Taxes?

The New York Times has released a bootleg copy of Donald Trumps taxes, with all the expected foo for all.  The gist, as you probably know, is that his losses in 1995, of $916 million, allowed him to avoid paying income tax for 18 years. Forbes has reported that in 2014 the NYT paid no taxes. This is legal.  As this is legal, deducting your losses over a period of years, there is no issue for Trump, outside of voter disapproval.

Is this our October surprise?

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211 thoughts on “Taxes?

  1. I’ve noted elsewhere that there is no legal obligation to arrange your financial affairs so as to incur tax liability. Indeed, it may be that the tax code exists, as it does, precisely to reward people to arrange their financial affairs in particular ways and therefore one does as the law intends when one does something that lowers tax liability. Trump has not broken the law here.

    The argument about Trump not paying taxes is a moral one, not a legal one. A wealthy person ought to pay their “fair share,” whatever that is, if that person wants to earn the respect of people who mostly do pay taxes, and to lead a government funded by those tax dollars.

    Someone else pointed out that there is classism at play here: very wealthy people can hire lawyers and accountants to make it so there is no tax liability. Middle-class people can’t afford those fancy lawyers and fancy accountants, and therefore must pay taxes instead.

    There’s also the issue of how the hell do you lose that much money in 1995. IIRC, the economy was going full-tilt tech bubble, laissez les bon temps roulez, my-financial-analyst-is-a-dartboard-and-I’m-making-it-hand-over-fist, recessions-are-a-thing-of-the-past at that point.

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    • There’s also the issue of how the hell do you lose that much money in 1995.

      My (very limited) understanding of this is that even though he took very serious hits on some Atlantic City casinos around that time, the $916m figure was most likely largely constructed via various (legal, at least at the time) accounting strategies as a tax avoidance scheme to serve the specific purpose it achieved.

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    • One guess I’ve seen around is a not-unknown tax dodge (and no, not legal applied like this) — it involves rolling up a bunch of debt into a single investment (it doesn’t even have to be your debt), declaring that entire loss your personal investment.

      Basically the company with the debt goes bankrupt, you claim all the loss of money was yours, you get giant tax write-off.

      Given the known shenanigans of Donald Trump, it would not really surprise me to find out he didn’t lose a billion dollars. A company under his control that he invested a much smaller amount in acquired a billion dollars of debt and went bankrupt, and Donald claimed the whole debt as his own personal loss.

      (There’s a reason the guy’s been audited every year for almost two decades now. It’s not because the IRS dislikes his hair).

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      • Morat20: A company under his control that he invested a much smaller amount in acquired a billion dollars of debt and went bankrupt, and Donald claimed the whole debt as his own personal loss.

        Can you do that? Which leads to another question – is it possible that some of this loss was disallowed and there’s an amended return out there? (And the ‘leak’ was only state returns, right?)

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        • I have no idea. Real estate has a lot of weird quirks in tax law (often for good reasons, but highly exploitable), and things have also changed a lot since 1995. I vaguely recall reading you can do that, but the money saved on taxes is actually income or something.

          It’s not that simple, and you can’t just take it all on, write it all off as personal losses, and call it a day. Not legally. There’s a bunch of other stuff that goes with it.

          But Trump’s been running his charity as a slush fund for years and that’s just coming out so…..honestly, I can’t see him not pushing the envelope until it splits on that.

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            • All this stuff is well past the statute of limitations, and given he’s been audited every year for the last decade, not even he’s going to push it too far.

              OTOH, he’s been caught pretty clearly self-dealing from an unlicensed foundation so….maybe so.

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              • Morat20,

                All this stuff is well past the statute of limitations, and given he’s been audited every year for the last decade, not even he’s going to push it too far.

                Umm… not necessarily. That’s not really the way tax law works. There is a kind of SoL in that normally a return is only auditable for a few years. BUT anything that affects an auditable return is itself auditable. So that ’95 loss would be auditable as long as the loss is being carried and then for a few years past that, conceivably maybe even still. (I want to say the limit is something like 7 years but I’m not sure about that.)

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          • I think you can get some sort of immediate depreciation in return for lessening future depreciation on the property?

            Frankly, it wouldn’t surprise me if Donald somehow bought up his own debt for pennies on the dollar, wrote off that debt as losses, and then never had to worry about him collecting on himself.

            Of course the estate tax might be a real nasty problem, but that’s not gonna be his problem.

            Whatever happened, I’m prepared to state the following is certainly true: Donald didn’t lose a billion dollars of his own money, Donald somehow managed to screw both workers and investors, and Donald somehow made money out of the whole thing while sheltered from taxes.

            In his own words, he’s very good with debt.

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            • Buying your own (or your affiliates) debt on pennies on the dollar is almost always strictly forbidden in Loan Agreements (otherwise why pay the loan? Defraud the bank, buy your own debt, and pay the banks pennies on the dollars)

              If you do it on the downlow through shell companies and can be tracked back to you, there’s at a minimum breach of contract, and perhaps fraud.

              And once you buy debt (from unaffiliated third parties), for tax purposes, the face value of the debt is marked to market to the amount You just paid to buy it. If you write it off, you write off the pennies you paid, not the dollars the document says. And if you get to collect the full amount, the excess above the pennies you pay is income.

              Plus, if you write off debt (formally, with the documentatation needed to claim a tax deduction) the borrower needs to record extraordinary income to the amount of the written off debt, and pay taxes on it.

              Writing off debt rarely happens, mostly only when the borrower disappears as a legal entity.

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          • Real estate means profits are usually directed into purchasing more real estate, often in highly leveraged deals financed by banks or other real estate investments. It means his earnings are going to more likely be treated as capital gains, than income.

            (Morat20 and I may be saying the same thing differently)

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        • *shrug*. It’s possible it’s entirely above-board. We don’t have his actual returns or the details to tell.

          But AFAIK, that wasn’t one of his casino bust years, it was a booming real estate market and — to be really blunt — I think it’s highly unlikely Trump had a billion dollars to lose, and his particular approach to real estate has always been to invest other people’s money, especially on really large projects.

          But what I’m reading is that more than anything, it’s the size of the loss. I mean that would be the combined total of partnerships, S-corps, LLCs, etc (and again, Trump does prefer putting together deals with a minimum amount of his money and a lot of other’s, so odds are he’s involved in a lot of those), but still? Nearly a billion dollars? In 1995?

          That’d be a staggering loss for someone of Bill Gate’s wealth. For Donald Trump?

          On a related note: New York just told his Foundation it has 15 days to provide the relevant paperwork, and to cease soliciting until that’s done.

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          • There was a real estate collapse in NY in 1989-1992 though: “the sad stretch from 1989 to 1992, when the median home price in Manhattan dropped by more than a quarter, construction declined by a third, and the city lost one-tenth of its jobs.” Link Its not inconceivable that what was reported in ’95 related back to that. Sad, quite sad.

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        • During the 1990s, before the cable industry consolidated into a small number of very large publicly-traded companies, shifting profits and losses around to the immense benefit of the families that dominated the business was an art form. All at a scale much larger than “S” corps. The cable industry also sold EBIDA (earnings before interest, depreciation, and amortization) to the analyst community — don’t look at whether I’m profitable, look at the ginormous cash flow. Amazing how the IRS would let the Roberts clan (Comcast) operate without a profit essentially forever, but if I try that with a little business, after three years it’s a “hobby”.

          Lots of people on the internet doing the “how could anyone lose a billion dollars in 1995 while the economy was booming?” shtick. One of the keys to getting the most out of that type of strategy is choosing when you realize the loss, not when it actually occurred.

