TRUMP’S TAX RETURNS: PART I — INFERENCES AND EVIDENCE

[NOTE: On Friday, October 7, I’ll be appearing at the Thomson Reuters Legal Executive Institute’s “Law Firm Leaders Forum” in New York City. Our panel’s topic is “Long Day’s Journey Into Night: The Evolving Law Firm Partnership and Strategic Models.” Now, on to more important matters…]

Four months ago, I wrote that Donald Trump’s excuses for refusing to release his tax returns were silly. He said he was “under audit,” but his campaign had released a letter from his lawyers at Morgan Lewis & Bockius confirming that the IRS had closed its examination for years prior to 2008 “without assessment or payment, on a net basis, of any deficiency.”

Presumption: Trump Paid Little or No Federal Taxes

If the pending audit is an issue, why wasn’t he releasing returns through 2008? There was no good answer to that one. So in a September 14 interview with the Pittsburgh Tribune-Review, Donald Trump, Jr. offered a new explanation:

“Because he’s got a 12,000-page tax return that would create … financial auditors out of every person in the country asking questions that would distract from [his father’s] main message.”

(The next morning, Trump Jr. made an unfortunate reference to “gas chambers.” Five days later, he compared Syrian refugees to a bowl of Skittles, sprinkled with a few “that could kill you.”)

Eight hours before the first Presidential debate, Republican Congressman Chris Collins came up with an equally absurd reason for Trump’s refusal to release his tax returns:

“He does not want to give his competitors the advantage of knowing the money he makes or doesn’t make in every partnership he’s involved in… You don’t disclose that kind of information to competitors. That is bad business.”

For someone seeking the Presidency, that explanation is idiotic. In fact, the argument is so ridiculous that Trump himself gutted it during the debate, when he pledged to release his returns upon completion of the current IRS audit. The truth is that — win or lose — Trump will never release his tax returns. If the pendency of an audit mattered, he would have released his pre-2008 returns long ago.

Irresistible Inference from Limited Evidence: Trump Paid Little or Federal No Federal Taxes

In May, I suggested that Trump’s reluctance could stem from the fact that, like many real estate developers who can utilize favorable rules relating to that business, he probably has paid relatively little, if any, federal taxes for decades. In August, James B. Stewart of The New York Times picked up that baton and ran with it.

Paying little or no tax, Stewart notes, was consistent with Trump’s “returns from the late 1970s, which he filed with the New Jersey Casino Control Commission when applying for a casino license in 1981. Mr. Trump reported losses and paid no federal income tax in 1978 and 1979 and paid only modest sums — a total of less than $75,000 — for the prior three years.”

Pulitzer prize-winning investigative reporter David Cay Johnston wrote in The Daily Beast that Trump also paid no income tax in 1984, citing a New York State Division of Tax Appeals ruling.

More Evidence That Trump Paid No Taxes

During the first Presidential debate, Hillary Clinton pressed the issue again. Trump took the bait — and then some.

CLINTON: “Or maybe he doesn’t want the American people, all of you watching tonight, to know that he’s paid nothing in federal taxes, because the only years that anybody’s ever seen were a couple of years when he had to turn them over to state authorities when he was trying to get a casino license, and they showed he didn’t pay any federal income tax.”

TRUMP (in one of his 25 interruptions of Clinton): “That makes me smart.”

In the law, Trump’s statement is called an admission. In a courtroom, the trier of fact would hear it. Admissions are the most damning form of evidence against a party. Juries weigh them heavily in deciding contested issues of fact.

Later in the debate, Trump interrupted Clinton again:

CLINTON: “And maybe because you haven’t paid any federal income tax for a lot of years.” [APPLAUSE] “And the other thing I think is important…”

TRUMP: “It would be squandered, too, believe me.”

That’s another admission. After the debate, an NBC reporter followed up directly with Trump in the “spin room,” and he dodged the question.

Conclusion: There’s More

“So if he’s paid zero,” Clinton said, “that means zero for troops, zero for vets, zero for schools or health. And I think probably he’s not all that enthusiastic about having the rest of our country see what the real reasons are, because it must be something really important, even terrible, that he’s trying to hide.”

What could that something terrible be? Clinton offered examples.

“First, maybe he’s not as rich as he says he is. Second, maybe he’s not as charitable as he claims to be. Third, we don’t know all of his business dealings, but we have been told through investigative reporting that he owes about $650 million to Wall Street and foreign banks.”

Trump responded in a bizarre fashion. He offered to release a list of his banks, and said he that he’ll release his tax returns as soon as Clinton releases her 33,000 deleted emails — an obvious impossibility.

“So it’s negotiable,” moderator Lester Holt suggested, referring to the release of Trump’s returns.

“No, it’s not negotiable,” Trump responded, quickly backing away from his meaningless bluff.

Why does Trump fear transparency in a way that distinguishes him from every presidential candidate in the last four decades? Because, as Trump himself might say, there’s something there. And that something may go well beyond Clinton’s checklist of possibilities.

One reason that Donald Trump refuses to release his tax returns could be the most important of all to voters. In my next post, I’ll discuss it. Here’s a hint: the title of that installment will be “From Russia With Love.”

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