What Trump tax report could mean for his campaign

Story highlights

The records are the first publicly reported detailed tax documents about Trump's financial empire

Clinton has made Trump's refusal to release his tax returns a major issue of the campaign

Washington CNN  — 

Hillary Clinton’s campaign Saturday night seized on a New York Times report about Donald Trump’s 1995 tax records, in which the Times showed he declared a $916 million loss that could have allowed him to legally skip paying federal income taxes for years.

The revelations threatened to put the controversy over Trump’s refusal to follow recent precedent and release his tax returns at the center of the presidential campaign less than 40 days before the election, after a week in which the Republican nominee has struggled to bounce back from a debate in which most analysts and scientifically conducted polls scored Clinton as the winner.

His campaign vehemently pushed back on the Clinton campaign’s effort to turn the report into an “October surprise” moment, saying Trump has a “fiduciary responsibility” as a businessman to pay no more tax than legally required. It also charged that the report proved that the Times and the “establishment media” are merely an arm of the Clinton campaign.

The report contains some of the most detail of Trump’s financial empire that has been publicly reported. It was immediately picked up by Clinton’s campaign, which has sought to make Trump’s refusal to release his tax returns a major issue of the campaign.

Calling it a “bombshell report,” the Clinton campaign said the Times’ article “reveals the colossal nature of Donald Trump’s past business failures and just how long he may have avoided paying any federal income taxes whatsoever.”

The Times’ report shows Trump that year declared a $916 million loss and lists tax benefits he used after a turbulent financial period for him in the early 1990s. The paper, citing tax experts, said Trump could have used his loss to cancel out an equivalent amount of taxable income for nearly two decades.

The paper says it obtained the three pages of documents when they were mailed to a reporter last month. A postmark indicated the documents were mailed from New York City, and the return address claimed the envelope had been sent from Trump Tower.

The paper did not look at his federal return. It obtained one page of his New York State resident income tax return as well as the first page of New Jersey and Connecticut nonresident returns.

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Trump's 4 business bankruptcies in 2 minutes
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CNN has not independently verified the documents’ authenticity.

Trump himself responded via Twitter on Sunday morning, saying: “I know our complex tax laws better than anyone who has ever run for president and am the only one who can fix them. #failing@nytimes.”

“I have created tens of thousands of jobs and will bring back great American prosperity. Hillary has only created jobs at the FBI and DOJ!” he added.

In its statement issued Saturday night, the Trump campaign said the GOP nominee has paid hundreds of millions of dollars in other taxes, including property and real estate taxes.

“The only news here is that the more than 20-year-old alleged tax document was illegally obtained, a further demonstration that The New York Times, like establishment media in general, is an extension of the Clinton campaign, the Democratic Party and their global special interests,” the statement said.

The Trump campaign statement was notable because it did not directly deny the allegations in the Times report. It also noted that though Trump had paid some taxes, it did not specifically say he had paid income tax.

A central issue

Trump has maintained that his tax returns in recent years are under audit and that he has been advised by his lawyers that it would be unwise to release them while that process is going on. However, there is no legal reason why someone under audit cannot make their tax records public while they are running for office. Candidates for president have released their tax returns for decades.

HEMPSTEAD, NY - SEPTEMBER 26:  Republican presidential nominee Donald Trump stands at his podium during the Presidential Debate at Hofstra University on September 26, 2016 in Hempstead, New York.  The first of four debates for the 2016 Election, three Presidential and one Vice Presidential, is moderated by NBC's Lester Holt.  (Photo by Win McNamee/Getty Images)
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But by refusing to release his tax returns, Trump, who has broken every other rule of politics during his stunning outsider campaign, has been, in effect, betting that he can outlast the demands of opponents who want to make his tax history a pivotal issue in the end game of the campaign.

The impact of the revelations in the Times story were difficult to gauge in their immediate aftermath.

But they seem certain to keep the issue of Trump’s tax returns and questions about his business prowess – which are at the center of his public image and rationale for running for president – at the center of the campaign over the next week.

Trump has just endured a rough week after scientifically conducted polls and most analysts agreed that he lost the crucial first presidential debate to Clinton. Early polling after the debate also appears to indicate Clinton is getting a modest boost from her performance.

The Republican nominee has also spent the week in a war of words with Venezuelan-born former beauty queen Alicia Machado, who was mentioned in the debate as a woman who had been the victim of unflattering rhetoric by Trump. The feud plays into Clinton campaign charges that Trump harbors prejudice against women and Hispanics – two crucial demographics that could help decide November’s election.