          This is all Tax Avoidance for the Wealthy 101 stuff. As Warren Buffett points out regularly, his marginal tax rate is much lower than his secretary’s despite his income being enormously greater. And if it isn’t, it means his accountants are incompetent.

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            • I thought that was more “Studio buys service from production company at idiotic prices and charges them to project X. Production company is part of the studio, so it’s a fake expense, but anyone outside the studio who gets a percentage of profits on X sees zilch.”

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              • This is one of the tactics that was used in the cable industry. The local cable companies hoovered up vast revenues. Fees, sometime extravagant ones, were paid to service or content companies owned by the same family that owned the cable company. Or deals back and forth between the families: the Cox sisters sell overpriced services to Roberts-owned Comcast, and vice versa. The Rigas family went down because they were greedy and careless about using Adelphia Communications as a private piggy-bank.

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                • Yeah, that’s the scam I’d bet Trump was running thruout the 90s and forward. Hell, it’s the scam he’s running right now, billing out his campaign for office space, travel expenses, food services, etc.

                  If he had a sign company he might have a better ground presence in competitive states, since he apparently won’t pay someone else to print em. He’s missing a real opportunity to make bank on this. A good businessman would do it! SAD!

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                  • Thanks for the reminder to check my theory that Trump Campaign is just a giant grift against the latest FEC data. As of the end of August it would seem to still hold. So far:

                    Donated Cash by DT: $6,000K
                    Donated Goods/Services by DT: $500K
                    Loan by DT: $40,000K (NOTE: he promised to convert this to donation back in May, but that has not seemed to have happened)

                    Cash on Hand: $50,000K

                    This has been consistent since shortly after he clinched the R nomination. The campaign has just slightly more than enough cash on hand to pay him back everything. This is even before we get into the weeds of the campaign purchasing goods/services from his companies.

                    It may be a coincidence this month, I will have to check it on the next and final release before the election. But I just noticed he has payed himself almost the exact $ amount as the donated goods and services. ($532,038 vs $532,081)

                    However, in the latest dump he does seem to be getting with the program. Almost half of his expenses totaling $48M is to two marketing firms. So he is at least feeding some of the other grifters like a good politician. And did he really spend $8.5M on the hats?

                    Of course this all just a bunch of numbers and it is easy to read what you want to see into it. But, even if it is not a grift, he sure seems to be in a position to be made financially whole regardless of win/loss.

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              • The main point is that this kind of debt structuring can only effectively be done by very large corporations, not small or medium businesses. And in the long run, absent bankruptcy, the IRS eventually gets paid what it’s owed, so the point of the exercise is to either hold off the IRS so the taxes owed can do other things, or until the corp has been bleed dry and discarded.

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        • Burt,

          Check this story out. It not only accounts for the S-corp limitations you’re talking about – and how they could be effectively bypassed by a mistake in the way a statute was written – but also answers the question Trump asked Hillary in the debate regarding tax law: “If you don’t like em, change em.”

          Turns out she did.

          Maybe.

          If any of this makes any sense.

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      • Given the known shenanigans of Donald Trump, it would not really surprise me to find out he didn’t lose a billion dollars.

        Given that he’d have to have invested over a billion dollars to lose a billion dollars, I’d be very surprised if he actually did. It seems reasonable to assume that Trump wasn’t financing most of his ventures himself (sure, he probably put money in, but I’d expect a bunch of other investors to make up the majority of the capital), so to have a billion dollars of his own money in a small enough set of baskets to realize an enormous loss like that would be kind of odd. It smells pretty fishy.

        If he did actually manage to lose a billion dollars of his own money, that’s a pretty serious statement about his business style and skills. Even if you take his claims about his net worth at face value, that’s an enormous loss to take over what one would expect to be a portfolio of different investments.

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        • I can intuitively imagine ways -through consolidation and chains of control- that he could claim a 1 Bn accounting loss w/o having invested more than 10% or so (a 100 MM cash loss) I’m not sure if those ways would actually be legal or not, because that loss would be balanced with someone taking the corresponding accounting gain. It’s something Enron would have tried to do.

          If this was an election where the electorate rewarded the wonkiest candidate, doing that (legally) would be a feather in your cap, certifying your genius status.

          But this electorate distrusts experts and wonky people like Hillary, so it’s difficult for Trump to take credit without having the millstone of the 1bn loss shadowing his great businessman persona

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          • That’s more along the lines of what I was thinking. Whatever it is, it seems very likely that the $1B paper loss wasn’t actually $1B in loss to Trump personally. It seems much more likely that it’s a sophisticated accounting trick. Whether it’s legal or not is kind of an interesting question but not super interesting, IMO. Even if it is technically illegal, it’s probably the type of thing that had at least a credible legal argument behind it. It seems unlikely that it would be obvious, outright fraud.

            Then again, so many of Trump’s scams are obvious scams that he might just be bold enough to sign off on something really crazy and just plan on not getting caught.

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    • The opening of Foxwoods as a full service casino really cut into Atlantic City’s business, though I thought it took till the end of the decade (when Mohegan Sun opened as well) for it to be really noticeable.

      Looking at the historical data, there were some brief interest rate hikes in 1995, even though by the standards of the day, it was relatively easy money (i.e. 3 to 4 percentage pts lower than all the rates were in 1990) (by today’s standards incredibly high – 5 to 6 % for T bills and CDs)

      And as said elsewhere on the thread, Trump Airline going tango uniform, one of many airline failures of around that time.

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    • “There’s also the issue of how the hell do you lose that much money in 1995.”

      I think you need to take a 300 level seminar at Trump University to get the answer.

      My guess is hookers and blow.

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    • “Someone else pointed out that there is classism at play here: very wealthy people can hire lawyers and accountants to make it so there is no tax liability. Middle-class people can’t afford those fancy lawyers and fancy accountants, and therefore must pay taxes instead.”

      I’d say it goes deeper than that, . When Mitt Romeny was talking about “the 47%”, that includes Trump… no? But yet he is unlikely to get the same vitriol thrown his way by people who like to throw vitriol at the 47%.

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    • “Setting aside voter disapproval, public humiliation, a devastating hit to his credibility as a “successful businessman”, and a chance he’s indicted for tax evasion, what’s the downside for Trump?”

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      • I wonder how devastating this is for his business rep; one of the few things I knew about the guy before he ran was that he lost loads of money in the early 90s, so I figured that this was common knowledge, already priced in to that rep. Could be wrong, though.

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        • Well, I knew that he lost loads of money in the 90s too. And I knew that he cheated his contractors by leveraging their contracted price against a threat of or actually declared bankruptcy. And I knew that he single handedly destroyed the USFL because he’s a megalomaniac with terrible business instincts. And do on and on and on.

          I don’t think that your average “uninformed” (not that there’s anything wrong with that!) voter is aware of any of that stuff.

          But maybe it’s too late for those folks…

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        • I’m guessing the impact to his base supporters will be zero.

          Mostly because the stated reasons for support, e.g. he is a business genius, are BS that no one really believes or cares about anyway.

          His support is based on a shared rage at certain groups of other people.

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          • Does anyone think this will hurt him with his base? His base appears to be solid and too small to win; the question is whether this hurts him with voters willing to vote for him but not yet sold on it.

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            • Actually, I think it might – probably will – hurt him with his base. I think a whole slew of those people are traditional conservatives, folks who will look at those shenanigans with disgust. Enough so that some of em, not many given the alternative, will jump ship.

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              • At this point I doubt it. Conservatives especially social conservatives have had to swallow the equivalent of a Six Foot Poop Hoagie, to support him by this point. This is just a tiny shit slider in comparison. They have already sacrificed so much to support him by now, they cant give it up.

                Of course, “the straw that broke the camels back” and all that. But I would be outright shocked if this revelation caused even 100 dedicated conservatives to change their mind.

