Donald Trump. AP Since The New York Times published three pages from Donald Trump's 1995 tax filings, there has been some pushback from right-of-center economics writers who argue that there's nothing necessarily untoward about using a huge business loss to wipe out tax liabilities across many years.

Bloomberg's Megan McArdle, for instance, argues that Trump's 1995 tax records reflecting a $916 million loss show "good tax policy at work."

McArdle's argument is roughly as follows: If Trump managed to avoid taxes for a decade or more, it must have been because he really lost a ton of money when his real-estate empire nearly collapsed in the early '90s. And as a result he had no net income to tax, even over a long period.

(It should be noted that McArdle's argument is a defense of Trump's taxes but not of Trump himself, as the argument implies he is a spectacularly bad businessman.)

I agree with McArdle that there's nothing wrong, in principle, with making use of a net operating loss. If you have a bona-fide business loss in one year, you should be able to use it to offset income from other years. Otherwise, people will be penalized for going into businesses like real estate that have boom and bust cycles.

But Trump's use of the net operating loss provision was not normal.

First, there is the issue of scope: The $916 million loss claimed on Trump's 1995 return accounted for 1.9% of all the net operating losses claimed by individual income taxpayers in the US in 1995.

Trump was a pretty big person in real estate in the early '90s, and he famously took a really big bath on his casinos, his airline, and a variety of other investments at that time. But still: Nearly 2% of all the NOLs on individual income tax returns in the whole country? Seems high.

Donald Trump and Hillary Clinton. Drew Angerer/Getty Image

Lavish lifestyle

Then there is the issue of Trump's lifestyle.

We can infer that Trump has enjoyed a significant amount of real income over the course of his adult life because of his extreme personal expenditures: His private Boeing 757, his various gold-plated homes, and his partly self-financed presidential run, for instance.

All that Trump lifestyle expenditure must have been financed by a significant amount of Trump income, earned at some point.

Even if Trump had generated no net value through his business ventures and was living off his inheritance from his father, you would expect him to be reporting (and paying tax on) significant investment income from his wealth. Indeed, his 1995 tax documents reflect over $7 million in interest income — meaning Trump likely owned $100 million or more worth of interest-bearing investments at the time, despite his significant financial distress.

Yet all the public tax information we have about Trump reflects incomes near or below zero.

Last spring, The Washington Post reported that Trump paid no federal income tax in 1978, 1979, 1984, 1991, or 1993. He did have taxable income in the years 1975 through 1977, with the highest amount of income being $118,530, on which he paid $42,386 in income tax in 1977.

His 1995 tax documents, of course, reflect income of negative $916 million, with reported business losses far more than wiping out his interest and dividend income. Most of that reported loss was carried forward from prior years, which suggests he had several years in a row with no taxable income, going back to the peak of his business difficulties in the early '90s.

Still, $16 million of Trump's negative income for 1995 was attributable to real estate, royalties, partnerships and other business investment vehicles reporting negative income for 1995 itself, meaning even his current income as reported to the IRS had not yet ticked positive even as real estate markets were on the upswing.

Donald Trump. AP

The property-tax rebate

Then there is the property-tax evidence.

In several recent years, Trump somehow received a small property-tax rebate on his Trump Tower penthouse through a program that is supposed to be available only to people who earn less than $500,000 a year.

When this story first broke in March, it seemed like a bizarre quirk: Even if Trump was overstating his wealth, how could he possibly make less than $500,000 a year? Trump spokeswoman Hope Hicks insisted at the time that the rebate had been granted in error. A spokeswoman for the city demanded that Trump return the rebate money — all $302 of it.

But then in June, Trump's next tax bill came out, showing he was still getting the rebate. This time, the city clammed up, insisting that tax-privacy laws prevented them from discussing any taxpayer's eligibility for a rebate. Ultimately, the city withdrew the rebate at Trump's request, without ever saying whether he was entitled to have the rebate if he wanted it.

The city is supposed to check taxpayers' incomes as reported on their state income tax returns before granting these property tax rebates. It wasn't hard to believe the government would make a mistake in this verification process.

But given that the city kept giving him the rebate even after news coverage of the "error," and given the large number of prior years in which Trump had incomes below the $500,000 threshold, doesn't it seem likely the reason he kept getting the rebate was that he qualified for it?

Finally, we know that since 2008, Trump has given no money to his own charitable foundation, to which he used to be the principal donor. One reason a person might decide not to give money to one's own foundation is that one does not have income against which to deduct charitable contributions.

All of which is to say: The public has somehow managed to come into possession of a lot of information indicating that Trump reported very little, no, or negative taxable income in a given year — and no information that indicates Trump had a high reported income and a high tax liability in any year.

Republican presidential nominee Donald Trump arrives at a campaign rally in Manheim Thomson Reuters

3 possibilities

That leads us to three possibilities.

One option is that Trump has had very limited real income across the course of his adult life. This seems impossible, given his outlandish consumption patterns discussed above.

A second option is that the limited set of Trump tax information available to the public is unrepresentative. We have good reason to believe he reported very low or negative incomes some years in the late 1970s, mid-1980s, early to mid-1990s, and recently. But there could be other years in which he reported high incomes and paid a lot of federal income tax that we don't know about.

If this is the case, Trump can easily prove it by releasing additional years of tax returns. He wouldn't even need to release all of them, just some years in which he paid a lot of tax.

A third option is that Trump's income as reported to the IRS has been far below his true income in an economic sense.

The classic Haig-Simons definition of income is your consumption plus the change in value of your assets. It is entirely possible to report an income for tax purposes that is much less than this figure without breaking any laws.

In her column, McArdle nods toward this possibility, noting that "the tax law surrounding real-estate development is an arcane and wonderful thing, and it offers more scope for, let us say, artistic interpretation of your income picture than most industries."

In particular, real estate enjoys generous treatment of depreciation: As your building ages and decays, you may take an annual write-off for "depreciation expense," even if the value of the building is in fact rising. This depreciation expense is a noncash cost that you can write off against cash income, such as rent.

In the long run, this is all supposed to come out in the wash: When you sell a building, you have to pay tax on the difference between the sale price and your cost basis in the building, which is roughly your purchase price minus all that depreciation you took credit for on many years' tax returns.

But while depreciation doesn't let you delay tax forever, it does allow you to delay it for a very long time: until you sell the building or die.

Currently, the estate tax acts as a backstop of sorts for real-estate-tax deferral: If Trump dies and passes his properties on to his children, his accrued value gains in those properties will never be taxed, but the estate value itself will be taxed at rates up to 40%.

If there were no estate tax, it would be possible for real-estate investors to pass their empires on to their descendants without ever triggering taxes on accrued gains in value, as long as the real-estate portfolio was never liquidated.

It is interesting to note that while Trump has abandoned some shibboleths of supply-side tax policy — he is fine with a top ordinary income tax rate of 33% and would cut capital-gains tax rates only to 20%, both higher figures than are typical in Republican tax plans these days — he has held fast to the extreme position of abolishing the estate tax altogether.

Is this perhaps because Trump has been very good at using "artistic interpretation" to avoid subjecting his real-estate income to ordinary and capital-gains taxes, and because the estate tax is the last piece of the puzzle that stands in the way of his passing a great deal of tax-free income on to his children and their children and their children in perpetuity?

I don't know that. But it's consistent with all the evidence I have seen about Trump's personal tax situation.