago. She's a lawyer. She said, well, no lawyer would let somebody release a tax return when they're under audit.
--:-- Andrew Prokop: There is, in fact, no law preventing him from releasing his tax returns if he's under audit. So many people suspected that he had something to hide here.
--:-- Andrew Prokop: And there were all sorts of theories going around. Was it that perhaps he paid no income taxes at all in some years? Maybe he doesn't want the American people, all of you watching tonight, to know that he's paid nothing in federal taxes.
--:-- Andrew Prokop: Was it that he might not be as successful of a businessman as he claimed to be? And it's natural to wonder, well, what is it that he's hiding in his taxes? Maybe it's that Donald Trump doesn't earn nearly as much as he has so loudly told everyone.
--:-- Andrew Prokop: Maybe he's not as rich as he says he is. Or was he perhaps claiming some deductions and write-offs that were a bit legally aggressive and perhaps dubious that might not stand up to close scrutiny?
--:-- Andrew Prokop: Okay, so what does the New York Times reporting reveal on those three big buckets? The Times story reveals that all of those are true.
--:-- Andrew Prokop: That in several years, from 2011 to 2014, Trump paid zero federal income taxes. And in 2016 to 2017, he paid the paltry sum of $750 each year. As in, you and I probably paid more taxes than President Trump.
--:-- Andrew Prokop: Yes, I certainly did. I don't know about you, Sean. I did too. I did too, Andrew. Good, good.
--:-- Andrew Prokop: They also reveal that the reason Trump paid so little in taxes is because he claimed his businesses were losing massive amounts of money. And he used those losses as an excuse on these tax forms to avoid paying income taxes.
--:-- Andrew Prokop: So that, if we take it at face value, makes him look like a rather unsuccessful businessman. And then there's the issue of the dubious deductions, and The Times sniffed out a few deductions that he claimed or write-offs that he claimed that don't seem to really pass the smell test.
--:-- Andrew Prokop: What are we talking about? The most prominent example is that Trump claimed on several projects that he had consultant expenses, and he tried to write off consultant expenses as a business expense, millions and millions of dollars worth.
--:-- Andrew Prokop: But it turns out that, according to The Times' reporting, there were no outside consultants working on these projects for the company. And they figured out that some of these payments, the amounts, match payments given to Trump's daughter, Ivanka.
--:-- Andrew Prokop: So it looks like, at least in some cases, Trump was claiming that he was spending on consultants as a business expense. But those consultants were actually his children who also work for his company. And that raises some eyebrows.
--:-- Andrew Prokop: When you say it raises eyebrows, I mean, a thing I wondered last night reading over this stuff is, is this illegal or is this just some shady accounting?
--:-- Andrew Prokop: Well, that the question hanging over all this because it obviously possible to have really clever accountants. It also possible to have really aggressive and perhaps unethical accountants.
--:-- Andrew Prokop: And the question of what was happening here it tough to conclusively say without having more underlying information about what was going on.
--:-- Andrew Prokop: But the Times also flagged payments for Don Jr.'s legal fees related to the Russia investigation as questionable because they say you're not supposed to deduct legal expenses that come from a political campaign.
--:-- Andrew Prokop: And then there's also the New York attorney general is investigating certain charitable deductions Trump claimed. The petition also names four Trump organization properties under investigation.
--:-- Andrew Prokop: Seven Springs, a 212 acre New York family estate in Westchester, 40 Wall Street, a mixed use building in lower Manhattan. The Trump International Hotel in Chicago Tower, as well as Trump National Golf Club in Los Angeles.
--:-- Andrew Prokop: For basically agreeing not to develop on certain of his properties, he claimed that this was effectively a charitable donation from him that was very valuable and should be deducted from his taxes.
--:-- Andrew Prokop: So that was already under scrutiny from the New York attorney general. So I guess it remains to be seen whether any of this is explicitly illegal or not.
--:-- Andrew Prokop: Is that fair? Yeah, I mean, that's a question for investigators and prosecutors to determine. But it certainly doesn't seem absolutely obviously entirely legal.
--:-- Andrew Prokop: What more do we learn about the president's debts? There's a lot of attention paid to the mention in the article that Trump has a great deal of debt, over $400 million worth, that will be coming due in his second term.
--:-- Andrew Prokop: $400 million? Yeah. Now, that is actually not a new revelation. That has been known since Trump filed his financial disclosure forms back during the 2016 campaign.
--:-- Andrew Prokop: So there was a lot of questioning about who exactly that debt was to, especially because the Times pointed out that the tax returns do not actually mention who holds that debt.
--:-- Andrew Prokop: But according to Trump's financial disclosure forms, we actually do know the largest debt holder for Trump is Deutsche Bank. It's about $300 million in debt.
--:-- Andrew Prokop: And these are for all active, successful projects. These are golf courses in Florida. This is partially for his hotel in Washington, D.C., which we know just opened.
--:-- Andrew Prokop: You know, rather than secret Russian money being confirmed by this or something like that, it seems that this debt that's being disclosed on the tax returns, at least so far as we know, appears to be to financial institutions and about mortgages.