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            • Possibly, at the margins.

              There probably is that outer core of “Pox on both houses lets shake things up” Trump-curious people, who with the recent erratic behavior and now this, paint Trump as just another rich snot who stiffs people.

              The core of his support, I believe, is the seething white hot ball of rage that the Onion first identified.

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            • I think there is an important difference, and I hope Clinton’s team are bright enough to exploit it

              The base does not care that he hasn’t paid taxes for 20 years. They’ll cheer that.

              If I were Hillary, I would repeat over and over again:

              “What kind of business person loses one billion dollars in one year? A very bad, very incompetent, business person. A loser of a business person. That’s the kind”.

              You don’t need to say anything more. This goes directly to the persona Trump has worked to create with his base. That of the great businessman that does amazing deals, and makes yuuuuuge fortunes. Great businessmen do not lose one billion in one single year. Only losers lose one billion in one year.

              Of course you can explain that he didn’t lose the money, that it’s all S corporations, and absorciones, and write offs and accelerated depreciation, and mark to market combinations of LLCs.

              Try to say all that in a Trump meeting.

              Whomever mentions LLCs, accelerated depreciation and S corporations loses. If Hillary, nerdish and wonkish that she is, goes that route to build a case about tax code reform, she loses. If Trump goes that route to prove he’s a genius, he loses, because he’s now explaining why he’s not a loser, even though he lost one billion dollars in one year.

              It’s the same discussion with Trump’s net worth. His persona is worth ten billion. If paper trail show him with only two billion, he’s a loser. And the moment he looks like a loser, all the superstructure is at risk of collapsing.

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          • Which would be relevant if the criticism of Trump was that he deducted business losses at all. But because that would be stupid, it’s not the criticism that I’ve seen anybody making. The issue is that Trump either A) lost a truly spectacular amount of money but remained wealthy, largely at the expense of others or B) evaded his taxes by claiming vast paper losses in a legally and/or ethically dubious way.

            Or, in other words, $3,000 is not at all like $916,000,000

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            • Or, in other words, $3,000 is not at all like $916,000,000

              It is if you used the same legal mechanism to get there. You want to turn this into a discussion about the amount of loss and its propriety, which it isn’t.

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                  • Well, yes, the title of this post is “Taxes” but — as I’m sure you are so well aware — articles can be about more than what the headline says.

                    In fact, the question the OP asks is whether or not this is our October surprise. In order to ask that, we need to consider what the response will be. And people will respond to more than just the legality of what Trump’s tax return indicates.

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                  • If you think it’s only liberals that might have a problem with avoiding taxes for 18 years because you somehow managed to lose a billion dollars in the mid-90’s, then please please please please get a job as a Republican campaign strategist.

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                    • There isn’t any proof that Trump avoided taxes for 18 years. Even if he did, so what? Was it illegal? You sound like Harry Reid talking about Romney’s taxes. Is there anything else you might like to insinuate while you are at it.?

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                      • It doesn’t have to be illegal to reflect poorly upon him as a candidate. And it’s hardly unfair to speculate, because he’s withholding the information that would answer all of these questions. You know, the tax returns that every nominee since Nixon has made public.

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                      • I agree that losers that lose one billion dollars per year should be protected. That’s what the welfare state is, to protect losers.

                        And people that lose one billion in one year are the most losing losers of them all losers

                        So we are all in agreement now. Good

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          • I don’t think the problem is with being able to write off an operating loss. That’s a completely reasonable piece of the tax code. What gets fishy here is either:

            1) Trump lost a truly staggering amount of money. Like, how in the world do you do that?
            2) He didn’t actually lose a staggering amount of money, but through clever accounting was able to get a tax write off for a staggering amount of money.

            I’m still having a hard time imagining a reasonable scenario for possibility 1, and I’m pretty sure that any realistic scenario for it would make Trump’s claims to be a brilliant businessman look…shaky. I find 2 much more plausible.

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      • It’s not an uncommon occurance for someone to quote back the very article notme just linked, which refuted the very claim he made when he linked it.

        So no, he didn’t. Or if he did, he can’t grasp the difference. Despite the fact that the Clintons took a 3000 dollar deduction while paying 3 million in taxes, and Donald Trump stopped paying taxes entirely for what looks like 20 years.

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        • Well, in his “defense”, the article seemed to show as much understanding of the tax return as NotMe typically shows of his links. So it seems equally possible that NotMe read the link (but not the tax return) and didn’t read the link: both would lead to a similar misunderstanding.

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  2. If Trump can accuse a debate moderator of being on her period and get away with it, then I think we have to admit that unless he literally melts into a shapeless puddle of goo on live TV then there’s basically nothing that can stop his name being on the ballot in November.

    Even with that, I have a feeling that most people are going to look at this and say “wait, you can do that? Anyone can do that? I could do that?!”

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  3. “Taxes are the price tag of civilization” – Justice Oliver Wendell Holmes, Jr.

    Let us remember also that the first President to impose income taxes was that notorious Democrat, Abraham Lincoln.

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    • As Burt said somewhere upthread, you’re making a moral rather than legal argument. Trump may be a sociopathic free-riding opportunistically megalomaniacal narcissist, but using existing laws to effectively eliminate ones tax burden isn’t necessarily illegal.

      Under the current regime (apparently) the vast majority of people in the US don’t pay taxes voluntarily outa a commitment to civic duty, but a legally imposed requirement which they can’t escape.

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      • I agree with this, and with those who have said similar things elsewhere in this thread. Most of us take deductions and credits when it’s easy for us to do so. (Like Burt’s example below, there are some I might be able to take but won’t….not because I’m virtuous but because it’s too much of a hassle to learn how to do it.)

        Another way to use Lincoln as an example is the draft bounty people could pay to get out of serving in the union army. Those who used it were acting legally, if not in a morally praiseworthy way. Further, I don’t see why the Democratic-leaning New York Times should be convinced to pay taxes simply because a Republican was the first to enact an income tax.

        And frankly, the Holmes quote doesn’t do it for me, although it might if I knew the context better.* After all, the guy also said, “three generations of imbeciles are enough.” The fact of taxes may be necessary to maintain civilization, but that doesn’t mean all taxes are necessary for that end or are good (we have an amendment against poll taxes for a reason). It doesn’t mean that people shouldn’t take the tax breaks that the tax laws legally make available to them. I’m not prepared to condemn people who use the EITC or student loan interest deductions. (I venture no opinion here whether Trump or the NYT are acting legally.)

        *Kind of like Santayana’s (I paraphrase) “those who do not learn the past are doomed to repeat it.” Interesting thought, but having never read Santayana I’m not clear exactly what he was driving at. It seems we do a good job of repeating the past even when we do learn it.

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        • The better Lincoln analogy here involves the statute of limitations. During his law practice many legal authorities argued that it is immoral to raise a statute of limitation defense against a just debt. He, as most Whig lawyers, raised such technical defenses numerous times. He was not always successful because the law/morality divide was disputed, but ultimately the Whig view of the law prevailed.

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    • The left plays a motte-and-bailey game with this. Yes, government needs some revenue to perform its essential function of maintaining law and order. Very few people object to this or the taxes necessary to raise this money. But that’s not where the vast majority of tax money goes. It mostly goes towards providing private benefits for individuals. You can’t play the “price of civilization” card when 80% of tax revenue is going to stuff that has fish-all to do with the upkeep of civilization.

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        • I’m finding numbers closer to 41% of GDP in 2014:

          The figures below, indicate 41.6% of GDP spending and a GDP per capita of $54,629, which suggests and total per person government spending of $22,726 in the U.S.

