Notes From the Underground - On Trump's taxes and Sanders's cellar dwellers.

[Ubiquitous]

Mitt Romney was wrong. At least one member of the 47% supported his
presidential candidacy four years ago, though Romney didn’t return
the favor.

That would be Donald J. Trump. Actually, it’s not clear if Trump was
among Romney’s 47%—those with no federal income-tax liability—in
2012, though the New York Times speculates he “could have” been. But
according to documents received by the Times, Trump “declared a $916
million loss on his 1995 income tax returns” and therefore paid no
income tax that year.

Trump has departed from the decades-old custom of tax-return
disclosure by presidential candidates, so that the Times received
the partial 1995 state income-tax returns in the mail from an
anonymous source—purportedly someone inside Trump Tower, though the
only evidence for that is the return address.

Marc Kasowitz, a lawyer for Trump, said his client did not authorize
the disclosure and threatened “prompt initiation of appropriate
legal action” over its publication. That’s unlikely to be
successful, as the Times would claim that the public interest in a
candidate’s finances is great enough that the paper’s First
Amendment right to publish outweighs any legal prohibition.

Not that there’s all that much to see here. The Times concedes that
the “tax experts” it consulted “said nothing in the 1995 documents
suggested any wrongdoing by Mr. Trump,” even though the size of the
loss was unusual enough that it “probably attracted extra scrutiny
from I.R.S. examiners.”

The story’s headline reads: “Donald Trump Tax Records Show He Could
Have Avoided Taxes for Nearly Two Decades, The Times Found.” That
is, the story rests heavily on speculation about what Trump might
have done in subsequent years, which are as yet undocumented.

For businesses, the federal income tax is a levy on profits—revenues
minus expenses—not revenues. That means you don’t pay the tax unless
you make a profit. But while the government takes a share of your
profit, it does not share your exposure to risk. If you earn $1,000,
a substantial portion of it goes to the Treasury. If you lose
$1,000, it all comes out of your pocket.

Except that if you stay in business after a loss, you can use the
loss to offset profits in future years. “Although Mr. Trump’s
taxable income in subsequent years is as yet unknown, a $916 million
loss in 1995 would have been large enough to wipe out more than $50
million a year in taxable income over 18 years,” the time limit on
such carry-overs, the Times reports.

Under that scenario, however—and let us emphasize the Times has no
facts to back up this speculation—Trump would still come out behind.
A $916 million loss in 1995, followed by $50 million gains in each
of the next 18 years comes out to a net loss of $16 million. Again,
a business doesn’t pay income taxes when it loses money. And the
carry-over is not adjusted for inflation, so that the putative $900
million in profit from 1996 through 2013 was worth less than $900
million in 1995 dollars.

Mrs. Clinton and the Times hope swing voters don’t understand the
tax system; for those who do, this doesn’t reflect badly on Trump at
all (except on his judgment in refusing to release his returns
earlier so as to avert the October surprise). It does make Romney
look foolish with his 47% analysis back in 2012. As we noted at the
time:

Romney’s description of the 47% as consisting of--our
paraphrase here--a bunch of freeloaders is inaccurate.
Forbes’s Janet Novack reports that in 2011 more than 60% of
such households paid federal payroll taxes. That means that
somebody in the household was working for at least part of
the year, but the household income was either not high
enough to be subject to the income tax or offset by the
Earned Income Tax Credit and similar subsidies.

Of households that paid neither income nor payroll taxes,
more than half “were headed by a senior—in other words, by
someone who paid payroll taxes and likely some income taxes
too, in the past.” Some additional fraction presumably
consisted of the unemployed, of businessmen or investors
who showed a loss for the year, and of affluent earners
who donated most of the year’s income to charity.

Speaking of politicians’ impolitic political analysis, Hillary
Clinton is at it again—or rather she was at it in February, and
we’re learning about it now, thanks to the Washington Free Beacon,
which obtained an audio recording of the private event.

The Beacon’s Lachlan Markay was more interested in Mrs. Clinton’s
remarks on defense policy, but Politico extracted the segment in
which she described Bernie Sanders’s supporters “as political
newbies attempting to deal with an economy that has fallen short of
their expectations”:

“Some are new to politics completely. They’re children of
the Great Recession. And they are living in their parents’
basement,” she said. “They feel they got their education
and the jobs that are available to them are not at all what
they envisioned for themselves. And they don’t see much of
a future.”

Clinton added: “If you’re feeling like you’re consigned to,
you know, being a barista, or you know, some other job that
doesn’t pay a lot, and doesn’t have some other ladder of
opportunity attached to it, then the idea that maybe, just
maybe, you could be part of a political revolution is pretty
appealing.”

“I think we all should be really understanding of that,”
Clinton said.

At least she didn’t call then “irredeemable” or “not America.” As
political analysis goes, this is more astute than Mrs. Clinton’s own
basket of deplorables, Romney’s 47% or Barack Obama’s bitter
clingers. It does seem reasonable to think one reason young voters
are attracted to Sanders and his promise of “political revolution”
is that they bought expensive college degrees that turned out to be
counterfeit tickets to success.

Mrs. Clinton’s analysis is incomplete, though understandably so.
Another reason young people like Sanders is his manifest sincerity.
Even this columnist finds that aspect of Sanders’s persona
appealing, though we regard most of his ideas as foolish and
pernicious. But Mrs. Clinton can’t very well acknowledge Sanders’s
sincerity, because of what that would say about the comparison with
Mrs. Clinton. Even generally honest people aren’t usually _that_
honest.

The remark about Sanders supporters’ “living in their parents’
basements” was tone-deaf and odd, though. It reminded us of a riff
from Paul Ryan’s 2012 Republican conventions speech in which, as we
recalled, he said much the same thing. When we looked it up, we
discovered Ryan had not referred to basements at all. What he said
was this:

College graduates should not have to live out their 20s
in their childhood bedrooms, staring up at fading Obama
posters and wondering when they can move out and get going
with life.

The last time this columnist lived with our parents—for a few months
during the summer when we were 19—we stayed in a bedroom. We suspect
that is the common experience, especially in parts of the country,
namely the South and Southwest, where basements are uncommon for
reasons of geology or weather.

Where there are basements, some homeowners will finish them and use
them as rec rooms or even bedrooms. More commonly, they’re just a
place to store useless junk—which is not a nice way to characterize
the young voters who support your opponent.

Sanders himself has mixed feelings about Mrs. Clinton’s remark.
“What she was saying there is absolutely correct,” he told ABC’s
“This Week” yesterday, quoted by the Puffington Host. “And that is,
you’ve got millions of young people, many of whom took out loans in
order to go to college, hoping to go out and get decent-paying, good
jobs.”

But on CNN’s “State of the Union,” as the Washington Examiner notes,
Sanders was asked if the comment bothered him. “Well, look, of
course it does,” he said:

“But we were in the middle of a campaign and . . . in some
of the statements that I made about Hillary Clinton, you
can see real differences,” he quickly added. “So we have
differences. There’s nothing to be surprised about. That’s
what a campaign is all about.”

Poor Sanders is in the same unpleasant position as Ted Cruz and
Marco Rubio—supporting the candidate who vanquished him in the
primaries as the lesser of evils in the general election, and
genuinely believing the “evils” part. We’ll find out after Election
Day if the cellar dwellers are persuaded by Mrs. Clinton’s status as
the lesser.


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Wikileaks says they'll surprise and shock us all with their findings
on Crooked Hillary. They must have found a trace of ethical
behavior.