Donald Trump’s team said Sunday that he wasn’t just smart but a “genius” after a leaked tax return from the 1990s showed a nearly $1 billion write-off that likely got him out of paying taxes for years, but it also buttressed accusations by Hillary Clinton that he has avoided taxes.
The Republican presidential nominee’s tax bill was already a burning issue in the campaign, fueled by Mr. Trump’s refusal to follow tradition and release his federal income tax returns, when a bombshell report revealed the huge deduction in 1996 that could have eliminated years of tax debt.
Mr. Trump also teed up the controversy by quipping in a debate with Mrs. Clinton last week that he would have been “smart” if he had avoided paying taxes, as the former first lady charged.
Former New York Mayor Rudolph W. Giuliani defended Mr. Trump’s tax moves by boasting that the billionaire businessman was an “absolute genius.”
“It shows you what a genius he is, how smart he is, how intelligent he is, how strategic he is. I want that working for me [as president],” Mr. Giuliani, an adviser to the Trump campaign, said on ABC’s “This Week.”
He stressed that the 20-year-old deduction was “perfectly legal,” noting that years of tax audits never resulted in criminal charges against Mr. Trump.
“We should get that straight immediately. This is a perfectly legal application of the tax code,” he said. “He would have been a fool not to take advantage of it. Not only that, he would have probably breached his fiduciary duty to his investors, to his business.”
Although the write-off had the potential to keep Mr. Trump from owing any taxes for as much as 18 years, the billionaire’s earnings in subsequent years likely exceeded the amount of the deduction and resulted in tax debt, Mr. Giuliani said.
New Jersey Gov. Chris Christie also called Mr. Trump a “genius” who followed the law.
“Politically, he has said he is going to change these laws, and there’s no one who is better suited to change these laws than someone like him that has been subjected to audit after audit by the IRS year after year after year,” Mr. Christie, a former primary rival who now leads the Trump campaign’s transition team, said on “Fox News Sunday.”
Before the 1996 state tax return surfaced Saturday, Mr. Trump was under fire for saying in a debate with Mrs. Clinton last week that he would be “smart” if he got out of paying taxes.
“Maybe he doesn’t want the American people, all of you watching tonight, to know that he’s paid nothing in federal taxes,” Mrs. Clinton said on the debate stage at Hofstra University in New York.
“That makes me smart,” interjected Mr. Trump.
Clinton camping spokesman Brian Fallon said Mr. Giuliani and Mr. Christie were “doubling down” on the debate remark.
“He [should] release all his returns so we see his full brilliance,” tweeted Mr. Fallon.
Sen. Bernard Sanders, a self-identified socialist who was Mrs. Clinton’s primary rival but has become a top surrogate, said Americans were “disgusted” by Mr. Trump’s tax deduction.
He said that billionaires such as Mr. Trump get their lobbyists and “friends on Capitol Hill” to put loopholes in the tax code so that they pay no taxes. But middle-class Americans get stuck with the bill for schools, infrastructure and the military, he said.
“Trump goes around and says, ’Hey, I’m worth billions. I’m a successful businessman. But I don’t pay any taxes. But you, you make 15 bucks an hour. You pay the taxes, not me.’ That is why people are angry and want real change,” he said on CNN’s “State of the Union.”
A 1996 state tax return obtained by The New York Times showed Mr. Trump claiming a $916 million net operating loss. The massive deduction could have shielded him from any tax liability for up to 18 years, according to tax experts.
The report added pressure on Mr. Trump to release his tax returns.
There is no legal prohibition against releasing tax records amid an audit. There also is no legal requirement that he release the returns, although every presidential candidate for the last 40 years has done so.
Mrs. Clinton has released years of federal income tax returns filed jointly by herself and her husband, former President Bill Clinton, which included some eyebrow-raising deductions.
The Clintons previously claimed charitable donations of clothes, including Mr. Clinton’s used underwear, valued at as much as $2 each.
In their 2015 return, they deducted charitable donations, including a $1 million donation to the Clinton Family Foundation, which distributes money to various charities, including to the Clinton Foundation, which pays for some of the Clintons’ expenses such as travel.