          Over the last century, overall government spending in the United States has increased substantially from about seven percent of GDP in 1902 to about 35 percent of GDP in 2010.

          From Wiki, natch.

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          • I’ve seen conflicting figures and am not sure how to resolve them. The Economic Report of the President gives about one third for 2015. Other figures may account for present value of accrued future expenses, but I’m not sure. I went with the low estimate, since I can defend it, and I think tripling is sufficient to make the point I was going for.

            I know that it’s declined somewhat since 2009, which was very high due to a combination of the recession and stimulus spending.

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      • Brandon Berg:
        The left plays a motte-and-bailey game with this. Yes, government needs some revenue to perform its essential function of maintaining law and order. Very few people object to this or the taxes necessary to raise this money. But that’s not where the vast majority of tax money goes. It mostly goes towards providing private benefits for individuals. You can’t play the “price of civilization” card when 80% of tax revenue is going to stuff that has fish-all to do with the upkeep of civilization.

        That number is flat wrong even if you assume (incorrectly) that all of the dread non-defense discretionary spending is paying out individual benefits to people. Defense is around 21% and debt service is another 5% or so. That said, i don’t think this is a motte-and-bailey so much as it is a different conception of what is a societal benefit vs. an individual benefit. I’d say we all benefit from the safety net aspect of the safety net: we can take risks and know that there is a limit to how far we can fall if things don’t work out. But assuming that you don’t buy that (and you’re a conservative, so you don’t), education is probably the biggest line item* after SS, Medicare, Medicaid, Defense, and debt service. And again, I don’t think it’s a stretch to say that mass literacy and a well-educated populace provides plenty of broadly enjoyed benefit beyond that enjoyed by the individual being educated. Then there’s transportation and other infrastructure, scientific research, things like the CDC and NOAA, etc etc etc. When liberals say taxes are the price of living in a civilized society, we don’t mean the price of a night watchmen state because we don’t think a night watchman state is particularly civilized.

        *if you include state budgets.

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        • I was talking about total government spending. Military spending is ~20% of federal spending, not total government spending. And I’m surprised to see you claiming that the entire military budget is necessary for the maintenance of civilization.

          For debt service, I think it’s reasonable to attribute it in proportion to what the government spent money on when the debt was incurred.

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      • Since we know what is in the budget, when you talk about private benefits for individuals, i guess you mean the salaries of military and public employees, social security and Medicare payments to old people, and education for children

        Those are the “majority of it Hirsh to private benefits for individuals” I can think of

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        • Not salaries of military. That’s (ostensibly) part of the whole price-of-civilization thing. That the entire military budget is actually necessary for that purpose is debatable, but I’m talking about payments and in-kind benefits made specifically for the benefit of the individual receiving them, not payments for service rendered in provision of public goods.

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      • Yes, government needs some revenue to perform its essential function of maintaining law and order. Very few people object to this or the taxes necessary to raise this money.

        Provided we’re all willing to stipulate that such taxes are theft, I think everybody’s on the same page here.

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  4. Bloomberg has an article explaining how this stuff works but only in generalities. Essentially, it’s a provision of the tax code that allows you to use losses in one year to offset gains, both forwards 15 years and backwards 3 years, hence, the references to “not paying taxes for 18 years”. It’s a variation on a provision that used to exist in the tax code for everybody called income averaging where you could average your income over the last three years in case of a spike in your income. I used it way back in ’84 or so when I got my first decent job out of college. It wasn’t really meant for that purpose but it wasn’t specifically disallowed (or at least it was easy to get away with). Now it’s very specifically limited to farmers and fisherman.

    I think the real issue with the story has more to do with the perceptions and narrative he’s trying cultivate than anything else. If it were possible to actually get a look at it and it turned out that he actually didn’t have to pay any taxes over that period because of that one-time loss then it would mean that he apparently was never able to make that money back over the subsequent 15 years. So maybe he’s not so much of an amazing businessman, heh? It won’t matter to his die-hard supporters but it’s all about the undecideds at this point anyway, right?

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      • Yglesias is conflating being a business owner with being rich, which is pretty silly. While rich people may disproportionately own businesses, the vast majority of business owners aren’t rich, and many aren’t even middle-class.

        While I think income averaging for wage income should be brought back, and would personally have benefited from it in the past, it’s not nearly as important for wage earners as loss carry-forward is for business owners and other investors. Investment income and business profits are extremely volatile, in a way that wages are not. There are no wage losses, for one. This is less a giveaway to rich people than a concession to the fact that running a business is just different from earning a wage, and requires different tax treatment.

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        • Isn’t one of the arguments for low capital gains taxes is that it is “double taxation”? “I earned this money and paid taxes on it. Then I put it to work for me and you want me to pay taxes AGAIN?”

          Doesn’t this undermine the idea of claiming investment losses? Gains shouldn’t be taxed but losses should be deductible? Is that oversimplified? Or am I missing something?

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          • I thought the “double taxation” issue was related to dividends. Corporations pay income taxes and the shareholder pays income taxes on the dividend income that has already been taxed.

            Since you can only get cap gains on an investment, I’m not sure how it can be double taxed. If you invested the money into a corporation, you’d pay taxes on the appreciation when you sold. The corporation pays no taxes anywhere in that scenario.

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            • In most normal countries, corporate dividends are tax free income, because it has already been taxed at the corporate level.

              The US is an outlier here, and it’s a true obstacle for US companies investing abroad, because US investors prefer pass through corporate structures like partnerships that are obsolete in most jurisdictions.

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            • A bit of Google sleuthing tells me a capital gain is when a capital asset is sold for more than what it was bought for. The net difference (the “capital gain”) is taxed at a lower rate than income.

              So, if you bought a stock for $100K and sold it for $200K, you’d have a capital gain of $100K. That $100K would be taxed at a lower rate than if you had earned that as a wage.

              My understanding of the argument for that differential is that you earned the money used to buy the stock and paid taxes on it. So, in reality, you had wages of $130K, a take home of $100K, and you poured that into your stock. Folks arguing for lower (or no) capital gain taxes think that $100K you earned is different than income earned through other means and that taxing it would amount to double taxation (because of the income tax on the initial wages).

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          • Gains shouldn’t be taxed but losses should be deductible?

            Double-taxation, as Damon points out, refers to the taxation of profits both as corporate income and as personal investment income. There’s also a pretty solid economic argument (Chamley-Judd) that investment income shouldn’t be taxed at all, but hardly anyone who isn’t an economist knows about this.

            Regardless of whether they should be, capital gains are taxed, so it would be pretty fished up if you couldn’t deduct the losses. Note that your ability to deduct capital losses against wage and dividend income is extremely limited; I think this is capped at $3000 per year. That is, if you have gross capital gains of $20,000, wage income $60,000, dividend income of $5,000, and gross capital losses of $30,000 in one year, $20,000 of the losses entirely cancel out your $20,000 in capital gains, giving you a net capital loss of $10,000. You can only deduct $3,000 of that from your wage or dividend income; the other $7,000 can only be carried forward to future years.

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            • So if I’m understanding, this is what occurred (with certain assumptions being necessary and lots of rounding)…

              In 1995, Trump lost $1B in capital assets. That is to say, he sold something(s) of value for $1B less than he purchased them for.
              For as long as 15 years after, Trump could portion out that loss to offset any capital gains.
              So, hypothetically speaking, if he had capital gains of $60M (i.e., sold something(s) of value for $60M than he purchased them) every year from 1995 through 2010, he could actually claim a net capital loss because $1B/15 = $66M. So each year, he claimed a net capital loss of $6M.

              This meant two things: no income from capital sales; a $3000 deduction off other income.

              If all of Trump’s income during this time was derived from the purchase and sale of capital assets, this would lead to him paying zero income tax.

