Tax Fraud and the Trump Organization

I’ve been trying to find time to read the entirety of the Times investigation of the chicanery that Fred Trump and his children pursued to shield Fred’s estate from taxation.

It’s obviously a remarkable thing to see the nation’s leading paper put it out in black and white that the President of the United States is a potentially criminal tax cheat. I’m not sure it’s surprising, though.

This is in some ways a fitting cap to decades of financialization of urban housing–of turning the provision of space for dwelling and commerce into a financial transaction in which housing people and businesses is largely incidental–and of public policy that engineers results by embedding massive financial incentives in the tax code instead of directly allocating resources to necessary projects. The result is apartments unaffordable to anyone except their absent owners and storefronts vacant because collecting their rents is unprofitable.

Of course, breaking tax laws is not OK. Tax evasion means that governments at all scales lack the resources they need to solve problems. But observance of tax laws as designed often produces similar results.

Update: Here’s Amy Plitt noting how one aspect of the Trump family tax avoidance illuminates problems with rent control. Landlords are able to raise rents on stabilized apartments only if they can demonstrate making significant capital improvements to the property. Fred Trump was able to both raise rents and avoid gift taxes in transferring wealth to his children by making them partners of a corporation that sold boilers and other maintenance supplies to Fred Trump’s buildings, after buying them at rates negotiated by Fred Trump, and then selling  them to Fred Trump at a significant markup. All of this was enabled by an “honor system” approach to enforcing legal restrictions on landlords, which still plagues the city, as Plitt notes:

While the Trump family’s abuse of the MCI provision is egregious, it’s hardly unique, which is why tenant advocates have long argued that it must be reformed, or abolished altogether. “We see really dramatic rent increases through MCIs, and they’re full of fraud,” says Cea Weaver, the policy director of New York Communities for Change. Landlords are allowed to raise the rent by up to six percent per year, depending on the scope and extent of the repairs, which can lead to hikes of hundreds of dollars. “[It’s a] one-time cost for the landlord but a permanent increase for the tenants,” Weaver explains.

The system is also easy to abuse: Increases based on MCIs are overseen by the state’s Division of Housing and Community Renewal (DHCR), which Weaver says is “horribly underfunded” and doesn’t always thoroughly vet applications. And according to DHCR’s own fact sheet, the only proof that a landlord needs in order to get an MCI comes from the landlords and contractors themselves, which can easily be falsified.

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