The Trump campaign responded to the report by accusing the newspaper of attempting to aid Mrs. Clinton. The campaign did not say if Mr. Trump paid federal income taxes in the years since 1996, although it claimed he paid millions of dollars in various taxes.
“Mr. Trump’s a highly-skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required,” the campaign said in a statement. “That being said, Mr. Trump has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes, along with very substantial charitable contributions. Mr. Trump knows the tax code far better than anyone who has ever run for President and he is the only one that knows how to fix it.”
The tax bill issue is tricky for both Mr. Trump and Mrs. Clinton.
It is an open question whether getting out of paying taxes is smart. But Mrs. Clinton’s allegations also fall flat.
Anti-tax crusader Grover Norquist refused to agree that avoiding paying taxes was smart. But he insisted that the criticism from Mrs. Clinton was both illegitimate and dishonest.
“The implication is that he’s not paying taxes he owes. I assure you the IRS actually cares about that stuff, and if there was even a hint of that, they’d have been all over him. That’s not the case,” said Mr. Norquist, founder and president of low-tax advocacy group Americans for Tax Reform.
“One of the problems with the income tax is it violates people’s privacy vis-a-vis the government, and the idea that anybody should open up their personal finances to the government is ridiculous,” he said. “The IRS has all of his stuff. If there was anything wrong, the IRS under this administration would have gone after him a long time ago.”
Accountants who make a living navigating tax laws said the same thing. Bibi Rudstedt, secretary of the Florida chapter of the National Association of Tax Professionals, Mrs. Clinton’s accusation lacked merit.
“Of course everyone pays taxes. I’m sure Mr. Trump pays taxes because, with his income, he must have AMT tax on everything,” she said, referring to the alternative minimum tax that the federal government imposes on the wealthy to prevent them from finding loopholes in tax law.
Mrs. Rudstedt, who has practiced tax accounting with her husband for 25 years in Spring Hill, Florida, bristled at the former secretary of state’s allegation that Mr. Trump weaseled out of paying taxes.
“I think she is stupid because she should know more. A man with that kind of income must pay taxes,” said Mrs. Rudstedt, a Trump supporter. “I don’t know where she got that from.”
Refusing to say it was “smart” to avoid paying taxes, Mrs. Rudstedt said that dodging taxes wasn’t the goal in her accounting office.
“Everybody has to pay his own share,” she said. “We don’t want them to overpay. But it is important that you claim the deductions you have. If you don’t have any deductions, that’s too bad. But I mean those are the things we have to help people with.”
Mr. Norquist’s nonprofit organization does not endorse candidates. However, he has endorsed Mr. Trump’s proposals to cut taxes and reduce federal regulations, and he has criticized Mrs. Clinton’s tax plan for increasing a variety of taxes.
Talking about Mr. Trump’s tax returns, he said, was a tactical maneuver to let Mrs. Clinton avoid talking about her plan to increase taxes and to duck other issues, such as her secret email setup as secretary of state, with which she mishandled classified material.
He also defended Mr. Trump against Mrs. Clinton’s claim that his attempt to minimize his tax burden was unpatriotic.
“Hillary Clinton has gone to great length to move her inheritable money so it won’t be hit by the death tax, even as she wants to raise other people’s death taxes,” said Mr. Norquist.
He was referring to Mrs. Clinton’s plan to increase estate tax imposed on inherited assets from 40 percent to 45 percent and add a 65 percent “death tax” on property valued at more than $500 million for a single person or $1 billion for a couple.
Mrs. Clinton and her husband use financial planning strategy, including putting ownership of their New York home in a residence trust that will avoid estate taxes, according to an analysis by Bloomberg.
“His position that you try to keep your taxes down is her position,” said Mr. Norquist. “It’s kind of goofy. She’s flailing because she doesn’t want to talk about other things. She wise to do that. If you’ve got a problem, keep pointing at other people.”
• S.A. Miller can be reached at smiller@washingtontimes.com.
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