              Is that understanding more or less correct (again, accounting for the rounding and the necessary assumptions)?

              It seems important to note that these assumptions are just that: this is what could hypothetically have had happened. Because we lack Trump’s returns from 1995 onward, we have no idea if he actually did this.

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              • Kevin Drum had a possibility on what happened.

                Trump threatened to tie his bankers in legal knots for years unless they forgave the loans that had been largely responsible for his operating losses in the first place. Eventually, he badgered them into agreeing.

                But a forgiven loan is income, so this produced a billion dollars in taxable income for Trump that would have offset his $916 million in operating losses. What to do?

                In 1995, Congress passed a law that allowed real estate professionals to trade the taxes on forgiven debt for future real-estate tax deductions.

                This gave someone at Trump HQ a bright idea: why not use this trade to dump his tax obligation onto Trump’s casino properties? Normally this would just be trading one tax obligation for another, so to get around that they advised Trump to take all his casino holdings and put them into a shiny new public company.

                Here’s the genius part. By trading away the taxes on his forgiven debt, Trump kept his $916 million operating loss. It was the new public company that got saddled with property that owed a lot more in taxes than it normally would.

                Thousands of people invested in the company, and lost everything when Trump drove it into the ground. But as CEO, Trump paid himself $82 million along the way.

                Which seems to really fit the way Trump does business.

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                • “Thousands of people invested in the company, and lost everything when Trump drove it into the ground.”

                  Why isn’t Hilary or her SuperPAC or whatever parading these people across a stage somewhere?

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                  • This was back in the 90s, before every major investor got wise to the fact that Trump’s investments went south while he pocked some money. (Also, IIRC, fairly new rule).

                    So the smart money was not yet very smart on Trump.

                    The big money investors might have seen it and figured the property would work out (again, 90s, property was looking fairly good especially in New York) and the small investors probably never even noticed.).

                    Which doesn’t really change the reality — Trump pocketed the tax break and offloaded the other side of the exchange onto someone else. Which is basically how Trump has been known to operate for decades now.

                    Which is one reason he’s having to go so far afield to find people willing to loan him money these days.

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                    • Being “creative” in disclosures in public filings -without lying- is what got Enron executives in jail.

                      I suspect after this election there going to be a lot of people checking and combing out any public filing Trump companies ever made that it’s not barred by a statute of limitations.

                      I’ve sat on iPO prospect drafting meetings. Every single word is weighted. That includes The, A, and And.

                      It particularly includes THE and AND.

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    • So like, if a guy was laid off from his 50K / year job for half the year, acar salesman didn’t get that bonus he was expecting, a gambler loses his house to a casino, they can deduct those losses off the next few years’ income?

      Naw, the tax laws are not written for the little people.

      THATS the charge being made.

      Whether the little people care about it, remains to be seen.

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      • Two of those aren’t even losses. Not earning income you had hoped to earn isn’t a loss. You can deduct the “loss” in the sense that you’re not taxed on income you didn’t earn. Gambling losses are treated as a form of consumption, because gambling isn’t an investment. Do you think the IRS should treat it like an investment?

        The idea that tax laws aren’t written for the little peopleis bizarro-world levels of wrong. Taxes are levied in proportion to income. The people who earn the least are taxed the least. If we really wanted to be neutral, people would pay taxes in proportion to the government services they use. That’s what a tax system that isn’t written for the little guy would look like.

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        • Brandon Berg:

          The idea that tax laws aren’t written for the little peopleis bizarro-world levels of wrong. Taxes are levied in proportion to income. The people who earn the least are taxed the least. If we really wanted to be neutral, people would pay taxes in proportion to the government services they use. That’s what a tax system that isn’t written for the little guy would look like.

          Wait, what? Does the carried interest loophole not exist? The lower rate for capital gains relative to income? Regressive payroll taxes and sales taxes? Particularly once you include state taxes, its a complicated picture that is neither very progressive nor extremely slanted against the little guy, with the very poor and extremely rich probably paying the least.

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          • Also too, the definitions of what constitute income versues earnings versus wealth are themselves gamed by the rich.

            Much of investing IS gambling, plain and simple, except that the law says otherwise. And planned earnings from a wage is no different than planned earnings from a rental property, but the law says otherwise. Whether this or that can be written off or deducted is entirely a political matter of lobbying and influence.

            The famously complex tax code is complex precisely to shield and protect the wealth and interests of the wealthy.

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            • The problem here, it seems to me, is that we need a tax code that hasn’t been captured by special interests.

              The only way around that is to give the government more power and make sure that people like us are in charge of leveraging the government’s increased power.

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                • Sure. Let’s do that.

                  Hey, once Hillary wins, The Left should push to get rid of the mortgage deduction and the deductions for churches.

                  The best time to do that is when interest is low enough that most people just take the standard deduction anyway and the deduction for churches mostly affects those still backwards enough to believe in a deity and this will be a way to nudge them toward enlightenment.

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              • …we need a SOCIETY that hasn’t been captured by special interests.

                Its not just the tax code.

                There is a very large plurality of citizens that approve of the proposition that rich and powerful people should be given special privileges and shielded from consequences.

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                • I think that this is the richest vein we could possibly dig in.

                  A society that hasn’t been captured by special interests.

                  How in the hell do we get one of those? How do we, as a society, change us, as a society?

                  We seem to be moving from higher trust and higher collaboration to a lower trust/lower collaboration. That is bad. Like, the definition of bad.

                  How in the hell do we turn that around?

                  Thought: the people who are voting for Trump seem to agree with the premise that we’re moving from higher to lower and they seem to agree with the premise that we want to turn things around.

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                  • : >>We seem to be moving from higher trust and higher collaboration to a lower trust/lower collaboration. That is bad. Like, the definition of bad.

                    No. We’re not. Metrics of perceived trust and collaboration between people – willingness to interact with others, grant them equal rights, tolerate their different behavior, etc. – have been steadily increasing, so have metrics that are down-stream of trust/collaboration, such as crime rates. What has decreased somewhat is trust in specific institutions: people generally like Congress less and less, and black people generally like police less and less. However, even the decreased trust in government is motivated by the assumption that problems are easy to fix but politicians just aren’t doing the hard work, and not an increased perception of the opposition *voters* as being distrustful.

                    Trump is an anomaly: the least popular presidential candidate in history. He was able to capture the GOP party because it was in an extremely fragile position with a dozen candidates all trying to fit through one door to the party’s future while leaving the door to the fringe past ajar. His views – separate from the candidate – always appealed to a minority of GOP primary voters. His general election voters are older, and their views are unrepresentative of the trends in public opinion nationwide. The fact that he is able to do as well as he is speaks to the negatives of Hillary Clinton, the difficulty of one party taking a third presidential term, and the built-in base of support that the GOP still has with it’s voters.

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                    • I’ve got to admit: this is a fairly optimistic view that I haven’t seen.

                      So things are better today than they’ve been in a long, long time and, more than that, they’re still on track to get even better?

                      Okay. This doesn’t really harmonize with what I think I’m seeing day-to-day but I’m wrong about a lot of things.

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                        • I’m going back to the 70’s and the idea of the 50’s that kids in the 70’s got from Happy Days and Grease and whatnot.

                          2008 was, what? When we kicked off the beginning of the current president?

                          How is *THAT* a useful measure?

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                          • JB, remember how in the early 90s everything looked like it was going to heck in a handbasket with the recession and Falling Down and riots in LA and all the Gen X reality bites angst (that even carried thru to the theme song of Friends?)

                            But then by 1998 everyone forgot about all that?

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                            • Oh, yeah. That was pretty sweet.