--:-- Andrew Prokop: And is it all these debts that prevent the president from paying taxes like people like you and me, like most Americans?
--:-- Andrew Prokop: So the story as outlined in the Times article, what seems to have happened is that Trump used various parts of the tax code to avoid paying much income taxes for many years.
--:-- Andrew Prokop: And then in the mid 2000s, that's when The Apprentice premiered. And The Apprentice sent tons of money pouring in to Trump's coffers.
--:-- Andrew Prokop: And he actually ended up paying a lot of taxes. From 2005 through 2007, according to The Times, a total of $70 million in federal income taxes.
--:-- Andrew Prokop: The first time he paid substantial income taxes in his life. And he appears to have not liked this very much.
--:-- Andrew Prokop: So he changed his financial strategy and business strategy. What he was going to do from this point forward was to spend a lot of money and plow it often into what on paper looks like money losing businesses.
--:-- Andrew Prokop: And then he would claim those losses as business losses and use them to avoid paying income taxes in future years.
--:-- Andrew Prokop: So if you lose this much money, then you don't owe taxes on the parts of your business that are actually profitable.
--:-- Andrew Prokop: And that's how the president, who may or may not be a billionaire, gets away with paying $750 in income taxes.
--:-- Andrew Prokop: Yeah, so the question hanging over this is whether the massive losses that Trump has declared are actually real.
--:-- Andrew Prokop: Because there's one picture in which Trump is actually a pretty incompetent businessman. He's losing a ton of money by just plowing it into mainly golf courses that are losing a ton of money.
--:-- Andrew Prokop: And that's why he's paying no taxes on the part of his business that is profitable. Because he's losing so much money on the unprofitable parts of his business.
--:-- Andrew Prokop: The other explanation would be that this is a bit of trickery on Trump's part, that he wants to avoid paying taxes So he has made his golf courses particularly seem very unprofitable on paper.
--:-- Andrew Prokop: Whether this accounting is legal or not we really don't know It's impossible to say But that he is kind of seeming to be more unsuccessful than he is just because he doesn't want to pay taxes.
--:-- Host (Sean Rameswaram): Support for today's show comes from Adio. What is Adio?
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--:-- Host (Sean Rameswaram): That's attio.com slash todayexplained.
--:-- Host (Sean Rameswaram): So you've got to ask yourself, why won't he release his tax returns? And I think there maybe a couple of reasons.
--:-- Host (Sean Rameswaram): First, maybe he's not as rich as he says he is. Andrew, four years ago, Hillary Clinton was talking about Trump's tax returns in the presidential debates.
--:-- Host (Sean Rameswaram): Or maybe he doesn't want the American people, all of you watching tonight, to know that he's paid nothing in federal taxes.
--:-- Host (Sean Rameswaram): And I remember the president proudly saying his not paying federal income taxes made him smart. That makes me smart.
--:-- Host (Sean Rameswaram): Reading this reporting from the New York Times, all the loopholes and smokescreens certainly seem like the work of someone very smart or incredibly stupid.
--:-- Host (Sean Rameswaram): Well, the question is, how far do you go in claiming aggressive tax deductions or write-offs without going too far?
--:-- Host (Sean Rameswaram): And it does seem that Trump is in serious danger of having gone too far. The story reveals that he really is under audit from the IRS.
--:-- Host (Sean Rameswaram): He has been for several years and that the audit looks really serious. If there is an unfavorable finding to Trump, it could cost him about a hundred million dollars in back taxes.
--:-- Host (Sean Rameswaram): So, you know, that is more taxes than you and I probably paid, Andrew. Yes, that that would be more taxes than I paid last year.
--:-- Host (Sean Rameswaram): I will admit that. Tell me a bit more about this audit. It sounds epic.
--:-- Host (Sean Rameswaram): So back in 2010, just after the financial crisis, Trump claimed an income tax refund that was worth $72.9 million.
--:-- Host (Sean Rameswaram): That was all of the federal income taxes he paid from 2005 through 2008, according to The New York Times.
--:-- Host (Sean Rameswaram): He asked for it back. And this is back when he was making money off The Apprentice?
--:-- Host (Sean Rameswaram): If you work hard, you can really hit it big. Yes. I used my brain. I used my negotiating skills. And I worked it all out.
--:-- Host (Sean Rameswaram): Now my company's bigger than it ever was. It's stronger than it ever was. And I'm having more fun than I ever had.
--:-- Host (Sean Rameswaram): So he claimed, essentially, that he lost so much money during the recession. $1.4 billion.
--:-- Host (Sean Rameswaram): For me, failure is never an option. That he deserved a refund of the taxes he actually paid in previous years.
--:-- Host (Sean Rameswaram): Is that how federal tax code works? If you lose a bunch of money at one point, you can claim that you gave a bunch of money before and then get it back?
--:-- Host (Sean Rameswaram): So this was a specific change that was passed under President Obama that Trump was trying to take advantage to. Thanks, Obama.
--:-- Host (Sean Rameswaram): And so he basically, he wanted all of his tax money back that he paid since 2005. And then initially he actually got it.
