Trump's $916 Million Tax Loss Revealed

The Leaked Tax Returns

In October 2016, just weeks before the presidential election, The New York Times published a bombshell report based on three pages from Donald Trump’s 1995 state income tax returns. The documents, which had been mailed anonymously to the newspaper, revealed that Trump had declared a loss of $915,729,293 on his federal tax return for that year. Under the tax code’s net operating loss provisions, a deduction that large could be carried forward to offset taxable income for up to 18 years, potentially allowing Trump to legally pay zero federal income taxes over that period.

The revelation was extraordinary in multiple respects. The sheer scale of the loss reflected the catastrophic collapse of Trump’s business empire in the early 1990s, when his casinos, the Plaza Hotel, and the Trump Shuttle airline all spiraled into financial distress. But the fact that Trump could then use those losses to eliminate his tax burden for nearly two decades raised fundamental questions about the fairness of the tax code and who it truly served.

”That Makes Me Smart”

Trump’s response to the revelation was characteristically defiant. At a presidential debate with Hillary Clinton, when she suggested that he had paid no federal income taxes, Trump interjected, “That makes me smart.” His campaign issued a statement saying that Trump had “a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required.” His surrogates argued that the ability to use losses to offset future income was a standard feature of the tax code available to all businesses.

Critics argued that the episode illustrated a system rigged in favor of the ultra-wealthy. A real estate developer could suffer catastrophic losses, much of them borne by banks and investors, and then use those same losses to avoid contributing to the public treasury for nearly two decades. For someone who lost $916 million of other people’s money, the tax code effectively provided a second reward.

The Broader Pattern

The 1995 tax revelation was just one piece of a larger picture that would emerge over subsequent years. A 2018 New York Times investigation found that Trump and his family had engaged in a pattern of suspect tax schemes, including instances of outright fraud, to shield their inherited wealth from taxation. A subsequent 2020 Times investigation, based on more than two decades of Trump’s tax data, revealed that Trump had paid just $750 in federal income taxes in both 2016 and 2017, and had paid no income taxes at all in 10 of the previous 15 years.

Trump refused to release his tax returns throughout both his 2016 and 2020 presidential campaigns, breaking with a precedent that had been followed by every major-party nominee since Richard Nixon. The returns eventually became the subject of a multi-year legal battle between Congress and the Trump administration, reaching the Supreme Court before a House committee finally obtained them in late 2022.