“Self-Made” Billionaire: Donald Trump and Inherited Wealth
A recently published New York Times report challenges Donald Trump’s repeated claims of being a “self-made” billionaire, finding that he has received the modern equivalent of at least $413 million from his parents, Fred and Mary Trump—much of which Mr. Trump received after he constructed tax schemes for his parents.
Mr. Trump’s wealth is still generational and dependent on his father’s. The New York Times investigation, which analyzed over 100,000 pages of public and private documents detailing the network of Fred Trump’s real estate empire, uncovered that Mr. Trump has benefited from his father’s wealth since he was a toddler. At age three, Mr. Trump received the modern equivalent of $200,000 a year. At age eight, he was a millionaire. In his twenties, he received a million dollars a year. In his forties, he received more than $5 million a year.
Fred Trump made Donald his banker, consultant, landlord, and property manager. He funded his son’s car, offices, and stocks. He gave his son $10,000 Christmas checks, building revenue, shares in multiple partnerships, and trust funds. Money flowed in even after Fred Trump’s death. In May 2004, Mr. Trump and his siblings sold their father’s real estate empire, and Mr. Trump received the modern equivalent of $236.2 million—an under-sale of hundreds of millions of dollars, though Mr. Trump claims that he has “never made a bad deal.”
A significant portion of this wealth comes from a series of tax schemes that Mr. Trump constructed for his parents. The Internal Revenue Service turned a blind eye to Mr. Trump's exploitation of several loopholes in the law and consequently blurred the line between what is legal and illegal; however, the report alleges that Mr. Trump’s tax schemes, which enabled Fred Trump to transfer wealth to his children and to pay little to no taxes for doing so, included “instances of outright fraud.”
The New York Times report deemed “the most overt fraud” to be All County Building Supply and Maintenance: a company that nominally made purchases for Fred Trump’s buildings but actually marked up already made purchases and funneled millions to All County’s owners—one of which was Donald Trump. All County effectively gave untaxed gifts from Fred Trump to Donald Trump. In total, Fred and Mary Trump created 295 schemes to transfer over $1 billion to their children. Under the then-55 percent gift and inheritance tax, they should have paid more than $550 million in taxes. Tax records show that they paid $55.2 million.
The investigation has repercussions beyond Mr. Trump’s apparently criminal tax evasion. It exposes Mr. Trump’s affluence as inherited wealth from his father rather than a self-made fortune, unravelling his carefully-crafted narrative that gained him sympathy and voters in his presidential run. Mr. Trump’s brand revolves around invincibility and independence, but it is all spin.
In October 2015, Mr. Trump claimed he received “a small loan of a million dollars” to jumpstart his business. This “small loan” was actually $60.7 million, or the modern equivalent of $140 million, much of which Mr. Trump never repaid. As a matter of fact, The Times investigation has calculated that “[h]ad Mr. Trump done nothing but invest the money his father gave him in an index fund that tracks the Standard & Poor’s 500, he would be worth $1.96 billion today.” Fred Trump provided the framework for Donald Trump’s business ventures, as well as a security net for his son when these ventures repeatedly failed.
Donald Trump’s ventures continue to fail—his net worth has decreased from $4.5 billion in 2015 to $3.1 billion in 2018—but Fred Trump’s fortunes continue to support him. The public has long suspected that Mr. Trump was not actually self-made, especially considering the President still has not released his tax returns. The New York Times report simply provides concrete evidence for and confirms these suspicions. The question remains, however, whether any action will be taken against the President.
The day after the story was published, Mr. Trump tweeted the following:
At a White House press briefing the same day, White House Press Secretary Sarah Huckabee Sanders was asked to “explain what is [actually] inaccurate about that story.” She answered, “I'm not going to sit and go through every single line of a very boring 14,000-word story…[o]ne thing the article did get right was that it showed that the President's father actually had a great deal of confidence in him. In fact, the President brought his father into a lot of deals.”
The President’s lawyer, Charles J. Harder, publicly defended his client as well. In a statement issued to The New York Times, Harder wrote, “President Trump had virtually no involvement whatsoever with these matters. The affairs were handled by other Trump family members who were not experts themselves and therefore relied entirely upon...licensed professionals to ensure full compliance with the law.”
Support for the President also came from beyond his administration and close professional circle. His brother, Robert, released a statement from the Trump family, excerpted: “All appropriate gift and estate tax returns were filed, and the required taxes were paid...our family has no other comment on these matters that happened some 20 years ago.”
Although the press secretary and the President’s lawyer challenged allegations of fraud and tax evasion, no one explicitly denied the main takeaways of the report: that Mr. Trump’s wealth is generational and dependent on his father’s, and that at least some of this wealth comes from IRS-permitted tax maneuvers.
Since the New York Times report has been published, state officials have mobilized to launch yet another investigation against the President. In New York, a State Department of Taxation and Finance spokesman said “the Tax Department is reviewing the allegations in the NYT article and is vigorously pursuing all appropriate avenues of investigation.”
New York City Public Advocate Letitia James, who is all but guaranteed a victory in the state’s attorney general race, issued a statement: “There must be a full examination of these claims. I welcome the New York State Department of Taxation and Finance’s inquiry, and call on every agency with jurisdiction...to follow the facts wherever they may lead. No stone should be left unturned. Donald Trump’s days of defrauding Americans are coming to an end.”
The New York Tax Department has been investigating Mr. Trump’s charity, the Trump Foundation, and current New York Attorney General has sued Mr. Trump and the Trump Foundation for breaking state and federal law by mismanaging the charity. The New York Times report simply adds to already existing investigations against Mr. Trump—not only in New York but also in the other states that Mr. Trump has done business in and therefore may owe taxes in.
Although the statute of limitations for criminal fraud and tax evasion charges for Mr. Trump has likely run out, civil tax fraud has no statute of limitations, which the Internal Revenue Service and states that Mr. Trump has done business in may choose to pursue. Mr. Trump may owe more than $400 million in taxes in New York alone, and the accumulation of penalties from comparable tax laws in other states, as well as on the federal level, may force Mr. Trump to liquidate his fortune.
Without a doubt, the New York Times report successfully challenges Donald Trump’s “self-made” myth and exposes his tax schemes. And without a doubt, there is still a lot of unscrupulous and potentially illegal behavior to uncover. However, it is unclear how much the report will move the needle against the President. After all, in October 2016, The New York Times found in a similar investigation that Mr. Trump had likely finessed himself out of paying taxes for almost 20 years. The article was published just over a month before the 2016 presidential election, and Mr. Trump won anyway.
What fuels Mr. Trump’s political success is not being “self-made” or following the law, but his ability to focus anxiety and resentment about change in America and to leverage these common emotions into power. Mr. Trump’s taxes and the nature of his wealth have little to no relevance. Although the President’s character hinged on being “self-made” in the past, it no longer matters.
While America experiences increasing economic inequality and downward social mobility, families like the Trump family—including ones from the entire political spectrum—have continuously dominated the American political economy through inherited wealth, which has empowered following generations to climb even higher in financial and political ranks. The consequences are just beginning to reveal themselves.