Trump’s desperate need to win re-election has become more obvious this week, even before the recent news that he has caught COVID-19. Many pundits ascribe the palpable angst evident in the first presidential debate to his narcissistic personality. However, the extensive revelations of his tax documents by the New York Times suggest that grasping so tight to the presidency may be more motivated as well by potent personal financial woes.
Trump’s personal financial desperation may spill over into reckless action in foreign policy - including in US-China relations - as he tries harder and harder to shift blame from himself onto foreigners. He made the claim in the debate, one that he has repeated again and again, that China is to blame for over 208,000 COVID-19 deaths in the US, not his own failed response. He may try other ploys to shift public concern to China as the election looms and Trump’s last chance slips away to exploit his public office to deflect his private financial failure. However, most of the public by now seems immune to Trump’s lies, so it would be hard for him to spin any conflict he might provoke in his favor.
Both Trump and his Democratic opponent, Joe Biden, have accused the other of being “too soft on China.” Both call for strong measures to protest Chinese policies in a variety of areas, but Biden has made clear that he thinks the broad tariff war unleashed by Trump is counterproductive. He prefers narrower, more targeted sanctions against specific offenders.
It may take weeks for a complete analysis of Trump’s tax documents in the context of all that has been previously documented about his business dealings. However, three jarring points are already obvious: 1) Trump largely evaded Federal income taxes for decades, 2) numerous red flags suggest that his evasion may include systematic tax fraud, and 3) he has far less wealth and income than he has always claimed and is in fact verging on bankruptcy again. Hanging on to the presidency may be his only change of averting ruin in the near term, if not actual jail time.
It is now painfully obvious (as I always suspected) why Trump has fought so zealously in the courts to avoid doing what he has promised to do for five years: release his tax returns. The IRS audit that he has long used as the excuse to avoid disclosure is revealed by the Times to involve an IRS claim that he received a $72 million tax refund that was not deserved. If the IRS is correct, Trump would owe over $100 million, adding penalties and interest. If his tax filings are not completely fraudulent, on the other hand, they indicate that he cannot afford to pay this debt along with at least $421 million he claims to owe to other creditors without selling his interest in most if not all of his existing properties to repay this debt.
The tax documents show that most of Trump’s core properties and businesses lost money year after year. It appears he would have been bankrupt already except for $427 million he received for starring in the reality TV hit, “The Apprentice.” That money too, has since been largely lost or expended, according to Trump’s tax filings.
There is an important tax accounting principle that many pundits are ignoring. Even if Trump appears to be losing money on most of his real estate businesses, a big chunk of these are paper losses counted as depreciation. Accounting law, which most real estate investors take advantage of, presumes that buildings decrease in value to zero over time, whereas in fact they typically increase instead. However, when a theoretically depreciated building is sold, the taxable profit from selling it is thereby magnified, causing a large capital gain tax burden in the year of sale. Thus selling a building to pay debts can result in a very large tax burden, potentially offsetting the prior tax advantage of the annual depreciation deductions. Trump may be loath to sell real estate assets and thereby suffer a further tax burden known as “depreciation recapture.” Liquidation might avert total bankruptcy when his debts come due, but it would also reveal the vastly reduced scale of his actual wealth and force him to confront an enormous deferred tax liability.
One important thing not found in the documents thus far is to whom he owes his vast debt. Most of the creditors are presumed to be foreigners because it is well known that American banks have largely shied away from lending to him since his multiple bankruptcies. Those willing to lend to such a high-risk client as Trump are likely to include, according to considerable evidence in the public record, foreign interests using Trump real estate assets for money laundering, tax evasion, and influence peddling.
Mirroring Trump’s strenuous efforts to keep his taxes hidden, he has also struggled in multiple courts, largely unsuccessfully, to keep his financial records secret from Congress and various jurisdictions that have issued subpoenas for documents required by investigations into his potential business fraud and conflicts of interest, including those already exposed in Congressional testimony under oath by his former attorney, Michael Cohen.
Trump’s tax records indicate he received income from and paid taxes to Turkey, the Philippines, and India. He has praised the leaders of all three countries and given them significant favors. Did he do this in consideration of the debt he owes or the income he received from these countries? Further investigation may reveal more fully the conflicts of interest between Trump’s duty to represent American interests in foreign policy and his temptation to favor his own financial interests abroad.
Trump himself, as well as close allies like his son-in-law Jared Kushner, also have well documented foreign business interests in the Middle East, China, and Russia that very likely pose conflicts of interest with their foreign policy obligations. The American people are entitled to know the details of these relationships. They deserve representation by leaders uncorrupted by personal financial ties that might contradict their oath of office.
Trump’s wildly aggressive rule-breaking behavior during the first presidential debate indicates how seriously he feels his pyramid of business frauds and failures closing in on him. Maintaining power is much more for him than mere ego gratification. It may be essential for keeping himself, his family, and his family business solvent and safe from looming legal repercussions.
That is why Trump has been adamant to insist that he cannot and must not lose. He is not considering the will of the American voters. He is thinking about his own collapsing house of cards. He has gotten so reckless that he has urged his supporters to vote twice (in person and by mail), which is illegal, of course. He has refused multiple times to pledge that he would respect the result of the election if he loses. He continues to appeal to violent white supremacists, even in the debate, to “stand by” as if ready for violent action if he should lose. He has told his supporters in rallies that he cannot lose except by fraud from the other side. Most assume it is his personal fear of failure that forces him to deny in advance any contrary will of the people, but the evidence increasingly shows it is more than his fragile ego at stake. His financial solvency is also jeopardized by losing power. Yet polling consistently and steadily indicates that he will lose the election to Biden. Trump seems to grasp that too, adding to his desperation as the walls close in.