October 2, 2016

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Business October 2, 2016

How Donald Trump Would Be Able To Not Pay Income Taxes For 18 Years

Donald Trump speaks about his tax plan in New York on Sept. 28. Julie Jacobson/AP hide caption

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Julie Jacobson/AP

We don’t really know what Donald Trump paid in taxes, because unlike every other major presidential candidate in the last four decades, the GOP nominee has refused to release his tax returns. But the New York Times offers a tantalizing theory that Trump could have legally escaped income tax liability on hundreds of millions of dollars, thanks to staggering losses from two decades ago.

That he could have done so while still enjoying a lavish lifestyle is testament to both the flexibility of the federal tax code—especially when it comes to real estate professionals—and the willingness of creditors and investors to keep propping up a businessman who had already lost nearly a billion dollars.

The Times account is based on a fragmentary sample of Trump’s tax returns from a single year that were leaked to the newspaper by an anonymous source. Trump’s former accountant confirmed their authenticity for the paper.

The forms show that in 1995, Trump claimed a business loss of nearly $916 million. Much of that likely resulted from Trump’s business losses in previous years, including money-losing casinos in Atlantic City and the Trump Shuttle airline.

At the time, the tax code allowed such losses to be “carried forward” up to 15 years, offsetting income and reducing or even eliminating tax liability and carried backward on income up to 3 years prior. (The allowance has since been changed to carry forward 20 years and carry back 2 years.) The code is particularly flexible when it comes to real estate professionals like Trump.

A doctor who owns a rental property and loses money on it can only use that loss to offset rental income, not what he or she earns practicing medicine.

But thanks to more generous allowances for real estate professionals, Trump would have been allowed to use his casino losses to offset income from unrelated work, including the millions he earned as star of “The Apprentice” television show, or licensing his name to the maker of Trump neckties.

“Here’s the magic of real estate,” says Lee Sheppard, contributing editor of Tax Notes, a Washington-based journal. “Congress, which writes the tax laws, affirmatively subsidizes commercial real estate through the mechanism of the tax code.”

The favorable treatment of real estate developers is just one example of the way the tax code rewards real estate development and investment. The popular tax deduction for home ownership is another, and one of the costliest in the overall code.

“Real estate is a very powerful lobby in Washington,” Sheppard says. “There used to be a running joke that it would be cheaper for the government to make real estate tax-exempt.”

The losses cited on Trump’s 1995 return were so massive, he could have earned up to $50 million dollars a year for nearly two decades without owing any income tax.

“Mr. Trump was a spectacular loser,” said Steve Rosenthal, a former staffer for the Joint Congressional Committee on Taxation and a senior fellow at the Tax Policy Center.

Because the tax records obtained by the New York Times are fragmentary, we don’t know the detail behind the losses that Trump claimed that year. A separate statement describing the losses was not included in the leaked documents.

“That’s why we should see his tax returns,” said Rosenthal. “Was Mr. Trump really losing money that spectacularly? Or was he ginning up his losses” through accounting maneuvers?

It’s a provocative question for a presidential candidate whose campaign is largely based on his purported success as a businessman.

“Donald Trump has a long, well-documented history of reporting different numbers” to different audiences, said David Cay Johnston, an investigative reporter, tax expert, and author of The Making of Donald Trump.

Trump’s Atlantic City casino empire, overbuilt and overleveraged, hemorrhaged money during the 1990s and ultimately filed for bankruptcy. Investors in his public company lost more than $1 billion, and a number of businesses that worked on the casinos went unpaid.

But debts that were personally guaranteed by Trump were transferred to others, while Trump himself collected tens of millions of dollars in salary and bonuses.

For years, investors and creditors went along in the belief that Trump and his lavish public lifestyle added value to the aspirational casino business.

“If his lifestyle is part of the brand, his lifestyle is kind of a business expense in itself,” said Sheppard.

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Health October 2, 2016

A Bygone Era: When Bipartisanship Led To Health Care Transformation

Construction of Moses H. Cone Memorial Hospital in Greensboro, N.C., was partially funded by the Hill-Burton Act. The hospital, seen circa 1973, was at the center of a court case, Simkins v. Moses H. Cone Memorial Hospital, that brought an end to racially segregated health care. Cone Health Medical Library hide caption

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Cone Health Medical Library

People might be forgiven for thinking that the Affordable Care Act is the federal government’s boldest intrusion into the private business of health care.

