Critics of Donald Trump’s apparent $916 million worth of investment losses in 1995 are missing the point when they say it’s a loophole that the wealthy businessman exploited to avoid paying income taxes in future years.
A loophole implies some sort of secret device in the admittedly confusing tax code, available only to those few people who employ accountants to ferret out the benefits.
Claiming investment losses certainly helps reduce income taxes, but it’s about the least secret deduction there is. Anybody who had investments when the dot-com bubble burst in the late 1990s, or at the start of the Great Recession in 2008, almost certainly used the same laws as Trump did in 1995.
If you sell an asset — shares of stock, for example — for less than you paid, you can deduct that loss from your income taxes.
Example: In 2010 you bought $1,000 worth of stock in a company. In 2015 you sold it for $400. You lost $600 on it.
So if your 2015 income was $30,000, you get to deduct part or all of that $600 loss, depending on many other circumstances in your return.
Your taxable income for 2015 would be reduced because you lost money on the investment.
That’s all Trump did, except his losses had a lot more zeroes on them.
Because he reported such a huge loss in 1995, it’s very likely that he didn’t pay any income taxes for many years after that. In 2012 he criticized President Obama for paying only 20.5 percent of his income in taxes when Trump himself may have paid nothing. No wonder he was so reluctant to release his tax returns.
Even so, had Trump not been so stubborn about his tax returns, all this stuff would have been dissected months ago. Reporters and voters would have moved on. Instead, his campaign will face questions about the issue all the way to November. It’s a good lesson for future presidential aspirants.
This provision of the tax code makes sense. Without a deduction for losses, plenty of businesses would not invest in new things that take a few years to become profitable.
The fact that Trump lost money is not the problem. That happens to everybody. The question that people should ask is: If he’s such a great businessman, if he alone can fix what is wrong with America, then just how did he lose more than $900 million? Expect that topic to be explored in detail in this Sunday’s debate with Hillary Clinton.
Of course, the same sort of question should be spun back to Clinton: If she’s so smart, how come she and her husband keep getting tangled up with ethics problems? How come she ignored her pledge to keep a sturdy wall between the State Department and the Clinton Foundation?
Rest assured that Clinton, and probably citizens who get to ask questions in the upcoming town hall-style debate, will zero in on Trump’s income taxes. It will at least be entertaining to hear him defend the tax writeoff as evidence that he’s a great business operator.
The $916 million question is whether Trump has the discipline to hit Clinton about her obvious flaws — or whether he can once again be baited into veering off topic to respond to meaningless issues like how much weight Miss Universe gained 20 years ago.
Jack Ryan, Enterprise-Journal
