Politics & Policy

What’s Wrong with Taking Tax Breaks?

(Dreamstime image: Carroteater)
We already knew the basic outlines of the Trump tax-deduction ‘bombshell.’

Every spring, millions of progressive households join with their conservative neighbors and busily get to work doing the exact same thing. They open TurboTax, take documents to an accountant, or sit down with pencil and paper at the kitchen table to figure out how to pay the smallest amount of taxes possible. Sure, they may have disagreed on what tax rates should be or whether certain deductions should exist, but after the rules are set, both sides apply them, work diligently to minimize their tax liability, and celebrate when the refund is larger than expected.

In all my years on this planet, speaking to friends and family members on the left and right, I have never — not once — heard anyone say, “You know, I could have taken that business-expense deduction, but I decided the troops needed the cash more than me.” Yet to read Twitter, one would think Donald Trump is a monster for (apparently) using legal tax breaks to offset future earnings.

According to leaked documents obtained by the New York Times, Trump took an immense loss in 1995 — an amount totaling nearly $916 million. The paper then notes that this amount would be enough to allow Trump to pay no income tax even if he made $50 million per year for the next 18 years. The Trump campaign didn’t deny the fundamental facts of the story, and the commentariat was off to the races — hashtags and all.

Since this is 2016, it was hard to find rational discourse. Trump defenders proclaiming his “genius” were cleverly eliding his catastrophic losses. Indeed, Trump had endured massive financial setbacks, and he had himself primarily to blame. Yet his attackers were almost certainly hypocrites. How many of them have skipped standard available deductions for the purported good of the commonwealth? Yes, the tax code is complicated, and, yes, it is intentionally crafted to provide benefits to particular classes of business, but that’s simply progressive wonkery in action. Technocrats are constantly fiddling with the code to incentivize or discourage certain kinds of business activity.

To be sure, another shoe may soon drop. The Times has strongly hinted that it has more documents, and we may discover that Trump’s tax filings crossed legal lines. Or we may not. But, for now, the story is lurid mainly because of the numbers, not because of the underlying principle. A man lost money, he was thus entitled to take deductions. He almost certainly took those deductions. Wake me up when this gets interesting.

What is interesting, however, is the speed at which pundits can impose new moral standards. Writing in the Washington Post, columnist Allan Sloan notes that while both Trump and Hillary Clinton are filthy rich, at least Clinton’s tax proposals would cost her money, while Trump stands to benefit immensely from his proposed tax cuts.

The story is lurid mainly because of the numbers, not because of the underlying principle.

But the proper standard for economic effectiveness and moral propriety is not whether any given tax proposal will cost a candidate money (by that standard, virtually every tax-cutting Republican would fail the moral test) but whether the policy would increase prosperity and enable human flourishing. When a politician considers a tax proposal, he should disregard his own self-interest entirely — weighing its merits regardless of whether it costs or saves him money. His own personal experience is relevant only to the extent that it informs his knowledge as to how tax policies work in the real world.

Moreover, I want wealthy, public-spirited Americans to pay less in taxes and provide more charitable contributions. Charity dollars are typically far more efficiently spent and allocated to help our nation’s poorest and most vulnerable citizens than tax dollars, which prop up our soul-destroying welfare superstructure. Leftists argue that Trump’s tax dollars would have been outlaid to support “troops and vets,” but the majority would have gone to the exact same causes that the rest of our dollars support — immense entitlement programs, massive bureaucracies, and debt service.

#related#Sadly, however, it appears as if Trump has hardly been the model philanthropist. And his continued failure to release his tax returns leaves his supporters hanging by a thread. All those hailing Trump’s “genius” may be forced to eat their words if later leaks show that he’s little more than a lawyered-up tax cheat. For the time being, however, the story is much ado about nothing. We already knew Trump faced massive financial challenges in the 1990s. We all knew the tax code allowed past losses to offset future earnings. The rest is just math.

Unless another shoe drops (and it well might), it’s time to return to the truly pressing issues of our time. After all, another beauty queen might be nursing an ancient grudge. Americans have a right to know.

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