Show me yours

2 August 2016 By Rob Cox

The latest kerfuffle involving Donald Trump’s taxes definitively underscores the strangeness of America’s presidential campaign. Moving beyond the oddities of finger size and Republican convention rallying cries to jail Hillary Clinton, the GOP nominee is now being goaded reality-TV style by fellow plutocrats to disclose his Internal Revenue Service returns. At stake isn’t just whether he paid enough. Rather, Trump’s billionaire bona fides are in question despite an election pegged on income inequality.

Taxes were in focus four years ago, too, when Mitt Romney, the former Massachusetts governor and Bain Capital buyout baron, released his federal filings two months before the November election. They revealed that Romney had paid a relatively low 14.1 percent effective tax rate in 2011. The disclosure proved troublesome for the candidate, who had been caught on video complaining that 47 percent of Americans didn’t pay their fair share to the taxman.

Romney’s returns also shed light on other important aspects of the man and his character. They showed, for instance, that he earned $13.7 million, mainly from capital gains. That aligned with what his campaign stated was his net worth, of some $250 million; and suggested he generated returns of about 5 percent on his investments. They laid bare that Romney handed over $4 million to charity, including $1 million to the Church of Jesus Christ of Latter-day Saints, as well as to a foundation that helps families of children with epilepsy.

The episode helped confirm the relevance of disclosing tax returns, which every candidate has done since 1973. By presenting an audited fiscal blueprint, voters are given a unique opportunity to compare what the candidates say about their money with what they actually do with it. In Romney’s case, his returns suggested that he paid too little compared to average working people. They also opened a window onto his generosity – and a truth in advertising about his wealth.

No modern candidate, however, has used his or her lucre to tout so boldly a readiness to become commander-in-chief as Trump. Even though an expanding gap between rich and poor may be the rallying cry of the underemployed white males who support the real-estate mogul, his elite financial status – as a supposed self-made man, despite starting with a large gift from his father – is also important to his credibility with such voters. Tax returns are the only empirical way for Trump to prove his standing. That’s especially true considering his boasting of a $9 billion net worth, or twice as much as Forbes magazine estimates the value of his various properties and businesses.

This amplifies the significance of three legitimate members of the three-comma club emerging in just the past week to endorse Clinton. Unlike Trump, their riches are certifiable in a variety of ways. Warren Buffett, the Berkshire Hathaway boss, for one, on Monday challenged Trump to meet “any place, any time between now and the election” to compare their tax returns.

The Oracle of Omaha owns a stake – whose disclosure is required by the Securities and Exchange Commission – in a large publicly traded company. His 37 percent of Berkshire’s “A” shares, which comprise the bulk of his booty, is worth some $64 billion. In that respect, Buffett’s billionaire bona fides are unimpeachable. At the rally he held with Clinton in Nebraska on Monday, Buffett also said he, too, is under audit by tax authorities, pushing back on one of Trump’s arguments for failing to disclose his own returns.

Then there is Mark Cuban, the brash owner of the Dallas Mavericks basketball team and, like Trump, a reality-TV star thanks to his role on the hit ABC show “Shark Tank.” He endorsed Clinton over the weekend at a rally in his home town of Pittsburgh, Pennsylvania, a swing state the Republican probably needs to win the presidency. Cuban, who founded Broadcast.com and sold it for a verifiable $5.7 billion to Yahoo in 1999, taunted Trump to release his tax returns with a series of tweets suggesting Clinton paid more to the IRS than Trump earned in real income.

Lastly is Mike Bloomberg, the former New York City mayor. While speaking at the Democratic National Convention last week in Philadelphia, the media mogul said of Trump: “I’m a New Yorker, and I know a con when I see one.” Hizzoner issued tax returns, albeit redacted ones, during his tenure through 2012. Meantime, the value of his eponymous financial information firm can be roughly estimated at $40 billion by applying the performance of public competitors – like Breakingviews parent Thomson Reuters – to Bloomberg LP’s disclosed revenue and other metrics.

The point is that all three businessmen now attacking Trump have credible paper trails to validate their billionaire status. As unusual as it may seem during an election in which insurgents from both the left and right have emerged to protest the inequality of American wealth, their self-anointed champion is now under pressure to prove he actually is as rich as he says he is. The reluctance to release documentation that might support his braggadocio – or perhaps what the numbers might actually divulge – could damage his standing with both rich and poor alike.

 

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