                              It might do to compare 2016 to 1998. Better to see the trendlines from whenever we feel like starting in the early 1900s and get to today.

                              We can look at peaks and troughs and tie them to then current-events and come up with hypotheses (perhaps even testable ones!).

                              Like we can with, for example, murder rates.

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                          • I assumed that if something is “the definition of bad” we would, (at the very least) not see a consistent *increase* in self-reported quality of life. Is there a metric that goes back to the 70’s you had in mind?

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                  • Thought: the people who are voting for Trump seem to agree with the premise that we’re moving from higher to lower and they seem to agree with the premise that we want to turn things around.

                    I don’t believe this for a moment.

                    Trump voters, by their own statements, are angry, and want to punish someone.

                    They never speak about a world of greater camaraderie, rising levels of cooperation and trust, or flourishing of the human spirit.

                    They want to hurt someone, a lot of someones.

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                    • They want to Make America Great Again. They want jobs. They want jobs for Americans. They want to make wages here, and spend it on their families.

                      This is a narrative that is, seriously, flying around.

                      Some people even wear it on their hats.

                      Don’t be blind to it. You may miss something if you only register the things that confirm your priors.

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                      • I don’t see any straight line of logic that explains all the objective facts we are seeing, except that Trump supporters want to punish people.

                        Nothing they offer as ostensible reasons for support makes any sense, except anger and resentment.

                        They never talk about making America great, except in terms of punishing undocumented aliens, punishing women who have abortions, punishing Muslims who don’t swear fealty to Judeo Christian values.

                        They talk endlessly, and darkly, about punishing “elites”, they talk angrily about having to press 1 for English, they talk about battling a nonexistent crime epidemic, they talk about droopy drawers and metrosexuals, they blabber in panic about men in dresses in bathrooms.

                        Its your crazy uncle’s Facebook memes come to life.

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                      • Trump’s favorables are around 30%, but more importantly, so are the issues he’s running on:

                        * 15% oppose a path to citizenship, 33% favor a wall [gallup.com/poll/193817/republicans-favor-path-citizenship-wall.aspx]
                        * 28-38% think banning Muslims would be effective (and that’s not even asking if it should be done), [gallup.com/opinion/polling-matters/192695/american-public-opinion-terrorism-guns.aspx]
                        * 34% think foreign trade is a threat to the US (58% think it’s an opportunity) [gallup.com/opinion/polling-matters/190427/american-public-opinion-foreign-trade.aspx]

                        Where there are trends, they point away from Trump’s policies or are flat. The idea that Trumpism represents some kind of growing movement or a silent majority has no basis in fact.

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                        • And this is where I believe in the power of leadership in steering the cultural direction of society.

                          Polls change, public opinion changes, and is malleable within certain degrees.

                          Gay rights, feminism, civil rights, smoking, environmentalism…all these things saw dramatic reversals of public opinion, shaped by influential and well regarded people.

                          Whether America becomes a place where Muslims are rounded up in concentration camps or if it becomes a place where people live in peace and harmony is always yet-to-be-determined, always hanging in the balance, subject to shifting ideas.

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                    • Fine, don’t believe it. Jaybird’s statement which you don’t seem to believe is one reason why I’m voting Trump. But then again you usually want to make everything into Republicans hate brown people. It’s a simplistic notion which satisfies all of your preconceived notions.

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                      • It’s not gonna happen simply because you vote for the Great and Wise Businessman named Donald Trump.

                        If you really want to “Make America Great Again” I could give you some suggestions on whom to vote for. Of course, these votes are counted in dollars, not ballots.

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                      • Jaybird’s statement is true.

                        It’s also true that what Trump voters say they want, and Trump offers to deliver is, in most cases (i) not feasible (bring those jobs back, take their oil); (ii) extremely damaging to the economy (walk out of existing Trade Agreements); or (iii) dangerous to national security (ignore NATO obligations, send troops to Syria, cuddle to/stand up to?? Putin)

                        And I’m not even including the cultural issues here

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                        • So, in the best case, if Trump wins, we won’t be Ble to deliver on his promises

                          In the worst case, he delivers, and we are all fished up by the law of unintended (but previsible) consequences

                          Now what?

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              • Also too-
                Scorning the idea of getting “the right people” in charge implies that it would be preferable to have some mechanism in place that can deliver justice and good outcomes regardless of who the people in charge are.

                But that is madness.
                Like we see with the racial disparity in how laws are enforced and adjudicated, there doesn’t exist any mechanism that can’t be gamed and perverted. Even the most minimal of governments can be used to create an absolute tyranny, depending on who is in charge.

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                • So we have to pick between Good Moral Agents in charge acting on behalf of The Good or pick a system… and we’ve already demonstrated that picking a system is going to result in a gamable system that will then be gamed?

                  For what it’s worth, I think that the Trump People agree with you.

                  They’ve got somebody in mind.

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                  • The difference between Charles Angel in Charge and a system that can be gamed has more to do with people & our damn tribalism than anything else.

                    When society(s) are not so inclined to place flawed leaders upon unassailable pedestals, I’ll be more open to trusting Angels. Until then, I’d rather focus on system design.

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                    • I tend to agree. But I also think that the underlying society requires a handful of things in order to work and, Trizzlor’s observations notwithstanding, it strikes me that we’re moving away from the trust in society that we need in order to support the government-mandated levels of cooperation.

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                      • “it strikes me that we’re moving away from the trust in society that we need in order to support the government-mandated levels of cooperation.”

                        Yeah….well regardless of how much I do or do not trust “other people”, I sure as hell don’t trust “the gov’t”. They’ve demonstrated enough times that they can’t be trusted.

                        Fast and Furious
                        IRS (both in Obama and other admins)
                        Gulf of Tonkin
                        Destabilization of Iran, Ukraine, Vietnam, the Contras
                        Extreme rendition
                        How many more shall I list.

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                        • I agree, the government sucks

                          Can you suggest an alternative to operate without government, at all, besides the obvious warlords.

                          And please make it realistic. one that does not include that every single person is virtuous and collaborative (*)

                          (*) can I point out that “every single person must be virtuous and collaborative” was the basic -and stated- premise of despised communism. If it didn’t work for communists, it won’t work for you.

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                          • “Can you suggest an alternative to operate without government”

                            Why suggest an alternative? I’d much rather fix the problems with the current one.

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                              • First, I’m not a libertarian. I diverge from them in several areas, immigration being one.

                                Would I like to live in a more libertarian country? Yes. That is a long term issue. In the interim, I’d like the gov’t that I PAY FOR to behave ethically and professionally. Sadly, it has a long long history of not doing that.

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                  • Who said anything about picking?

                    Sure, system design is important, but also is a society that desires justice rather than injustice, and agents who are themselves reasonably good.

                    A just society is all these things working in concert; an unjust society is lacking one or more.

                    I mean, a thought experiment;

                    Suppose the antebellum plantation owners all decided they liked socialism, the public ownership of property, including slaves, and all other things remained equal;
                    How would this have produced justice for the slaves?

                    Suppose instead they all suddenly decided they liked libertarianism, a minimal state; Again, how would this have produced justoce for the enslaved?

                    The answer of course is neither one would have made a bit of difference; The white society of the time wanted to oppress the black people, and any system at all would have been turned to that end.

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                    • Hence why something like this rings true.

                      A well designed system would identify and remove the bad 15%. A good system would at least significantly reward the good 15%. A bad system is what we largely have (IMHO).

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                    • Sure, I agree 100% with the outcomes of your thought experiment.

                      Can we run with a thought experiment of what things would look like in San Francisco or Portland under the current system?

                      I mean, we’re not even to “but this solution doesn’t scale” yet. We don’t even have a proof of concept.

