ON TRUMP’S $750 TAX PAYMENT FOR 2016

NOTHING ILLEGAL OR UNETHICAL

 We have all heard over and over again that President Trump paid only $750 in taxes in 2016. Many working citizens paid more taxes.  How can that be?

We all know why we pay taxes.  Revenue is collected to pay for government services.  Our government  presently (2020) collects about $3 trillion dollars in taxes from Americans and spends about $4 trillion.  Much expenditure is for our military, health care, various Government services, maintaining  government facilities, and paying interest  on our borrowed money.  We must collect revenue for these purposes, but at the same time we do not want to discourage entrepreneurship and economic growth 

The government in it wisdom realizes that its ability  to tax can also incentivize investment and promote economic well being   To help increase wealth and business investment, create jobs and sustain profits for all,  the government attempts to encourage individuals and corporations to invest their profits by implementing  deductions on gross income  to encourage reinvestment.  A deduction is a correction to a tax payer’s  gross income which permits the  payer  to remove certain classes of income  such as: costs incurred to generate profit (as well as  losses of income) from  income to calculate what’s called “taxable income”.  Citizens  pay taxes at a sliding rate based on taxable income. 

A traveling salesman can deduct the cost of travel, cost of hotel bills and food from his income.  A teacher can deduct the cost of special materials she or he may need to conduct their classes.  Large businesses can deduct the costs of a new plant , or the development costs of a new product from the total profits generated from the sales of that product. Losses such as in cases where a chain store must close a store which has been unprofitable are also deductible.  Thus the government does not punish an investor for loss. Such action would only tend to discourage further investment,  Deductions help to stimulate new investment, increase investment, increase economic growth and encourage better services to the community as well as new jobs too. 

Therefore, one can see how common it must be for individuals or a company to pay little tax or no tax at all for certain periods of time when legitimate deductions are high.  It is common for  larger corporations such as GE, Ford, GM, or Sysco  or other large companies to pay no taxes because of high deductables resulting from investing their profits in new plants and new products.  As a result, many huge companies often  pay no or very little taxes in some years. But the government and the nation still profit from increased wealth, new products, innovations, growth in employment, better paying jobs, increased service to communities, that these entities generate.  Thus  for this reason our government wisely  maintains and encourages the use of deductions. 

Paying little tax or no tax may mean the individual or corporation made large investments that year or had heavy losses, all of  which raised their deductions equal to their profits for that year. It does not indicate  that they did any thing illegal or even unethical. 

President Trump’s $750 dollar tax bill reflects his company reinvested most of its profits, and had losses which increased deductions.  

Tax returns are Byzantine  and complex documents that can not be understood in a ten second sound bite such as:  “ He only paid seven hundred fifty dollars in taxes,”.  The statement  is meaningless and suggests that the person making a claim  suggesting something sinister is either ignorant of tax regulations or is simply  attempting to deceive the public.