What is hiding in Donald Trump's tax returns that he doesn't want people to see?

The last time a Republican candidate's tax returns became the subject of public controversy it was over the very low effective tax rate paid by the very rich Mitt Romney. That's unlikely to be what's up Trump's sleeve, because he's been quite open about the fact that he's taken rather extreme measures to minimize his tax bill.

In an interview with ABC's George Stephanopoulos on Friday he said, "I fight very hard to pay as little tax as possible." When Stephanopoulos followed up and asked what his tax rate is, exactly, he repeated: "I fight very hard to pay as little tax as possible."

So he's not hiding the fact that he pays a low tax rate.

My guess is that the damaging information he's trying to conceal is that his real net worth is lower than the $9 billion he's claimed. A lot lower. There's pretty good evidence that this is true, and that the evidence for it is lurking in his tax returns. At least that's what Timothy O'Brien — the one man in journalism who's actually seen the tax returns — seems to be saying.

Donald Trump versus Timothy O'Brien

Back in 2005, O'Brien, a veteran business reporter, published Trump Nation: The Art of Being the Donald, a biography of Trump.

The book contains a section about O'Brien's efforts to ascertain Trump's net worth:

So I asked around for guidance. Three people with direct knowledge of Donald's finances, people who had worked closely with him for years, told me that they thought his net worth was somewhere between $150 million and $250 million. By anyone's standards this still qualified Donald as comfortably wealthy, but none of these people thought he was remotely close to being a billionaire. Donald dismissed this as naysaying. "You can go ahead and speak to guys who have four-hundred pound wives at home who are jealous of me, but the guys who really know me know I'm a great builder," he told me.

Trump responded to the publication of the book by suing O'Brien.

The case was dismissed in 2009 on the grounds that Trump is a sufficiently public figure that a libel accusation would have to meet the stringent "actual malice" standard. This would mean that to prevail, Trump would need to prove that O'Brien knew the $150 million to $250 million estimate was wrong and published it anyway to harm Trump. The court ruled that Trump had no evidence that could meet this standard and threw out the case. On appeal, a New Jersey appeals court rejected Trump's claim that reliance on anonymous sources per se constitutes actual malice.

These rulings were good for press freedom, but in light of Trump's subsequent political career it's a little unfortunate that the trial never took place for one simple reason — truth is considered an absolute defense to libel charges, so at trial O'Brien and his publisher would have had the opportunity to produce evidence regarding Trump's actual net worth and Trump would have had the chance to rebut it. The outcome of the trial would tell us something very interesting about Trump's finances.

Since a trial didn't happen, we don't have that chance. But there was pretrial discovery, and O'Brien got his hands on Trump's tax returns.

O'Brien has seen Trump's tax returns and says they're interesting

O'Brien recently wrote a column for Bloomberg View whose thesis is pretty well-captured by its headline: "I Saw Trump's Tax Returns. You Should, Too."

Here's a key passage:

Actually, as someone who saw Trump’s federal tax returns about a decade ago as part of a legal action in which he sued me for libel (the suit was later dismissed), I think there probably are some things to be learned from them. The tax returns my lawyers and I reviewed were sealed, and a court order prevents me from speaking or writing about the specifics of what I saw. I can say that Trump routinely delayed — for months on end — producing those documents, and when they finally arrived they were so heavily redacted that they looked like crossword puzzles. The litigation ran on for five years, and during that time we had to petition the court to compel Trump to hand over unredacted versions of the tax returns — which he ultimately did.

So in the context of a lawsuit that was specifically about the question of whether Trump was as rich as he said he was, the lawyers arguing that he wasn't as rich as he said he was wanted to see the tax returns and Trump did not want to hand them over.

O'Brien is not at liberty to say what he learned from the tax returns, but he does offer five kinds of things we could learn from them, and No. 1 on the list is that we could learn about Trump's income.

O'Brien appears to stand by the charge

Sometimes in the course of journalistic life, a reporter or an editor screws up and prints something that isn't true. Sometimes we end up getting sued over it, at which point we normally defend ourselves (everyone likes money) even if we feel bad about the screw-up. But if we screwed up, we don't normally run around repeating the charge in public.

Yet that's exactly what O'Brien did in a July 2015 column that echoed the anonymous sources' claim and added new evidence that Trump is overestimating his net worth:

My lawyers deposed Donald for two days during the litigation, and we covered a range of interesting subjects. Among the documents discussed was a Deutsche Bank assessment that pegged Donald’s net worth at $788 million in 2005. At the time, Donald was telling his bankers and casino regulators that he was worth $3.6 billion; he was telling me he was worth $5 billion to $6 billion. Have you "always been completely truthful in your public statements about your net worth," my attorneys asked Donald. "I try," was his reply. When they asked him about how he calculated his net worth, he noted that the figure "goes up and down with markets and with attitudes and with feelings, even my own feelings." Later he added that "even my own feelings affect my value to myself."

At another point during the depositions, Trump claimed not to understand the meaning of the generally accepted accounting principles (GAAP) that are used by publicly traded American companies in their financial disclosure forms.

"No," he said. "I'm not an accountant."

That's fine. Most people, after all, aren't fully up to speed on GAAP accounting. But in the context of the deposition, it appears that Trump was trying to give himself wriggle room to explain why his off-the-cuff estimates might be so far at odds with more rigorous assessments from business associates.

Maybe O'Brien is lying for no reason

Of course, I haven't seen Trump's tax returns. Maybe O'Brien, having gone through a lawsuit in which he avoided a charge of actual malice in his portrayal of Trump's financial situation, is just back for another bite at the apple and this time he's willfully misdescribing the situation.

One good way for Trump to clear this up and make his critics in the press look foolish would be to release his tax returns. But he doesn't want to do that.

The question of Trump's net worth is relevant because, lacking any experience in government, he is running on his record as a businessman. Reasonable people can disagree about how relevant success in business is to a person's political aspirations, but it's what Trump has put on the table.

Yet without tax returns and other detailed, rigorous financial information, we can't actually tell how successful Trump has been at business. He's clearly rich, but he had a rich dad and stood to inherit tens of millions of dollars all along. Parlaying the money he started out with into a $9 billion fortune would, nonetheless, be quite impressive. Turning it into even $2 billion would be pretty great. But turning it into the $150 million to $250 million that O'Brien's sources thought he had — or even into the $788 million that Deutsche Bank came up with — would be Trump drastically underperforming broad stock market indexes.

It would show, in other words, that he had demonstrated no investing skill at all over the years.

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