'Brazen' fraud: David Cay Johnston on how Trump’s tax returns show he fleeced US and enriched himself

Six years of Donald Trump’s tax returns were released by a House committee on Friday after a years-long legal battle by the former president to keep them sealed. Early revelations include the finding that Trump paid just $750 in federal income tax during his first year in office in 2017, and he paid no tax in 2020. The newly released tax records give a long-overdue glimpse of Trump’s personal and business finances, which he refused to disclose during the 2016 presidential election, breaking with decades of precedent. Pulitzer Prize-winning investigative reporter David Cay Johnston, who has covered Trump for decades, says the new documents show “absolutely brazen” tax fraud. “Donald Trump has been a criminal his whole life,” says Johnston.

"Brazen": David Cay Johnston on How Trump's Tax Returns Show He Defrauded U.S. & Enriched Himselfwww.youtube.com

Transcript

AMY GOODMAN: This is Democracy Now!, democracynow.org, The War and Peace Report. I’m Amy Goodman, with Juan González.

After years of legal battles between former President Donald Trump and Congress, the House Ways and Means Committee released six years of Trump’s tax returns Friday, including thousands of documents from the years he ran for president and was in office. The records reveal Trump paid just $750 in federal income taxes during his first year in office in 2017. In his last year in office, 2020, he paid no federal taxes. They also showed the tax law Trump signed in late 2017 opened new opportunities for him, and disclosed income from a wide range of foreign countries, including Canada, Panama, the Caribbean island of Saint Martin, the Philippines, United Arab Emirates, China and Britain. Trump responded to the release in a video statement.

DONALD TRUMP: These tax returns contain relatively little information and not information that almost anybody would understand. They’re extremely complex. The radical Democrats’ behavior is a shame upon the U.S. Congress.

AMY GOODMAN: In fact, our next guest says the tax returns show Trump took tax losses he knew were fraudulent and that Trump knowingly committed brazen tax fraud. David Cay Johnston is a Pulitzer Prize-winning investigative reporter, co-founder of DCReport, his most recent book titled The Big Cheat: How Donald Trump Fleeced America and Enriched Himself and His Family, also wrote Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich — and Cheat Everybody Else.

David, welcome back to Democracy Now! It’s great to have you with us. Talk about what you found most significant, what you were most surprised by in these latest tax releases.

DAVID CAY JOHNSTON: Well, that Donald used a number of legal devices to reduce taxes is no surprise. But he did something absolutely brazen. And that requires we go back to 1984. That was the year Trump Tower was selling apartments like crazy and his first casino opened. So he had Amazons of cash flowing into his pockets. He filed a tax return that included something called a Schedule C. That’s what freelancers use. It’s what I use for my book writing business. And on it, he showed no revenue but over $600,000 of expenses. Auditors from the City of New York and the state of New York spotted that, disallowed it. Trump demanded trials. He lost both. The judges wrote scathing opinions about what he was doing.

So, what turns up in these six years of tax returns? Well, he filed 65 of Schedule Cs. Twenty-six of them had zero revenue and hundreds of thousands of dollars in expenses. There were a handful of others where the income and the expenses, exactly to the dollar, equaled out, which is impossible to believe is anything but manipulation. For those 26 returns, where he was on notice that it’s illegal to create a fictitious business and take deductions, he could easily be prosecuted, either by the federal government or Alvin Bragg, the Manhattan district attorney, for cheating on state taxes the same way. And that, I think, is the most brazen thing in there.

JUAN GONZÁLEZ: And, David Cay Johnston, for those people who are not familiar with these Schedule Cs, what are the IRS regulations about being able to have a business that has no income but has all kinds of expenses? And how long can that go on before the IRS normally has a red flag to go after you?

DAVID CAY JOHNSTON: You can start up a business and have expenses to start up, but you have to show that you were attempting to make a profit. If you go on for five years, the IRS will almost always declare that this is a hobby, and the taxpayers aren’t going to subsidize your hobby. But that Trump did 26 of these shows how determined he was to thumb his nose at the law.

And Trump has always done this. I mean, I’ve known Donald now for almost 35 years, and he’s always thumbing his nose at the law when he gets caught, as he has repeatedly in various civil and regulatory actions and some court cases, like where he cheated illegal immigrants, as he called them, who were brought into the country to work for him. He always somehow says, “Oh, no, this is a great victory for me. You don’t know what you’re talking about. It’s too complicated.” Nonsense. Donald Trump has been a criminal his whole life. He’s just very good at evading law enforcement.

