Tax preparer and Forbes contributor Ryan Ellis writes inthat “professional” journalists’ hot takes about Donald Trump’s 1995 tax return show how little they know about taxes and business.
To state the obvious, political reporters don’t know a damned thing about taxes. I know this–believe me (to channel my inner Donald). Part of what I do for a living is prepare people’s taxes in the Washington, DC area. As an Enrolled Agent, I run into all sorts of clients. The most political (that is, horse race/hot take) clients compete with performing artists for the least amount of knowledge when it comes to taxes. I’ve even had some of them forget to bring their W-2s to a tax session.
That ignorance was on display in vivid colors over the weekend. We were told that this tricky NOL was some sort of “loophole” that only super-rich bad guys like Donald Trump got to use. We were told that this relieved him of having to pay taxes for 18 years, a laughably arbitrary, made up number that is the tautological output of simple arithmetic and wild assumptions.
In fact, a net operating loss is very common in businesses. As Alan Cole of the Tax Foundation pointed out this morning, about 1 million taxpayers had an NOL in 1995. It results from business deductions exceeding business income in a particular year. Under tax rules, this loss can be carried back up to two years, and carried forward up to twenty years. If this is a “loophole,” what are these political reporters suggesting? That a business loss should simply be eaten by the taxpayer? That Uncle Sam should be a full partner in your profits but not in your losses? How is that fair?
We also heard that real estate depreciation–of all things–was a loophole! Could anything be more mundane and ordinary on business tax returns than depreciation deductions? Under the consumption tax base that I and virtually all conservatives support, depreciation would be supplanted by first year full expensing (which, ironically, would cause NOLs in most cases when it comes to structures). But real estate depreciation is no loophole under any theory of tax.
Read the rest of the article here.