The New Yorker
By John Cassidy
October 3, 2018
Careful financial journalists and investigative reporters who have covered Donald Trump for decades long ago dismissed his claim to be a self-made billionaire as self-serving hogwash. It is well known that Trump’s late father, Fred Trump, who was one of the biggest property developers in New York, helped finance some of his second son’s early real-estate deals, and, later on, occasionally bailed him out. One story that has been told many times: in the early nineteen-nineties, when one of Trump’s Atlantic City casinos, Trump Castle, was struggling to make an interest payment on its debt, the elder Trump dispatched a lawyer to buy almost $3.5 million worth of gambling chips, thereby extending the casino a disguised loan. But none of this preëxisting information can detract from the monumental investigation into the Trump family’s finances that the Times published on Tuesday. Running more than thirteen thousand words, the Times article reveals that Trump didn’t merely get some family support: he received a vast fortune “the equivalent today of at least $413 million from his father’s real estate empire, starting when he was a toddler and continuing to this day.”
Trump has claimed that his father, who died in 1999, helped him out only once, by extending a loan of a million dollars. The Times article says the elder Trump extended to his son and his businesses loans and lines of credit worth “at least $60.7 million, or $140 million in today’s dollars.” Trump gradually received the rest of the $413 million in the form of salaries, profits, gifts, and bequests. “By age 3, Mr. Trump was earning $200,000 a year in today’s dollars from his father’s empire,” the story says. “He was a millionaire by age 8 . . . Soon after Mr. Trump graduated from college, he was receiving the equivalent of $1 million a year from his father. The money increased with the years, to more than $5 million annually in his 40s and 50s.” In 2004, when Trump and his siblings sold off the remaining family businesses, he received $177.3 million.
These revelations should lay to rest what remains of the myth of Trump as a Horatio Alger figure. But the Times article didn’t stop there. It asserted that much “of this money came to Mr. Trump because he helped his parents dodge taxes,” especially estate taxes. “He and his siblings set up a sham corporation to disguise millions of dollars in gifts from their parents. . . . Records indicate that Mr. Trump helped his father take improper tax deductions worth millions more. He also helped formulate a strategy to undervalue his parents’ real estate holdings by hundreds of millions of dollars on tax returns, sharply reducing the tax bill when those properties were transferred to him and his siblings.” Many wealthy families go to great lengths to minimize their estate-tax liabilities, of course. But the Times article claimed that some of the Trump family’s schemes amounted to “instances of outright fraud.”
In one instance that the piece details, the Trumps claimed a group of buildings were worth $90.4 million when they converted them to co-ops, but valued them at $13.2 million on one of Fred Trump’s tax returns, which he and Donald Trump both signed. On another occasion, Trump and his siblings valued a building in Queens that they were converting to a co-op at $17.1 million, and subsequently listed it as worth $2.9 million on a tax return.
In response to inquiries from the Times, a lawyer for Trump, Charles Harder, issued a statement that said, “The New York Times’s allegations of fraud and tax evasion are 100 percent false, and highly defamatory. There was no fraud or tax evasion by anyone.” But rather than contesting the details of the various schemes that the Times story outlined, Harder sought to distance his client from them. “President Trump had virtually no involvement whatsoever with these matters,” Harder said. “The affairs were handled by other Trump family members who were not experts themselves and therefore relied entirely upon . . . licensed professionals to ensure full compliance with the law.”
It is perhaps not surprising that Harder didn’t challenge the particulars of the Times story. In addition to combing through countless public filings and court documents, the Times reporters drew on “tens of thousands of pages of confidential records—bank statements, financial audits, accounting ledgers, cash disbursement reports, invoices and canceled checks,” the story said. “Most notably, the documents include more than 200 tax returns from Fred Trump, his companies and various Trump partnerships and trusts.”
Inevitably, there will be speculation about how the Times got hold of these papers, and whether anybody connected to the Trump family provided them. The story refers to depositions taken in a family dispute over Fred Trump’s will, which was eventually settled. It also mentions, “John Walter, a favorite nephew of Fred Trump’s . . . who died in January,” and who “was the unofficial keeper of Fred Trump’s personal and business papers, his basement crowded with boxes of old Trump financial records.”
Regardless of where the Times got its scoop, it contains a trove of new information about the President, much of which confirms what we already knew, or suspected. He is a shameless flim-flam man with practically no regard for the truth or the quaint notion that wealthy people like him have a civic duty to pay their fair share of taxes. Although Trump still hasn’t released his tax returns, previous exposés have shown that he paid no income taxes at all in 1978, 1979, 1992, and 1994. A Times story from 2016 reported that, during the early nineteen-nineties, he took an enormous tax loss—more than nine hundred million dollars—which he used to greatly reduce his tax liabilities in subsequent years. “I was able to use the tax laws in this country and my business acumen to dig out of the real-estate mess,” Trump said during the 2016 campaign. “Few others were able to do what I did.”
So what now? The Times article noted that “it is unlikely that Mr. Trump would be vulnerable to criminal prosecution for helping his parents evade taxes, because the acts happened too long ago and are past the statute of limitations.” Furthermore, the I.R.S. did challenge some of the valuations that the Trump family placed on Fred Trump’s buildings at the time their ownership was transferred, forcing his heirs to make modestly higher tax payments. But, even then, the family members paid “hundreds of millions of dollars less than they would have paid based on the empire’s market value,” the article said.
This experience points to an enduring scandal that goes well beyond the Trumps. “The key takeaway from the New York Times article . . . is that the wealthy and powerful abide by a different set of rules than the rest of us,” Alan Essig, the executive director of the Institute on Taxation and Economic Policy, a nonpartisan research group, said in a statement. “Not only does the tax system allow the wealthy to take advantage of legal loopholes, it also allows them to blur the line between legal avoidance and illegal tax evasion with little consequence. . . . We need to reform the tax system to close the loopholes the wealthy use to avoid taxes and substantially increase funding to the IRS to ensure that the laws we do have are robustly enforced.”
But, of course, the Trump Administration and the Republican Party are busy ignoring this advice. The G.O.P. tax-reform bill that passed at the end of last year did virtually nothing to prevent rich people from evading the estate tax and other levies. In reaction to budget cuts imposed by the Republican-controlled Congress, the I.R.S. has slashed its enforcement staff by about a third and reduced the number of cases it brings by about a quarter. “Due to budget cuts, attrition and a shift in focus, there’s been a collapse in the commitment to take on tax fraud,” Chuck Pine, a tax consultant who was formerly a senior criminal-enforcement officer at the I.R.S., told ProPublica. “I believe there are thousands of individuals who have U.S. tax obligations and are not complying with U.S. tax laws.” They are following the example set at the top.