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                    • Chip Daniels: Suppose instead they all suddenly decided they liked libertarianism, a minimal state; Again, how would this have produced justoce for the enslaved?

                      It’s really hard to sustain slavery without the State being involved. It was one of the South’s major beefs – the refusal of Northern states to enforce fugitive slave laws despite the US Constitutional requirement to do so.

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                        • #Notallminimalstates

                          (Though I’ll agree, this is the specific strain of neoconfederatism that infects a still too large portion of the libertarian thought ecosphere)

                          Eta- and you can’t square that definition of minimal state with the concept of ‘all persons are created equal’

                          (And it’s putting aside libertarian thought experiments regarding extreme contracting)

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                          • “Eta- and you can’t square that definition of minimal state with the concept of ‘all persons are created equal’”

                            Yes you can. You just need to define “persons”. Check Aristotle, or Jefferson. Or the couverture laws.

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                          • And who is a person? Who gets to decide that?

                            My point is, there is no state, minimal or otherwise, that lacks a definition of who is a person and who is not, of who is covered by rights and who is not, of what rights even are, and what they aren’t when they apply and when they don’t.

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  5. Before the first Presidential debate, HRC had a 55 percent chance of winning the Presidency according to 538 and a squeaker in the electoral college vote.

    Now she has a 70 percent chance of winning the Presidency. Florida went from a light red to a 60 percent chance of a Democratic victory. Same with Nevada. Ohio is still light red but close enough to be a toss-up.

    There are going to be core supporters that think Trump is a “genius” for pulling this off. I suspect that there are going to be more voters who are turned off and they will either switch their votes or go home. I suspect that most people would consider losing nearly a billion dollars in a year to be catastrophic and bad business sense (and his campaign/brand is built on him being a brilliant and ruthless business person.)

    There is the fact that he got to continue living in luxury despite this massive loss while most Americans who declare bankruptcy or have financial woes don’t get to carry forward their income losses like this and spend years with destroyed credit and tightened belts.

    There is the fact that Ezra Klein is probably right and the deeper truth is even more enraging.

    http://www.vox.com/policy-and-politics/2016/10/2/13137604/trump-tax-return

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    • My guess is that the post-debate proClinton shift isn’t directly correlated with anything specifically related to Trump’s taxes, but more the general sense that the guy is a psychologically unstable, self-absorbed whackjob.

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      • I generally agree with this. I also think that in the debate Hillary showed herself capable of dealing with aggressive blowhards very definitively, and that’s something people want to see in a president.

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      • I think that since we’re junkies, we’re actually forgetting that the debates are when a large segment of the voting public actually took a look at Trump.

        Like standing there. Trying to be Presidential. Without Cruz or Rubio or Cain to take some attention.

        Just Trump. Standing there. Next to someone who has worked in politics for 30 years, quite successfully.

        And then he melted down into a ball of screaming crazy at the very moment the voting public was putting aside it’s beer and going “Okay, decision time. Are either of these people clearly crazy?” and then Trump lit himself on fire, and spent a week throwing his own feces at onlookers.

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  6. I don’t find anything particularly objectionable about a tax-loss carryforward.

    However, the magnitude of this loss makes it deeply suspicious. It is also the case that the person who prepared that return remarked that his software couldn’t print a number that high, so he had to use a typewriter to type in the first two digits.

    The reality is that during this time, he basically bilked the public into buying his resorts, wrapping them into the corporation he created, while paying himself a very hefty salary. He bundled up a bunch of debt that would have otherwise been forgiven into an offshore entity and wrote it off as a personal loss, which has allowed him to never pay taxes. He calls this “smart”.

    To me, “smart” consists of making money first, and employing a tax strategy second. It is amazing to me how many people, once they have money, switch those priorities around. They will buy very substandard products because they avoid taxes. I’m not talking about muni bonds either. They are price efficiently. I’m talking about life insurance, which, as far as I can tell, is a horrific scam, and is sold to people on the basis of “The IRS won’t get its hands on it”.

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  7. “The argument about Trump not paying taxes is a moral one, not a legal one. …..pay their “fair share,”

    I’ve always chuckled at stuff like this. My usual response to someone saying that is “you’ve done everything to PAY your fair share right? Refused to take deductions you’re legally entitled to because it’s the moral thing correct? You’re not being a hypocrite right?”

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    • I’m not running for President.

      At the same time, yes, I think I have paid my fair share, and yes, I have had the opportunity to engage in certain transactions for tax purposes that I would not otherwise have been interested in doing, and elected not to do them, because the transaction cost of a) learning how to play the tax game, b) implementing the tricks, and c) living with the credit effects of the thus-depressed apparent income all outweigh, as I assess things, the benefit I’d gain from playing such (perfectly legal) income-reduction-on-paper games.

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          • A reply to my own question: Upon a re-read, I think my above comment sounds too snarky to be acceptable. That was not my intention. It’s an honest question (trying to be) without built-in judgement. I’m trying to get at the point that most people, for most of their lives, serve their country by paying taxes. So, if serving one’s country is a good thing, then how should we really be talking about taxes?
            Dislike? Sure. Resentment? Maybe not so much.

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          • Interviewer: “As a patriot, have you ever done anything other than pay taxes to serve your country?”

            Trump: “[Not paying taxes] makes me smart. … I think I’ve made a lot of sacrifices. I work very, very hard. I’ve created thousands and thousands of jobs, tens of thousands of jobs, built great structures. I’ve done, I’ve had tremendous success.”

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            • It seems an awful lot of the things that could be termed “public service” are things that one may definitely want to avoid. But sometimes the “responsibility” part of being a grown-up outweighs the “doing-my-own-thing” part. (I find Mr. Trump rather spectacularly deficient in this area). My taxes enable a great many things that, as a responsible adult, I need to have done and don’t particularly want to do myself. Life is good. But I have a knee-jerk reaction against those that just complain about taxes with no apparent appreciation of why we have taxes and how much they serve to make life better all around.

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              • “My taxes enable a great many things that, as a responsible adult, I need to have done and don’t particularly want to do myself. ”

                Interesting. Tell me more about how “waaaah I dun wanna, mommee please do for me” is being a responsible grown-up.

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      • Burt, I wasn’t singling you out. I was just using your words, which I’ve heard/seen over the years used as a criticism of particular individuals who didn’t pay their “fair share”. Usually the comments come from self righteous individuals who bemoan rich folk taking every legal deduction while they seem to forget that they did the same thing…

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      • Burt: I note that you do not say “…oh yeah, and dodging taxes is immoral” in your reason why you didn’t do whatever tax-avoidance thing you had the opportunity to do.

        Which is what the discussion is about.

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  8. I’m starting to see the claim that Trump’s 1995 NOL was something like 2% of the total NOL for 1995.

    One billion is a ridiculous personal NOL today (for a business, that’s a different story) but one guy being 2% of the US? If that’s true, how on earth did he not get audited?

    A friend of mine once claimed about 5 figures worth of gambling losses to offset a much larger win (he won big and decided he didn’t want to go home with the money, and was strangely unsuccessful. He only managed to lose half of the 30k after-tax win. He had receipts and everything, and his CPA told him he had a 1 in 3 chance of being audited for claiming that much of a loss.

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      • And perversely, he’s been able to sell that fact as evidence that he’s a good businessman. (“I know wealthy businessmen who’ve never been audited” he said during the debate. Which makes no sense as a sales pitch. The opposite of sense, actually.)

        We live in strange times.

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  9. The problem, of course, is that we only have that one year, which may be why someone released just that one year (because it looks REALLY bad), in the hopes that he either releases other years returns, or so the DNC can milk that one year for all it’s worth.

