President Donald Trump paid $38 million in federal income taxes in 2005 on an income of $150 million, according to a partial tax return released Tuesday by MSNBC host Rachel Maddow and confirmed by the White House.
The release of the two-page 1040 return came after Trump refused for months to release his returns despite decades of precedent by candidates and presidents of both parties, sparking speculation that he had avoided federal taxes for years.
But the release of the 2005 tax return shows that speculation was incorrect, at least for that year, a finding that could end up being good news for the president.
Critics had long accused him of hiding his tax returns because he wasn’t worth what he said or because he didn’t pay much in taxes, speculating he had used a nearly $1 billion business loss from the 1990s to shield himself from federal tax obligations for years.
“He doesn’t want the American people, all of you watching tonight, to know that he’s paid nothing in federal taxes,” his Democratic rival Hillary Clinton said at a debate last fall.
Trump didn’t deny the accusation. “That makes me smart,” he responded.
But with the release of the returns both of those accusations were proven false.
It also made clear that Trump’s income is in a different league from previous presidents. By comparison, President George W. Bush and wife Laura reported adjusted gross income of $735,180 and paid $187,768 in taxes, according to their 2005 return.
2005 was a banner year for Trump. He and partners from Hong Kong sold New York property on the Upper West Side for $1.8 billion, at the time considered the largest residential real estate deal in New York City history.
The White House released the tax return’s details after Maddow announced via Twitter that she would release the return during her prime time show Tuesday night.
Trump paid roughly 24 percent of his income in 2005 federal taxes. By comparison, Clinton paid an effective federal tax rate of 30.8 percent in 2005, according to her campaign.
“The White House has confirmed the top line . . . it’s what behind that that really matters,” said Roberton Williams, a senior tax expert at the Tax Policy Center, a think tank jointly run by the centrist Urban Institute and the center-left Brookings Institution.
Trump’s tax returns are unique because he is a commercial real estate developer, and he runs his business empire as a private concern with his income flowing to his personal income that he claims on a 1040 form like ordinary Americans.
In 2005, the top tax rate for the richest Americans like Trump was 35 percent. Today it is 39.6 percent. But because Trump’s business was buildings, he was able to write off loans and the depreciation of his assets. These deductions are why he in 2005 paid the alternative minimum tax.
This tax took effect in 1970 amid outrage that a number of very rich Americans used loopholes to pay no federal income tax.
Johnston said Tuesday night that if not for the alternate tax, called the AMT, Trump would have paid less just $5.3 million in tax; the alternative minimum tax added $31.3 million to the bill.
“This means there is a lot of stuff considered preferential income from an AMT perspective,” said Williams, pointing to interest on loans and a host of other write-offs.
The 2005 return also reflects tax cuts put in place in 2001 and 2003 under President George W. Bush, which allowed capital gains on investment income and dividends issued by corporations to be taxed at a rate of 15 percent instead of the rate of ordinary income.
The 2005 returns released Tuesday night did not include Trump’s Schedule A for that year, which would have detailed information on itemized deductions such as state and local taxes and charitable contributions.
“It would be interesting to know how much he gives,” said Williams. “The detail is often where the interesting things are found.”
Maddow said the document was sent to Pulitzer Prize winning reporter David Cay Johnston, who wrote a book on Trump and appeared on her show.
Trump ignored years of tradition and never released his tax returns during his campaign. This led to many questions about what may be in them. The returns have since become a mystery that has dogged the Trump administration since he declined to release them – the first presidential candidate to refuse to make his returns public in decades.
“My understanding is he’s still under audit and I’ll follow up on the question,” White House Press Secretary Sean Spicer replied to a question last week about whether Trump would release his returns.
Despite the release, Americans still do not know where his money came from – a question that has been asked for months.
Johnston told Maddow he was unable to determine Trump’s sources of income, partners or interest payments from the document.
Nonetheless, Democrats slammed Trump for withholding the returns from the public.
“The White House’s willingness to release some tax information when it suits them proves Donald Trump’s audit excuse is a sham,” said Zac Petkanas, an adviser to the Democratic National Committee. “If they can release some of the information, they can release all of the information.”
Former Clinton campaign spokesman Brian Fallon warned Democrats not to get distracted by the information and stay focused instead on health care.
“Dems should return focus to Trumpcare tomorrow & the millions it will leave uninsured, not get distracted by two pages from ’05 tax return,” Fallon tweeted.
Clinton released her returns last summer during the campaign and called for Trump to do the same.
During the campaign, Trump had indicated that he used a nearly $1 billion claimed loss in 1995 to avoid paying federal income taxes.
He repeatedly promised to release his returns, but said he couldn’t because of an audit.
Trump in May 2016 filed a financial disclosure form that showed he had 564 companies, and another seven associated with his wife, Melania.
Most of these companies were formed after the 2005 tax returns, and today he collects licensing fees for use of his name on hotels, condos and high-profile golf courses around the world. That means that while helpful, the 2005 returns would show little about the foreign business deals or even terms of the refinance of major debt he owed to Deutsche Bank, whose wealth management division handled the reworking of the his debt.
Until Tuesday, most of what is known about Trump’s taxes comes from dated tax and court documents. A report from a New Jersey casino commission said that in 1978 and 1979 Trump reported negative income and paid no federal taxes, even as he publicly boasted of being a multimillionaire.
Even before the show aired, the White House released a statement.
“You know you are desperate for ratings when you are willing to violate the law to push a story about two pages of tax returns from over a decade ago,” the statement said. “Before being elected President, Mr. Trump was one of the most successful businessmen in the world with a responsibility to his company, his family and his employees to pay no more tax than legally required. That being said, Mr. Trump paid $38 million dollars even after taking into account large scale depreciation for construction, on an income of more than $150 million dollars, as well as paying tens of millions of dollars in other taxes such as sales and excise taxes and employment taxes and this illegally published return proves just that.”
The White House blasted the publication of the information, however. “It is totally illegal to steal and publish tax returns,” the statement said. “The dishonest media can continue to make this part of their agenda, while the President will focus on his, which includes tax reform that will benefit all Americans.”
Jimmy Carter released his returns in 1976; incumbent President Gerald Ford released a summary. Since then, 19 of 20 major-party presidential candidates have released at least a year of tax returns, according to Joseph Thorndike, the director of the Tax History Project at Tax Analysts, a nonpartisan policy organization, and author of the “Politics of Federal Taxation” column for Tax Notes magazine.