Donald Trump paid $0 tax in 2020: Will he be punished?

It was a question on everyone’s minds and finally we have an answer to it. How much income tax did Donald Trump pay? The answer: In 2020, he paid $0. No, that’s not a typo, but the former US president actually didn’t pay any income tax in the last year of his tenure as the commander-in-chief.

Finally, several years worth of former President Donald Trump’s tax returns are finally being made public after years of legal battles and congressional inquiries, suggesting that it will become more difficult for him to shield his business dealings from scrutiny after evading mandatory audits for years.

Here’s what we know about his tax returns so far and the implications of releasing such data.

Trump’s taxes revealed

On Tuesday, the House Ways and Means Committee voted to release Trump’s tax returns for 2015 through 2020. While the full records will take some time to be released, some parts of the records have been revealed.

According to documents released by the House Ways and Means Committee, showed that Trump paid $1.1 million in federal income taxes between 2016 and 2019, but none in 2020 after his businesses reported big losses amid the COVID-19 pandemic.

The figures show that the former reality television star claimed enormous deficits from 2015 to 2020. A look at the data shows that in 2015, Donald and wife Melania Trump declared negative income of $31.7 million and paid federal income taxes of $641,931. In the following year, they had a negative income of $31.2 million and paid taxes amounting to $750.

It is important to note here that these were the years that Trump was campaigning for presidency.

In 2017, as per the data released, the couple declared negative income $12.8 million and once again paid $750 in taxes. In 2018, the US First Couple declared an income of $24.4 million and paid $999,466 in federal income taxes.

In 2019, the Trumps declared $4.44 million in total income and paid $133,445 in taxes.

In Trump’s last year in White Office, the former president declared negative income of $4.69 million and paid $0 in tax returns and, in fact, they claimed a refund of $5.47 million.

While this is the first time that Trump’s taxes have been made public — he’s the first president since Richard Nixon not to declare his returns — they have been leaked in the past. In 2020, The New York Times had alleged that Trump had paid no income tax in 10 of the previous 15 years after reporting massive losses. According to the paper, it was “largely because he reported losing much more money than he made.”

Story behind Trump’s $0 tax

So, how is it that Trump paid no taxes in 2020. The Hill reports that Trump reported a $16 million loss from his real estate businesses. That loss put the former president almost $5 million in the red for 2020. That means he didn’t have any taxable income and he didn’t pay anything in income tax.

Steve Rosenthal, a tax analyst with the Urban-Brookings Tax Policy Center, was quoted as telling The Hill, “Trump uses losses as a sheltering device.”

Speaking to CNN separately, Rosenthal said: “It’s the 2,000-pound gorilla… He still uses the net operating losses to reduce his tax liability.”

This method has been used by other wealthy people in America to avoid paying taxes. The US tax laws are such that one can negate the profits one has made with losses incurred in other ways, to reduce the total tax liability. Not surprisingly, the super-rich capitalise on this loophole very effectively.

Implications for Trump

Most tax experts note that Trump hasn’t broken any laws — he has not committed tax evasion. However, questions have been raised if his moves have been ethical.

Erin Bass, who studies business ethics at the University of Nebraska, Omaha, pointed this aspect out in a report by The Conversation. She said, “Public leaders are evaluated not just on their own personal morality, but also by what influence their behaviours could have on others.”

“If a public leader avoids taxes, it might signal to the public to do the same, which could have greater consequences,” she added.

One has to agree, the tax revelations don’t look good for Trump, who’s already mired in several legal issues — investigations into his conduct on 6 January 2021 when a mob of rioters stormed the US Capitol on his behalf in an attempt to stop Joe Biden’s election victory from being certified and his handling of classified documents after leaving office.

Political pundits claim that the disclosures about his tax returns would negatively impact Trump, who recently announced his 2024 run for president .

It also raises larger questions on his purported wealth — which he has boasted about on several occasions — and also just how effective is he as an executive.

Besides Trump, the disclosures also reflect a broader American problem: wealthy Americans pay very little in federal income taxes and the failures of the IRS (Internal Revenue Service).

The release of Trump’s tax returns by the House Ways and Means Committee has shown that the IRS did not properly audit Trump during his first two years in office.

House Speaker Nancy Pelosi tweeted on Tuesday that the committee’s investigation has “revealed the urgent need for legislation to ensure the public can trust in real accountability and transparency during the audit of a sitting president’s tax returns — not only in the case of President Trump, but for any president.”

With inputs from agencies

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