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OP-ED: Trump’s tax returns are bad. Blame the tax code.

Morris Pearl

This week, the New York Times released a damning report on President Trump’s tax returns, detailing how Trump managed to avoid paying any income tax whatsoever in 10 of the last 15 years, and only $750 a year in 2016 and 2017.

There’s plenty of lurid details in the report that paint Trump in a shady light, but most of the news coverage is missing the real scandal: all or most of what Trump did to avoid paying his fair share of taxes is perfectly legal.

Thanks to decades of lobbying by deep-pocketed special interests and rich folks like me, politicians have structured our tax code to benefit the wealthy and powerful. There’s a dizzying number of loopholes, tax breaks, and special privileges embedded in our tax laws that allow rich people to reduce or entirely eliminate their tax bill simply because they’re rich. None of these advantages are available to working people in this country, and Trump’s tax returns merely illustrate that profound unfairness in sharp relief.

Trump and other rich folks and corporations like him often exploit one particular aspect of the tax code in particular to reduce their tax bill: write-offs. Through his liberal use of the “business expense” write-off, Trump was able to claim things like $70,000 worth of hairstyling, a private jet, golf courses, and a 200-acre mansion as IRS-approved tax-deductible “ordinary and necessary” business costs because he essentially claimed that “being a rich celebrity” was his job. These deductions significantly reduced his taxable income – and also allowed him to lead a lavish lifestyle even as his business empire was crumbling.

Compare that to the plight of an ordinary American schoolteacher, who pays an average of $7,239 in federal income taxes every year. Under our current tax code, teachers – who often are forced to buy their own supplies thanks to our chronically underfunded public school systems – can deduct just $250 of their own out-of-pocket expenses for their job. They aren’t allowed to write off basic things like transportation, food, or rent, and they certainly aren’t allowed to deduct major life expenses such as a surprise medical bill or student debt. So not only will that working-class teacher end up paying a higher tax rate than America’s 700 or so billionaires, but that teacher will also be far more vulnerable to an inescapable cycle of debt that rich folks like me could simply just write off.

For investors like me, our tax code offers an even more egregious special privilege over ordinary working people. I make most of my money off on investment income, and the taxes I pay on my investment profits, called long-term capital gains, qualify for a special rate that’s barely half the average tax rate that folks who go to work for a living pay. There’s no justifiable reason for this special rate, it merely lets my wealthy peers legally skirt their fair share of taxes.

Even for the most die-hard conservative, it should be obvious that a system that legally permits a man worth millions of dollars to pay just $750 in taxes is not a system that’s working. There’s no good reason in the world why a single mother working a minimum-wage job should be paying thousands of dollars in federal income taxes while Trump and folks like him pay next to nothing. It’s unfair to the point of downright corruption, and it’s long past time for our lawmakers to do something about it.

Raising tax rates on the rich is an obvious step, but Congress must go further. Our entire tax code needs to be reimagined to center the needs of the middle and working class first and foremost. There are many concrete steps that we can take to do that, including creating stricter definitions of write-offs to curb abuse like President Trump’s, equalizing the capital gains tax rate with regular income tax rates, and ending subsidies and special investment tax breaks for individuals and corporations who don’t pay their tax bills.

Additionally, we must fully fund the IRS so that they can audit rich folks like me, and stop rampant fraud in cases like Trump’s. As it is, the agency simply says it doesn’t have the money or manpower to audit the rich, so painful audits often fall on low-income taxpayers with simpler, easier-to-audit returns, even though they pay disproportionately more taxes than the country’s billionaires.

All of this needs to change because rich folks like me or scamming the government out of millions – and that means they are scamming working people, the actual taxpayers that fund our government. There’s no fairness in this system until we overhaul our tax code and tax the rich.

Morris Pearl is a former managing director at Blackrock, Inc., and is now Chair of the Patriotic Millionaires.