After The New York Times published tax documents from 1995 revealing that Republican presidential nominee Donald Trump lost nearly a billion dollars and could as a result have avoided paying any federal income tax for “up to 18 years,” Trump and his campaign surrogates have claimed he had a “fiduciary responsibility” to reduce his personal tax liability to the smallest amount possible under law. Veteran tax law experts tell Media Matters this explanation is “silly,” “complete nonsense,” and “almost incomprehensibly incoherent.”
In a front page Sunday article, the Times reported, “The 1995 tax records, never before disclosed, reveal the extraordinary tax benefits that Mr. Trump, the Republican presidential nominee, derived from the financial wreckage he left behind in the early 1990s through mismanagement of three Atlantic City casinos, his ill-fated foray into the airline business and his ill-timed purchase of the Plaza Hotel in Manhattan.”
The Trump campaign issued a statement in response that said, among other things, that Trump “has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required." Leading campaign surrogates including former New York City Mayor Rudy Giuliani have made similar claims during media appearances. Giuliani told CNN, “If you have a set of laws, you live by those laws. And the reality is, you are ignoring completely the fiduciary obligation he has to all the people around him to run his business at the lowest possible expense.”
But respected tax attorneys and others who teach tax law said this defense doesn’t pass the smell test.
“That’s nonsense,” said Rutheford B Campbell, a corporate law professor at the University of Kentucky College of Law. “He has a fiduciary responsibility to reduce the corporation’s tax liability. … The notion that somehow he owes an obligation to the corporation to reduce his own taxes doesn’t make sense.”
Jeff Scroggin, a tax attorney with Scroggin & Co., P.C. of Roswell, GA., agreed.
“I don’t see that as a legitimate argument,” said Scroggin. “The only way I can see that argument working is to say he is going to take the dollars he saves and invest them back in the business and I doubt seriously he is doing that. I doubt seriously anyone is expecting him to do that, take the savings and put them back in the business.”
He later added, “If you lose a billion dollars can you really be a successful businessman? It has to raise questions about the viability of what he’s been doing over those years.”
Martin McMahon, co-author of law school textbook Federal Income Taxation of Individuals, said having the responsibility to pay as little corporate taxes as possible does not extend to personal taxes.
“I’ve never heard of any legal principle that the owner of a business has an obligation to the employees of the business or the directors to minimize the owner’s personal tax liability,” McMahon said, calling it, “complete nonsense, there is absolutely no legal principle to support that.”
Edward Kleinbard, a tax law professor at the University of Southern California Gould School of Law, echoed that view.
“He owes no fiduciary duty to anyone else not to pay personal income tax. It is an almost incomprehensibly incoherent argument,” Kleinbard said via email. “No, it’s just plain silly. No one is under a fiduciary duty to lose nearly $1 billion of other people’s money. He made very bad investment decisions, he skirted with bankruptcy, his lenders forced him to unload several of his properties at pennies on the dollar, and as a result he claimed a $900+ million tax loss attributable to losing his lenders’ money. What’s hard about that?”
Roberton Williams, a senior fellow at The Tax Policy Center, a joint venture of the Urban Institute and the Brookings Institution, called Trump’s claim “kind of odd.”
“It is his own tax return, he is the one who personally benefits from it,” Williams said. “He has this other income that normally people would have to pay tax on.”