The Weekly Sift

Bad as it is, what we know so far about Trump’s taxes may not be the worst of it.

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One persistent problem of 2020 is that it’s hard to hold an issue in your mind for any length of time. The New York Times revealed Trump’s taxes just a little over a week ago, and since then two other big stories — the debate disaster and the White House coronavirus outbreak — have all but washed the tax issues out of the news. I think they deserve a little more attention than that.

Narratively, the problem with the tax story is that it’s a bunch of smaller stories, none of which encompasses the whole thing. It’s certainly about tax avoidance, maybe legal and maybe not. But it also could be about laundering money for people we can’t identify.

$750. The headlines that came out of the original NYT article were how little Trump has paid in taxes: $750 in each of 2016 and 2017, and nothing at all in many other years. And that certainly is scandalous, whether or not it turns out to be legal. I pay considerably more than that every year, and probably you do too. Nobody thinks Joe Biden is a billionaire, but he paid $299,346 in 2019.

Trump famously said “that makes me smart” when Hillary Clinton accused him of not paying his fair share of taxes in 2016. But that’s the same kind of “smart” that got him excused from Vietnam with bone spurs — unlike the “suckers” and “losers” who died for their country. It’s similarly “smart” to stiff your contractors, trade in your wives when they start to age, hire illegal immigrants to tend your golf courses, create a phony university and a phony foundation, and do a lot of the other things that have kept Trump safe and rich and feeling pleased with himself.

But I don’t think most Americans want to be led by someone with those kinds of smarts. Trusting “smart” people like Trump will usually get you outsmarted eventually. Someday, it will be smart to screw you the way he has screwed everybody else.

The bad businessman. The other headline from the NYT article was that many of Trump’s most famous properties are money-losers, and always have been.

The second article in the NYT series (the newspaper claims more are coming) showed how the windfall of income related to his TV show “The Apprentice” bailed him out of the financial difficulties created by his other business failures. In other words: His ability to play a successful businessman on TV covered up the fact that he actually isn’t one.

He sold his image in a variety of ways, many of which were harmful to the people who trusted him. The NYT finds he was paid $8.8 million to promote ACN, a multi-level marketing company that promoted what were essentially pyramid schemes.

The NYT paints a picture of a man who gets big windfalls (the first one being at least $400 million from his father), and then proceeds to fritter them away.

Debt. Trump owns a lot of assets and has taken out a lot of loans against them. The NYT estimates that about $400 million of loans come due in the next four years. We know some of the lenders (Deutsche Bank), but not all of them.

Nothing Trump is doing as a businessman is generating much cash. So during his prospective second term, he will either need to get new loans or sell assets. The security vulnerabilities here are obvious: If he gets loans or finds buyers, particularly from abroad, we will never know whether there is a bribe hidden somewhere in that money.

Ivanka? One way Trump lowered his taxes was to claim millions in “consulting fees” as business expenses. In at least some of those cases, it looks like he was funneling money to his kids, who shouldn’t be getting consulting fees from businesses that also list them as employees.

This resembles an apparently illegal scheme that Trump’s father used to funnel money to him.

The Times traces about $750K that went to Ivanka via this path. But CNN speculates about the other $25 million in consulting fees:

So we don’t know who received the other $25-ish million that Trump wrote off to “consulting fees” during that time. (Worth noting: The Times reports that Trump wrote off roughly 20% of all income he made on projects over that time to “consulting fees.”) Given the apparent payment to Ivanka Trump revealed by the Times, however, it’s not terribly far-fetched to wonder whether all (or much) of those “consulting fees” went through a similar process: Paid to one of Trump’s offspring who were serving as both managers of these operations for the Trump Organization and as consultants to the projects as well.

Money laundering? The most serious accusation is speculative, but the speculation explains transactions that are otherwise mysterious. A tweetstorm by author Adam Davidson delves into one Trump property (his golf course in Scotland) in detail, and finds some strange bookkeeping.

The thing everyone reports is the losses–the shareholder (Trump) has lost more than £7M. But the interesting stuff is the fixed asset value and the creditors — over one year. Trump is all of them: he owns the asset, lends the money, owes the money, is owed the money. …

There’s much more to say–each line here is fascinating. But the overall picture is crystal clear: Every year, Trump lends millions to himself, spends all that money on something, and claims the asset is worth all the money he spent.

He cannot have spent all that money on the properties. We have the planning docs. We know how much he spent — it’s far less than what he claims. The money truly disappears. It goes from one pocket to another pocket and then the pocket is opened to reveal nothing is there.

… These financials are clear: this is not a golf business, it’s a money disappearing business.

… If this is a money disappearing business and it is not only tax fraud, then he is making money disappear for somebody else and charging some sort of fee. Which might explain why a money-losing golf course pays huge fees to its owner.

Two obvious questions:

• What would happen if Trump’s other money-losing properties came under similar scrutiny?
• Didn’t the Mueller investigation look into all this?

The answer to the first is that we don’t know. And the answer to the second, we now know, is no. Mueller did not follow the money.

Trump had also done lots of business with Deutsche Bank, and although Mueller issued his subpoenas secretly, word somehow leaked to 1600 Pennsylvania Avenue. When the White House asked Mueller’s team what they were examining, Mueller responded that Manafort, not Trump, was the target.

“At that point, any financial investigation of Trump was put on hold,” writes Andrew Weissmann, a veteran federal prosecutor who played a senior role in Mueller’s investigation, in a new book. “That is, we backed down — the issue was simply too incendiary; the risk, too severe.