Donald Trump's murky finances and his refusal to make public his personal tax returns — breaking decades of tradition by presidential candidates — have dogged his campaign for months.
And the bombshell revelation that Trump reported a $916-million loss in 1995 that may have enabled him to pay no income taxes for 20 years has only intensified the pressure on the GOP nominee to shed light on his business ventures and explain the true nature of his finances and tax liabilities.
Trump did not dispute the speculation Sunday, but he blamed it on Hillary Clinton.
"She complains that Donald Trump took advantage of the tax code — well why didn't you change it when you were senator?" Trump said.
"The reason you don't is that all your friends take the advantage that I do," he said. "All of these people give you the money so you can take negative ads on Donald Trump."
Trump's tax plan promises to lower individual income tax rates to two brackets, 35% and 15%, and also bring down corporate rates.
But outside groups have said lowering rates would increase the federal deficit if they are not offset with spending cuts. They dispute Trump's promise of massive economic growth that will cover costs.
Trump said Clinton would be "raising your taxes, really high."
But Clinton's proposed new taxes are largely on the wealthiest Americans — those who earn more than $250,000 a year, which are the top sliver of earners.
Clinton reminded the audience that she voted in the Senate to close many of the loopholes Trump and other wealthy individuals use to lower their taxes.
And she said Trump's tax plan would be a greater windfall for the wealthy and corporations than for ordinary Americans. The new taxes she proposes include a surcharge on incomes above $5 million.
"It's sort of amusing to hear somebody who hasn't paid federal income taxes in maybe 20 years talking about what he is going to do," she said. "Donald always takes care of Donald, and people like Donald, and this would be a massive gift."
Trump's 1995 state tax returns showed that the massive loss reported that year could have allowed him to avoid paying federal taxes for many years. Whether he did or didn't isn't known for sure because only a small portion of that year's records was leaked to the New York Times, and his income and losses in subsequent years have not been disclosed. But the $916-million loss — and the likelihood that it did reduce or eliminate Trump's tax liability for up to two decades — has raised fresh questions about the real estate developer's business acumen and principles, however legal the tax practice may be.
"He's kind of stuck between a rock and a hard place," said Lawrence Zelenak, a tax law expert at Duke Law School. "Either I'm exploiting the heck out of the tax system, or I really lost a bunch of money. Neither of those sounds good."
Although what was leaked made it impossible to know what caused the loss in 1995, Zelenak said it likely represented real as well as paper losses, which Trump could legally take under the federal tax code.
The early 1990s was a difficult period for Trump as some of his Atlantic City casinos and other ventures ended up insolvent. A write-down of debts as part of bankruptcy settlements could have accounted for a part of the large loss in 1995.
Trump initially reacted to the 1995 tax disclosures by suggesting that it provided further proof of his astute business skills — a veritable genius, some of his supporters called him. But the Tax Foundation's Kyle Pomerleau noted that the practice of offsetting taxable profits in one year with losses from another was hardly anything special, as it is a very ordinary part of the tax code.
Tax experts widely accept the principle of offsetting, or loss carry-forward, as a reasonable practice to make the tax system fairer by allowing filers to smooth out income over time that can sometimes straddle two tax periods. Pomerleau said it is a common feature in industrialized countries, with some extending it well beyond the 20 years allowed in the U.S.
At the same time, Trump's tax returns spotlight a tax system that gives some special benefits to real estate business people. More than people in other professions, real estate investors can take advantage of depreciation. One of the most egregious loopholes, for example, would have allowed Trump to deduct business losses that were absorbed by banks, even if the lenders never got the money back.
"Congress lays out a variety of tax breaks and there are opportunities for clever people, and people who have influence to get what they want, to take advantage of them," said Steve Rosenthal, a senior fellow at the Tax Policy Center. "That's our system," he added, and that may be the best argument that Trump has: " that what he did was entirely lawful."
In his defense, Trump has said he had a "fiduciary responsibility" to minimize his taxes, but virtually every tax expert agrees that argument doesn't hold water. Trump's business is set up, for tax purposes, to be reported as individual income and not as a corporation. If it were a corporation, he would have a fiduciary duty to represent the interests of shareholders.
Trump also has argued that the tax revelations show that the nation's tax laws that he took advantage of are "unfair" — and that as someone who knows the system, he is the best person to fix it. Maybe that would have been a decent argument, said Zelenak, the Duke professor, "but when you became interested in putting a hand to it only after the leak, then that seems a little less compelling."
Also, in his tax plan for the nation, Trump hasn't proposed any changes that would address such loopholes or benefits to real estate investors specifically. The Tax Foundation estimates that Trump's plan would cut taxes by about $6 trillion over 10 years, with high-income filers benefiting more than those in the middle-and lower-income brackets.
Experts say Trump could, of course, put an end to all the speculation about his business and taxes, including questions about how much he gives to charitable organizations, by releasing his tax returns. But he has repeatedly said he would make public his taxes only after the government's audit is completed. Many have pointed out, however, that there is no prohibition that prevents him from sharing his tax returns while being audited. And Trump could certainly open up tax information from years that are not covered by the ongoing IRS audit.
Trump's businesses are not publicly listed. He has disclosed some business and wealth information in a filing with federal election officials, but the 104-page statement doesn't break down profits and losses, nor does it contain precise figures on assets over $50 million. Trump has often claimed he has a net worth of $10 billion, but outside estimates have put his personal fortune at less than half that.