JUAN GONZÁLEZ: And unlike, let’s say, a reporter like Maggie Haberman, whose recent book on Trump has gotten a lot of attention as a new expert on Trump, there are people like you and, of course, the late great Wayne Barrett who have been tracking — who were tracking Trump over decades. This whole issue of him actually during the six years of his running for president and being president actually having net losses, could you talk about that?

DAVID CAY JOHNSTON: Well, Donald reported net losses. We should think about that the way we talk about crime, reported crime. We don’t know the real level of that. So, Donald reported massive losses, so big that he had $150-some million of positive income — wages, capital gains, dividends, interest and pensions, $150 million-plus — but his tax returns show negative income of about $53 million. That’s a $200 million swing.

A lot of that was accomplished through laws that — a law that Donald Trump lobbied for in 1992 that allows real estate people, people who are big real estate investors — not mom-and-pop “I own one rental unit” people, but big real estate investors — to live pretty much tax-free, if their only income is from real estate and the rest of their income is modest.

Donald — I’ve been told by a number of retired IRS agents who have reached out to me that they’ve gone over the returns, and their fundamental conclusion — and these are people who don’t know each other; they know me — they all said the same thing: A lot of the numbers on the tax returns appear to be just made up. Of course, who ever heard of Donald just making something up?

AMY GOODMAN: I wanted to go back to 2016, one of these key presidential debates between Donald Trump and Hillary Clinton, with this exchange about Trump’s taxes.

HILLARY CLINTON: So you’ve got to ask yourself: Why won’t he release his tax returns? And I think there may be a couple of reasons. 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. 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. So —

DONALD TRUMP: That makes me smart.

AMY GOODMAN: “That makes me smart,” Donald Trump said in the background. And then, four years later, in the presidential debate with Joe Biden, with moderator Chris Wallace.

CHRIS WALLACE: I know that you pay a lot of other taxes, but I’m asking you the specific question: Is it true that you paid $750 in federal income taxes each of those two years?

PRESIDENT DONALD TRUMP: I’ve paid millions of dollars in taxes, millions of dollars of income tax. And let me just tell you, there was a story in one of the papers, I paid —

JOE BIDEN: Show us your tax returns.

PRESIDENT DONALD TRUMP: I paid $38 million one year. I paid $27 million one year.

JOE BIDEN: Show us your tax returns.

PRESIDENT DONALD TRUMP: I went — you’ll see it as soon as it’s finished. You’ll see it. You know, if you want to do, go to the board of elections. There’s a 118-page or so report that says everything I have, every bank I have, I’m totally underleveraged, because the assets are extremely good. And we have a very — we have a — I built a great company.

CHRIS WALLACE: Sir, I’m asking you a specific question, which is —

PRESIDENT DONALD TRUMP: But let me tell you.

CHRIS WALLACE: I understand all of that.

JOE BIDEN: Release your tax returns.

CHRIS WALLACE: I understand all that. I’m asking —

PRESIDENT DONALD TRUMP: But let me —

CHRIS WALLACE: No, Mr. President.

PRESIDENT DONALD TRUMP: Go ahead.

CHRIS WALLACE: I’m asking you a question. Will you tell us how much you paid in federal income taxes in 2016 and 2017?

PRESIDENT DONALD TRUMP: Millions of dollars.

CHRIS WALLACE: You paid millions of dollars.

PRESIDENT DONALD TRUMP: Millions of dollars, yes.

CHRIS WALLACE: So, not $750.

PRESIDENT DONALD TRUMP: Millions of dollars. And you’ll get to see it. And you’ll get to see it.

JOE BIDEN: When?

AMY GOODMAN: When will we get to see it? Well, we just got to see it, in 2022, at the end of the year. I wanted to ask you to respond to these, David Cay Johnston, to your allegation that just shows he committed tax fraud, which would mean he should end up in prison, and then, maybe he’s talking about the millions of dollars he paid in taxes not to the U.S. government, but to governments around the world.

DAVID CAY JOHNSTON: Yeah. The tax returns, Amy, show that Donald paid more taxes, income taxes, to foreign governments than to the United States. And Donald’s foreign entanglements as president should concern us a lot. You’ll recall in the 2016 campaign he said, you know, “The Saudis buy lots of apartments from me. They pay big prices. Why shouldn’t I like them? I like them.” That tells you that he’s influenced by people putting money in his pocket. And the president of the United States should not be. He should be insulated from that.

