Trump’s big beautiful income tax dodge

During the 2016 presidential debates between Hillary Clinton and Donald Trump, the former secretary of state claimed that Trump, despite his alleged fortune, had reportedly not paid any income tax. In response, Trump smugly quipped, “That makes me smart.” Enough people apparently agreed that vastly wealthy people are entitled to keep every last penny for themselves — rather than pay their fair share into the system that made their wealth possible — because Trump was elected president just a few weeks later.

Even then, it was clear that Trump’s reputation as a brilliant businessman was largely manufactured by his own relentless self-promotion, along with a talented reality show producer who put him on television. But it was and remains true: Most wealthy people and many corporations pay little or no income tax by manipulating the system in perfectly legal ways. Trump was one of them.

Since every major party presidential candidate had voluntarily released their tax returns over the past four decades, it was assumed he would follow suit. But despite promising to do so, Trump claimed his returns were under audit and they could not be turned over until the process concluded. Experts said there was no such rule, but as with so many other things, Trump just kept saying it and, eventually, journalists and pundits stopped asking. But between 2018 and 2020, an Internal Revenue Service contractor leaked a large number of wealthy Americans’ tax returns to the media, and Trump’s was among them. (Under President Biden, the Justice Department prosecuted the contractor, who is currently in federal prison.) 

Trump’s tax returns showed that, for once, he hadn’t been lying. Despite reporting millions of dollars in revenue, he paid no income tax in some years and as little as $750 in others. 

It also turned out that the IRS had indeed been auditing Trump for good reason. In 2020, the New York Times reported that the president had claimed large losses from his failed casinos starting back in 2010, garnering him a refund of $72.9 million, which the IRS was disputing. Further reporting by the Times and ProPublica revealed the agency was also challenging his claims of big losses on a Chicago development that could have resulted in a $100 million tax bill. 

The numbers revealed in black-and-white why Trump didn’t want the public to see his returns: It appeared he wasn’t so smart after all. In the 18 years of returns the Times examined, Trump engaged in tax avoidance to a far greater extent than most affluent Americans, or the top 0.001% of tax filers.

The president was livid, and he continued to fight other entities trying to obtain his tax returns. He sued the state of New York and fought efforts by congressional Democrats to obtain his returns, even though Congress has the power under federal law to obtain any tax returns it chooses and had demanded his. He lost every battle. On Jan. 29, 2026, Trump, along with his sons Donald Jr. and Eric, and the Trump Organization, sued the IRS for $10 billion over the leaked documents. 

The filing was in addition to an earlier suit against the Justice Department in which he demanded $230 million in compensation for various grievances over the Russia investigation and the case involving his refusal to turn over classified documents. Since, as the executive, he was ultimately in charge of the Justice Department and the IRS, he essentially sued himself — which left every legal analyst and tax expert scratching their heads and wondering how a president could sue his own government. “It’s interesting,” Trump himself admitted at one point, “because I’m the one that makes a decision, right? And you know that decision would have to go across my desk, and it’s awfully strange to make a decision where I’m paying myself.”

It was unclear if Trump’s Justice Department would give him some kind of payout for the alleged “lawfare” of the Biden administration, but since they’d already paid out millions to Trump former national security adviser Michael Flynn and the family of Ashli Babbitt, who had been shot while breaching a door at the Capitol during the Jan. 6 insurrection, it wasn’t completely unbelievable. But the suit against the IRS was in court and the judge in the case, Kathleen Williams, didn’t know what to make of it. 

Want more sharp takes on politics? Sign up for our free newsletter, Standing Room Only, written by Amanda Marcotte, now also a weekly show on YouTube or wherever you get your podcasts.

Two days after the case was filed, Trump told NBC’s Tom Llamas, “I’m supposed to work out a settlement with myself,” and Williams was left to wonder if it made sense to conclude there was even a genuine dispute between the parties. The situation was so odd that she ordered a team of nonpartisan, outside lawyers to brief the case, and they raised more questions than they answered. The parties were due to file briefs on the subject when the government suddenly announced a settlement had been reached. 

That settlement appeared to have nothing to do with the IRS complaint at all. In exchange for giving up the demand for $10 million they created an “Anti-Weaponization Fund” — or slush fund — in the amount of $1.776 billion as reparations for those who have “suffered weaponization and lawfare” under Democratic administrations. 

This could mean that Jan. 6 rioters could seek compensation. Or  Mike Lindell, the MyPillow CEO and promoter of 2020 election conspiracies, who said he planned to file a claim; Enrique Tarrio, the former leader of the Proud Boys who told Reuters he expected to receive a settlement of $2 million to $5 million. (Lawsuits to stop the fund are already pending; these include one filed by a Jan. 6 prosecutor who was fired, and another from police officers who helped defend the Capitol on Jan. 6.)

But it appears the administration tried to pull a fast one. The fund’s announcement said that the Trumps would not be eligible to receive payouts from the fund, and they did give up their $230 million claim. But a late addendum to the agreement signed by Acting Attorney General Todd Blanche — and conveniently released just after he testified on Capitol Hill — said that the government waives any claims against the plaintiffs for “any matters currently pending or that could be pending (including tax returns filed before the Effective Date) before Defendants or other agencies or departments.”

There you have it. It’s fair to suspect the IRS did find that Trump owed the government in excess of $100 million, and this is the backdoor way of ensuring that he will never have to pay it. Experts say this means he and his family are immune from any tax audits — and from any claims from other government agencies “that were pending or could have been pending” by the date the agreement was signed.

In other words, what Trump was looking for all along looks to be hidden in plain sight underneath all the folderol around the slush fund. At least when it comes to avoiding paying taxes, Trump may just be as smart as he says he is for once.