--:-- Host (Sean Rameswaram): According to Michael Cohen, his longtime lawyer and fixer, according to Cohen's testimony to Congress last year, Trump showed him off a huge check from the U.S. Treasury.
--:-- Host (Sean Rameswaram): He showed me what he claimed was a $10 million IRS tax refund and he said that he could not believe how stupid the government was for giving someone like him that much money back.
--:-- Host (Sean Rameswaram): But the thing is, that was just a preliminary refund. And the question of whether Trump actually deserved all that money back is the topic of the audit that has been unfolding ever since.
--:-- Host (Sean Rameswaram): Has the president said anything about all of this now that the New York Times reporting seems to corroborate something that Michael Cohen said under testimony?
--:-- Host (Sean Rameswaram): He basically said it all fake news. Totally fake news. We shouldn't believe it. It's wrong. Made up fake.
--:-- Host (Sean Rameswaram): He has complained about the audit often. Every year they audit me, audit me, audit me.
--:-- Host (Sean Rameswaram): He's complained that you have people in the IRS, they treat me very, very badly.
--:-- Host (Sean Rameswaram): So yeah, he's talked about both the audit and the Times report specifically, but not in a particularly candid way.
--:-- Host (Sean Rameswaram): What about his tax attorneys? Are they on the line here? Have they commented on what the Times reported?
--:-- Host (Sean Rameswaram): So the Times ran a lot of their findings by Alan Garten, who's a lawyer for the Trump organization.
--:-- Host (Sean Rameswaram): And he claimed that most, if not all of the facts appear to be inaccurate, but He didn't seem to really have much specifics.
--:-- Host (Sean Rameswaram): He claimed that Trump has actually, over the past decade, paid tens of millions of dollars in personal taxes to the federal government.
--:-- Host (Sean Rameswaram): However, as the Times report points out, personal taxes is not federal income taxes.
--:-- Host (Sean Rameswaram): That could also include Social Security, Medicare, payroll taxes for employees. Of which he has quite a few. Yes.
--:-- Host (Sean Rameswaram): I wonder, though, how exceptional is this? Is this just how the system works for the wealthy, the well-connected, the powerful people like Donald Trump who live in gold rooms at the top of skyscrapers?
--:-- Host (Sean Rameswaram): There are two schools of thought on this. One is that the super rich have all sorts of ways to take advantage of the tax code and try to minimize their tax liability.
--:-- Host (Sean Rameswaram): I absolutely used it. And so did Warren Buffett. And so did George Soros. And so did many of the other people.
--:-- Host (Sean Rameswaram): You know, this is just rather than something unique Trump does, that this is something of a broader scandal that is unfortunately quite common.
--:-- Host (Sean Rameswaram): The other school of thought is that Trump goes further than others.
--:-- Host (Sean Rameswaram): For instance, there is this question of the audit that is clearly a sign that the IRS is at least concerned that there is something not entirely on the level here.
--:-- Host (Sean Rameswaram): To be a super rich person, if you end up paying maybe 10% of your income in taxes, that is pretty common. To pay zero is more unusual.
--:-- Host (Sean Rameswaram): It is not necessarily illegal. There are potentially legal paths to get there, but it's not the norm.
--:-- Host (Sean Rameswaram): The Times reporters write that in many years, Mr. Trump lost more money than nearly any other individual American taxpayer.
--:-- Host (Sean Rameswaram): We're talking declared losses in the year 1995 of nearly a billion dollars, for instance.
--:-- Host (Sean Rameswaram): I mean, a billion dollars of debt, a fight with the IRS over a hundred million dollars. An agency under his own supervision.
--:-- Host (Sean Rameswaram): Just reading this article, I felt like the entire Trump presidency is just a conflict of interest.
--:-- Host (Sean Rameswaram): Yeah, and one of the most ominous things in the report from The Times is, to return to a topic from before, the fact that Trump has all of these debts coming due, scheduled to come due in his second term.
--:-- Host (Sean Rameswaram): That is a highly unusual situation for a president of the United States who could be on the hook for $400 million during his second term, who could be on the hook for another $100 million if the audit doesn't go the way he likes.
--:-- Host (Sean Rameswaram): Like, Trump has a lot of money at stake. And in the midst of, you know, a pandemic that's killed some 200,000 Americans and economic crisis and reckoning on race and everything else going on in this country right now, is it possible that this information, these revelations from The New York Times will make a difference in this election?
--:-- Host (Sean Rameswaram): Well, it certainly wouldn't help Trump. He's running out of time at this point. He's trailing in the polls. He needs to turn things around.
--:-- Host (Sean Rameswaram): And this is obviously not what he wants to be talking about.
--:-- Host (Sean Rameswaram): I think there's a question of how many people who currently support Trump might change their minds over this.
--:-- Host (Sean Rameswaram): But average people pay taxes. They know how much taxes they pay. And many of them will probably think that it is quite strange that they are paying more taxes than their supposed billionaire president.
--:-- Host (Sean Rameswaram): I think it's a little strange, Andrew. How about you?
--:-- Host (Sean Rameswaram): Yeah, I would agree with that.
--:-- Host (Sean Rameswaram): Money, money, money, money my