But few know about a 70-year-old law that is responsible for the construction of much of our health system’s infrastructure. The law’s latest anniversary came and went without much notice in August.

The Hill-Burton Act was signed into law by President Harry S. Truman on August 13, 1946 — and its effect on health care in the U.S. was nothing short of monumental. Perhaps more importantly, it stands as an example, warts and all, of how a bipartisan Congress can forge compromises to bolster American infrastructure and boost the well-being of our people.

Known formally as the Hospital Survey and Construction Act, Hill-Burton started as a Truman initiative. In November 1945, only two months after the official end of World War II, he gave a speech to Congress outlining five goals to improve the nation’s health. The first and least controversial of these called for constructing hospitals and clinics to serve a growing and rapidly demilitarizing population.

Hill-Burton provided construction grants and loans to communities that could demonstrate viability — based on their population and per capita income — in the building of health care facilities. The idea was to build hospitals where they were needed and where they would be sustainable once their doors were open.

Over the subsequent decades, new facilities sprang up all around the country, including many in the 40 percent of U.S. counties that lacked hospitals in 1945.

By 1975, Hill-Burton had been responsible for construction of nearly one-third of U.S. hospitals. That year Hill-Burton was rolled into bigger legislation known as the Public Health Service Act. By the turn of the century, about 6,800 facilities in 4,000 communities had in some part been financed by the law. These included not only hospitals and clinics, but also rehabilitation centers and long-term care facilities.

In 1997, this type of direct, community-based federal health care construction financing came to an end. However, numerous Hill-Burton clinics and hospitals still exist around the country, specifically financed by a part of law to provide care to those unable to afford it.

“After the passage of Medicare and Medicaid, Hill-Burton ranks right up there among the most important pieces of health legislation in the 20th century,” physician and historian Howard Markel told Shots.

Hill-Burton introduced many ideas in health care financing that are still in use today. Chief among them is that hospitals receiving federal monies are obligated to provide free or subsidized care to a portion of their indigent patients. U.S. non-profit hospitals (still the vast majority) must demonstrate evidence of ‘community benefit’ to maintain tax-exempt status. Providing care to the uninsured is one of the most common ways to meet this obligation.

Grace Hospital in Morganton, N.C., was funded in part by the Hill-Burton Act. Construction began in 1969. Courtesy of Blue Ridge Healthcare Foundation hide caption

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Courtesy of Blue Ridge Healthcare Foundation

Another idea rooted in Hill-Burton is federal-state matching, meaning that federal appropriations must be matched by dollars from states, which is how Medicaid is financed.

Hill-Burton also has a poorly remembered dark side: Because of its provenance as a bipartisan law named for a Northern Republican (Sen. Harold Burton of Ohio) and a Southern Democrat (Sen. Lister Hill of Alabama), the law codified the idea of “separate but equal” in hospitals and health care facilities.

In order to achieve compromise and the necessary Democratic votes for passage, Southern Democrat segregationists had to be appeased. When this aspect of the law was overturned in a federal court challenge in 1963, Hill-Burton went on to become a major driver of hospital desegregation.

It seems worth noting that Sen. Hill’s surgeon father named him after Dr. Joseph Lister, a pioneer of antiseptic surgery.

A month after enactment of the law, Truman, a Democrat, appointed Republican Sen. Burton to the Supreme Court in a bipartisan gesture that doesn’t seem imaginable in today’s polarized political landscape. And consider this: Burton was unanimously approved by the entire Senate the same day he was appointed. With no committee hearings! He joined the court the very next day.

“Hill-Burton speaks to an earlier time in our history when the American people and those who represented them had confidence that government could do good things,” Markel said. “And that makes it all the more phenomenal to me.”

John Henning Schumann is a writer and doctor in Tulsa, Okla. He serves as president of the University of Oklahoma-Tulsa. He also hosts StudioTulsa: Medical Monday for KWGS – Public Radio Tulsa. You can follow him on Twitter: @GlassHospital.

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