While the Joe Biden campaign was quick to leap on a New York Times story that President Donald Trump paid a small amount in personal income taxes in recent years, it is clearly a case of the pot calling the kettle black.
Joe and his wife Jill Biden funneled millions in income through a pair of S corporations they set up in Delaware as a way to circumnavigate paying Social Security and Medicare taxes, according to an August opinion article in The Wall Street Journal.
Of the nearly $13.3 million the couple took in primarily through speaking fees and book royalties during the 2017 and 2018 tax years, they claimed just $750,000 in income.
The other 94 percent of the money passed through the corporations as a direct distribution to the Bidens, preventing it from being subject to the up to 15.3 percent combined Social Security and Medicare tax rate, according to CNBC.
The Internal Revenue Service requires S corps to pay “reasonable compensation” to employee shareholders before making non-wage distributions to them.
The nature of the business dictates what should be characterized as income and what can be a distribution to an employee shareholder as money generated from the business.
“But to the extent gross receipts are generated by the shareholder’s personal services, then payments to the shareholder-employee should be classified as wages that are subject to employment taxes [Social Security and Medicare],” IRS guidance reads.
Such is clearly the case with the Bidens.
The companies made money through their speaking fees and book royalties and apparently little, if anything, else.
Most if not all the compensation the couple received from the S corps should have been in the form of income, subject to employment taxes.
Even left-wing journalist Ryan Grim, with The Intercept, during the heat of the Democratic primary race last year, highlighted the Bidens’ use of Delaware corporate law to shield their income from public scrutiny.
In response to the Times story, the president tweeted Monday morning, “The Fake News Media, just like Election time 2016, is bringing up my Taxes & all sorts of other nonsense with illegally obtained information & only bad intent.
The Fake News Media, just like Election time 2016, is bringing up my Taxes & all sorts of other nonsense with illegally obtained information & only bad intent. I paid many millions of dollars in taxes but was entitled, like everyone else, to depreciation & tax credits…..
— Donald J. Trump (@realDonaldTrump) September 28, 2020
“I paid many millions of dollars in taxes but was entitled, like everyone else, to depreciation & tax credits,” he added.
Due to the nature of Trump’s business being primarily in real estate development, tax law does provide for significant tax credits, deductions and depreciation to encourage entrepreneurs to take risks.
Trump’s oldest son, Donald Trump Jr., also addressed the Times story in an appearance on “Fox & Friends” on Monday, pointing to the development of the Trump International Hotel Washington, D.C., as an example for which his father received tax credits.
“My father’s paid tens of millions of taxes,” Trump Jr., said. “If he does things in certain years where you get depreciation, where you get write-off, where you get historical tax credits, like we did when we took on the risk of building the Old Post Office in DC.”
The Old Post Office Building, originally constructed in the 1890s not far from the White House, reopened as a newly renovated Trump hotel in October 2016.
“That was literally a government contract,” Trump Jr. recounted. “We bid against every hotel company in the world. Historical tax credits that you use to offset tax payments for taking the risk to build that. That was done under the Obama administration. It literally took an act of Congress to get it done.”
— Ronna McDaniel (@GOPChairwoman) September 28, 2020
The president’s son further suggested that while his father’s federal income tax due may be low any given year, he still had to pay property taxes and payroll taxes (Social Security and Medicare) among others.
Trump Jr. also pointed out that his father put “thousands and thousands of people to work on an annual basis” through his various business ventures. Those people pay taxes too.
The Times’ big scoop appears to be that a businessman took advantage of business tax deductions. And?
Of far greater service to the public would be reporting on the tax avoidance schemes of the Bidens and the shady dealings of their son Hunter.
UPDATE, Sept. 29, 2020: This story previously referred to the 15.3 percent combined Social Security and Medicare tax rate that makes up the self-employment tax. In fact, 15.3 percent is the typical tax rate, as the Internal Revenue Service sets a maximum net earnings figure that is subject to the Social Security portion of the tax each year. In some cases, the combined tax rate may be lower than 15.3 percent. This story has been updated to note that 15.3 percent is the maximum rate.
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