If you have a bad year financially, you should see some of your tax burden lifted. That's just good tax policy, argues Megan McArdle at Bloomberg. But very few of us will ever have a year as bad as Donald Trump's year in 1995, when leaked tax records reported by the New York Times show that he lost nearly $1 billion—a loss he was, quite legally, able to parlay into avoiding paying federal taxes for up to 18 years. There really isn't much new here, McArdle argues, since voters already knew Trump lost huge sums of money in failed Atlantic City ventures. It's also unlikely Trump was able to use shady tricks to negotiate down his tax debt, since a $915 million dollar loss was bound to attract heavy IRS scrutiny.
Further, Trump actually had every right to claim the net operating loss that let him leverage his disastrous 1995 against years that were more bountiful, writes McArdle. Take her example of a business that loses $1 million one year and makes $1.5 million the next: "Without the ability to carry forward the losses from year one, then over the two years, it would pay perhaps $600,000 worth of state and federal income taxes, on $500,000 worth of actual money that it could spend to pay those taxes." And yes, Trump did save a ton of money in taxes through that one very bad year, she writes. "But astute readers will have noticed that it is not actually smart financial strategy to lose $900 million in order to get out of paying $315 million to the IRS. Most of us would rather have the other $585 million than a tax bill of $0." Bad business, sure. Tax dodge? No way. Her full column is here. (More taxes stories.)
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