Tuesday night, MSNBC host Rachel Maddow led her show with the promise to reveal a portion of President Trump’s 2005 tax returns. After frenzied speculation, the two pages of returns provided only a very narrow window onto the president’s finances. In 2005, Donald Trump paid about $38 million on about $150 million in income, an effective tax rate of about 25%. He wrote down over $100 million in business losses that year, which David Cay Johnston describes as the remainder of the nearly billion-dollar tax shelter Trump benefited from starting in 1995.
What does this tell us? First, it is a nice example of a tax policy, the AMT, working as intended. Second, it illustrates just how important it is for public officials to be transparent about their finances.
Trump’s 2005 taxes are a poster child for the Alternative Minimum Tax.
The AMT was intended to prevent very wealthy people from paying very little or nothing in federal income taxes. Without the AMT, Trump would have paid about $5 million in regular income taxes, or about 3 percent of his reported income (plus an additional $2 million in self-employment taxes).
Trump has called for the repeal of the AMT. His taxes show exactly what a windfall that policy change would be for Trump and others high earners.
Second, the 2005 tax return shows us why Trump must release his entire tax returns.
Presidents dating back to Nixon have released their tax information. As Nixon himself explained: “People have got to know whether or not their president is a crook.” Two pages from a twelve-year-old tax form simply do not shed much light on the president’s business dealings or potential conflicts of interest. As it stands, Americans have every reason to worry about profiteering in the White House. Unfortunately, having dribs and drabs of tax information leak slowly into the media encourages the kind of speculative and even conspiratorial thinking that undermines public debate.
Moreover, public tax forms are about more than elected officials’ financial transparency, as critical as that issue is. Paying your taxes is an important civic responsibility, Americans overwhelmingly agree. As I demonstrate in my new book, Americans see being a taxpayer as evidence that one is an upstanding citizen who contributes to the community. That moral commitment is one reason tax compliance in the United States is so high compared to other countries.
President Trump has said that avoiding your taxes is “smart.” We are lucky that most Americans hold themselves to a higher standard. They deserve to know whether Trump has shirked a civic duty that the citizenry takes so seriously.