Everything you heard Donald say during the two debates, with Hillary Clinton and Joe Biden, was basically nonsense. In the case of paying taxes, there’s a tiny sliver of truth, because he paid overseas. The rest of it is absolute nonsense. And he knew it was absolute nonsense. But understand, Donald has no problem with lying through his teeth. He’s lied under oath in judicial proceedings. Donald essentially believes that whatever he says makes it so. So he just makes stuff up.

AMY GOODMAN: What about breaking the law?

DAVID CAY JOHNSTON: Well, why didn’t auditors catch Donald Trump is a very good question. First of all, Congress has given the IRS for two decades — more than two decades — extra money to pursue the working poor and make sure they don’t cheat on their taxes. But at the top, the Republicans have ordered the cuts of audits of corporations and wealthy people. Almost 25,000 families make $10 million a year or more. In the most recent year we have data, 66 audits were closed. That’s nothing. That’s a fraction of 1% of those families.

Secondly, Donald knows that so long as he has loss carry-forwards — that is a tax deduction he couldn’t use this year, but he can use in future years — an auditor assigned to his tax return would quickly conclude that even if he found a whole bunch of bogus material, he’d still owe no taxes. So the IRS practice is generally to close such a file and move on to one that’s easier and will produce immediate revenue. We need to change that. I’ve asked the IRS and members of Congress now for decades to conduct a detailed study of people who report negative incomes, not once in a while because a business fails, but year after year after year, which is what Trump does. I think we’d discover —

JUAN GONZÁLEZ: And, David —

DAVID CAY JOHNSTON: — some shocking things about our tax system. Yes, Juan.

JUAN GONZÁLEZ: David, I’d like to ask you, in terms of this — going back to the Schedule C issue that you mentioned, you highlighted, in one piece you wrote about it, you said that you thought that this was the easiest case to make in terms of a potential criminal activity. Why is that? And why would a jury be more likely to find someone guilty just on the Schedule C violations than on the more complex legal issues that arise when you study Trump’s filings in depth?

DAVID CAY JOHNSTON: Yeah. Juan, first of all, that’s not the most important case to bring. The most important case are the human intelligence documents he stole and took to Mar-a-Lago.

But on the tax front, creating a fictitious business and taking tax deductions for it is a plain and simple thing ordinary people can understand. Many of the things Donald Trump has done with his taxes are esoteric. It took me years and years and years to learn how the tax system really works. We pay tax lawyers tremendous amounts of money, because our tax code, unnecessarily, is ridiculously complicated and involves very complex concepts involving accounting and depreciation and recognition of income and all sorts of terms that I’m sure most people watching are going, “What?” But this is simple and easy to prove. And remember, Alvin Bragg, the Manhattan DA, got 17 felony convictions on 17 charges against the Trump Organization and a subsidiary company, both 100% owned by Donald Trump, for much smaller tax fraud involving freebies that were untaxed to executives — cars, apartments, things like that.

Showing to people, “Here’s the tax return. There’s no evidence of a business that existed. He took these deductions. There’s no evidence of documentation, receipts and invoices and things that show actual business,” people will grasp that, I believe. And it would not — I think it would take a prosecutor at most three days to present the case.

AMY GOODMAN: Finally, why was only one IRS agent charged with investigating and reviewing Donald Trump’s taxes when he was president? The significance of that kind of review not having happened, even though it’s the law, David?

DAVID CAY JOHNSTON: Right. Presidential tax returns and vice-presidential returns are supposed to be audited. Biden and Kamala Harris have been audited. Obama and Biden were audited. Donald Trump appointed the Treasury Secretary Steve Mnuchin, and he appointed Charles Rettig, who until recently was the IRS commissioner. And while they say they had no idea that these audits weren’t being done, they’re responsible. Doesn’t matter if you didn’t know. The question is “Why didn’t you know?”

Assigning a single IRS agent to something this complex and refusing him access to specialists — the IRS employs specialists —

AMY GOODMAN: We have 10 seconds.

DAVID CAY JOHNSTON: — in everything, in all sorts of things — shows you that this is the lawlessness of the Trump administration. They were lawless.

AMY GOODMAN: Well, David Cay Johnston, we thank you so much for big with us, twice Pulitzer Prize-winning investigative reporter, co-founder of DCReport — he is passing the baton and stepping down from that — author of The Big Cheat: How Donald Trump Fleeced America and Enriched Himself and His Family and many more books, including Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich — and Cheat Everybody Else. I’m Amy Goodman, with Juan González.