NEW YORK, NY - JANUARY 28:  Miss Universe, Venezuela's Alicia Machado, kisses Donald Trump, owner of the Miss Universe pageant, 28 January during her daily fitness workout at a health center in New York. The 19 year-old Machado started a new fitness program after she was criticized for gaining weight after winning the 1996 Miss Universe pageant. She claims to have lost five pounds in three days. AFP PHOTO Jon LEVY  (Photo credit should read JON LEVY/AFP/Getty Images)
Donald Trump weighs in on weight
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The issue could be next scrutinized at the vice presidential debate on Tuesday, forcing Trump’s running mate, Mike Pence – who has released his tax returns – on the defensive. Clinton and her running mate, Tim Kaine, have also released their returns.

Will voters care?

The extent to which Trump’s tax controversies will damage him could also take time to play out.

But there is evidence that a majority of voters believe it is important that candidates for president release their tax records.

In a Monmouth University poll last month for instance, 62% of those asked thought it was very important or somewhat important for candidates to show their tax records.

Trump’s decision not to release his tax returns is a complicated issue politically, and the controversy shows the complications of someone like Trump, with a vast business empire, running for president.

On the one hand, conservatives have long viewed the Internal Revenue Service with disdain and it has long been a plank of the Republican Party’s orthodoxy that taxes should be lowered across the board. The GOP also sought to make political capital out of claims that the Obama administration used the IRS to target the tax-exempted status of conservative grassroots and Tea Party groups.

So it is not beyond the realm of possibility that Trump’s core voters, who harbor deep suspicion of the federal government, would applaud his efforts to avoid some tax liability – as long as he acted within the law.

But Trump’s appeal in Rust Belt swing states has been aimed directly at voters who feel they have been left behind by the uneven economic recovery – and who see Wall Street figures with vast means as able to use legal maneuvers to escape the kind of tax burden that ordinary middle-class voters must bear.

So far, Trump has been able to position himself as the scourge of high finance and the New York financial elite – despite having moved in proximity to such circles for decades. Saturday’s Times report is likely to make it more complicated for him to pull off that feat.

It may also undermine Trump’s self image as a consummate dealmaker and businessman. He repeatedly argues that he has created a “great company” worth billions of dollars and implicitly argued that expertise equips him to manage the US economy and renegotiate what he has styled as global trade deals that disadvantage the United States. Anything that contradicts that image could be politically damaging.

And the story of those financial losses could be a humbling one for a candidate who has incessantly bragged about his wealth and referred to a $1 million loan he received from his father as “small.”

Trump and his campaign have sought to redraw the battle lines in their fight against the Clinton campaign by defining the race as one between an elitist insider and a change-making outsider.

But the possibility that Trump may not have paid any income tax for 18 years will undermine Trump’s message that Clinton abides by a different set of rules than most Americans by putting Trump at that very level.

‘That makes me smart’

Saturday’s developments come less than a week after Trump appeared to indicate that he had not paid federal income tax over an unspecified period during a debate with Clinton. The Democratic nominee accused the billionaire of refusing to release his returns because he wanted to hide how little tax he had paid.

“That makes me smart,” Trump replied, and also said that any tax money he had paid would have been wasted by the federal government.

Republican presidential nominee Donald Trump speaks as Democratic presidential nominee Hillary Clinton listen during the Presidential Debate at Hofstra University on Monday, September 26 in Hempstead, New York.
Trump: I'm 'smart' for paying no taxes
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Later, however, in an interview with CNN’s Dana Bash, Trump said that he hadn’t made such a comment.

“No, I didn’t say that at all,” Trump said in the spin room after the debate.

“If they said I didn’t, it doesn’t matter. I will say this: I hate the way our government spends our taxes because they are wasting our money. They don’t know what they are doing, they are running it so poorly.”

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Trump speaks out on taxes, birther movement
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Trump is also playing with fire in refusing to release his tax returns.

In the last presidential campaign in 2012, for example, Republican Mitt Romney’s resistance to releasing his tax returns was exploited by President Barack Obama’s re-election campaign.

Romney’s eventual decision to release tax returns also hurt him when it emerged that because most of his income as a former venture capitalist came from carried income and capital gains, he paid an effective tax rate of only around 14%. Although he was compliant with the law, it was easy for the Obama campaign to portray him as out of touch with the struggles of everyday Americans who have to pay higher tax rates on lower levels of income.

It would not be hard for the Clinton campaign – under pressure from Trump’s appeal in Rust Belt swing states left behind by globalization and a transforming economy – to make a similar argument.

CNN’s Dan Merica and Ashley Killough contributed to this report.