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  10. All those people saying Trump is smart for maximizing his gov’t refund, I’m sure they will never again complain about young bucks on welfare maximizing their T-bone steaks.

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    • But is the inverse true? That all the complainers of corps taking advantage of the tax code and its largesse should only complain about the “young bucks” maxing out the t-bone allowance?

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      • I think the missing piece that causes the asymmetry here is that only one side actually believes the T-bone steak thing is really happening.

        “Why aren’t you condemning this thing I made up as hard as I am?” isn’t really as compelling as, “If this thing you made up is true and it really upsets you, shouldn’t you be equally upset about this other similar thing?”

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        • Because the narrative that “this is a thing that I made up” is shattered by something as simple as a single outlier.

          Here. Look at this outlier.

          Now what? (Want me to actually find an outlier? We can play “but, wait, that’s a bad example” for a while, if you’d like. We both know that that eventually leads back to “okay, maybe you didn’t make it up but that sort of thing isn’t representative!” which is much less fun to argue.)

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      • I don’t see anyone standing up for young bucks using EBT on luxuries, do you? My point is that pretty much everyone agrees that when poor people find welfare loopholes it reflects poorly on their character. The debate tends to be about how much of the system this behavior represents, and whether policing it is worth the cost. On the other hand, when the wealthy find tax loopholes we’re apparently still at a point where people think such behavior is admirable.

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        • Crazy theoriticians come to conclusions like “they’re just following the incentives they’ve been given and are making rational decisions”.

          Though, of course, we can say the same of the people who pay the taxes.

          It seems really, really, really important to have social norms that say “I am responsible for the following things” rather than “someone else should do something about the following things and we should make the people who are flush with cash pay for it.”

          Because the former seems somewhat sustainable.
          The latter… well, eventually you have people start identifying with either the people who are flush with cash and the people who need something done and, from there, you get these natural little tribes showing up.

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          • I agree. My argument is that we have a social norm that says “I am responsible for using just the social services I need” for poor people and a separate norm that says “I am lauded for taking whatever social services I can get my hands on” for rich people.

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            • That was exactly Megan McArdle’s (PBUH) rant against people that surrendered their homes to the banks in full payment of the mortgage debt -so called “jingle mail”- in those states, like TX, that ringed the borrowers other assets.

              She insisted the borrower had a moral responsibility to pay in full the debt to the bank, even though the bank had willingly signed a contract saying that the house was the ONLY recourse the bank had. She agreed the borrower had fulfilled their legal duties, but there was personal honor involved here.

              Of course, she also completely supported the concept of corporations discharging their debt pennies on the dollar in Chapter 11 procedures. How dare you compare!

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              • That seems like a good example of a “right” argument for extra-legal responsibility. Though I don’t recall her every being opposed to personal bankruptcy; in fact, I think she’s extolled the virtues of it. Part of the issue several years ago was that people with the ability to pay their mortgage were walking away when home prices were perceived to have dropped too much. There is a collective action problem when a McMansion on the culdesac sells 30% below market value and everyone starts to panic and evacuate, because this group didn’t buy a home, it bought an investment. And animal spirits.

                I don’t care much about Trump’s tax returns, but if there is something in there that would bother me as a policy matter, it is whether there were incentives to take losses when the market was low because of tax incentives. I could imagine Trump have numerous holdings, having one that is underperforming or no longer part of his long term plans. He could sell for the best price, or perhaps he could sell it when the market was low, take a loss and use it to offset gains on other holdings. Is or was that possible?

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                • Part of the issue several years ago was that people with the ability to pay their mortgage were walking away when home prices were perceived to have dropped too much.

                  But again, in the corporate world this is considered “good business”. You SHOULD cut your losses in that situation and walk away. Especially when there’s a specific recourse in the contract for that exact event.

                  We routinely praise businesses for actions we find distasteful in individuals.

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                  • “We routinely praise businesses for actions we find distasteful in individuals.”

                    Yes, it’s just like when someone breaks up with her deadbeat cheating boyfriend. She should totally stick around and try to make it work, right?

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                  • No, I don’t believe what “homeowners” were doing (or being encouraged to do by the Occupy types) was normal business practices. Businesses don’t sell real estate at the downturn of a market cycle unless they cannot afford to keep it. They understand market value fluctuates over time and will seek to maximize their return. If tax policy in the 1990s gave incentives for business to do something different than normal business practice, like aggravate losses in order to receive a greater benefit from the tax code, there ought to be/have been a law.

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                    • These people weren’t selling real estate.

                      The bank owned the real estate already. (You know, it’s a mortgage). What they did was, you know, avoid the sunk cost fallacy. (In fact, given the truly ridiculous terms by the end of the bubble, I’d bet few had that much sunk into the loan).

                      This was a loan, moreover a loan they’d use to “buy high” and the chances of the property recovering in value to the face value of the loan (not even counting interest) inside of 10 years was practically nil.

                      Why continue shelling out money at 8% (god help them if they had an ARM) for an asset that would probably never be worth the total they’d invested in it?

                      A smart business would cut their costs and walk away.

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                      • A really smart business would cut their cost, walk away, stiff the landscaper, pool cleaner, and broker and then wrap up their equity loss into a separate shell entity without assets, have it pay an exhorbitant consulting fee to themselves then use the loss to offset next year’s income.

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                    • Texas is one of the states where mortgages are collateralized only by the asset (the house) and the bank has no recourse to the borrower’s other assets (a perfectly normal thing also in corporate banking, called, surprisingly, a non-recourse loan).

                      Every single bank that signs a mortage in Texas knows that if the borrower stops paying for whatever reason, they take pisession of the house, and that’s it. If the house value does not cover the balance, there’s nothing more to do.

                      The banks signed those contracts. They should live by them

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                      • Exactly. And frankly, it wasn’t people in fixed-rate 15s or 30s that were tempted (or being told that they should) use the recourse of jingle-mail.

                        It was people in the more exotic stuff that bloomed near the end — balloon mortgages with no down-payment and unaffordable payments after the initial 18 months, that sort of thing.

                        People who, in the end, weren’t going to be able to keep the house no matter what. You couldn’t refinance (nobody was going to offer you a fixed rate for 500k on a house that was valued at 300k now), the banks were still in the throes of lying about their own balance sheets so nobody was willing to do write-downs or eat losses.

                        If you’re staring at a balloon payment coming due or a rate adjustment that would turn the rent into a crippling amount? Jingle mail was the smart thing to do.

                        Accept the inevitable loss, hand the house back to the bank, and walk away. Maybe declare bankruptcy, depending on the laws of the state.

                        It’s what any smart business would do.

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            • And just so I’m clear, I would be happy with either equal responsibility or equal plaudits. With a consistent framework we can start talking about making or unmaking policies. But without one, the conversation is necessarily going to be about resentment.

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            • I agree that this current system is not sustainable.

              It rewards defecting too much and cooperating not enough.
              When people who want some display of good faith before they cooperate (see: “Trust”), they tend to be treated, pre-emptorially, as if they’re defecting.

              Which is yet another reward that out-and-out defection offers that cautious cooperation doesn’t provide.

              But, of course, I’m one of those who believes that Trust/Cooperation is decreasing rather than higher than ever.

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              • The problem is that the system was set up with “always cooperate” as the default strategy, and social norms were used to ensure that.

                Then we decided that enforcing social norms was a wicked thing to do because lots of times you violated the norms because of reasons outside your control and there were all sorts of excuses for you defecting and blah, blah, blah.

                And now we’re seeing the pendulum swing the other way. It’s a different sort of norms, of course.

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    • Ah, good. Getting us to agree that, if this were happening, it’d be worth criticizing is a very important step.

      I think that it gets us more than halfway to “wait, that’s not what I meant”.

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