(May 12, 2021) — For much of Donald Trump’s presidency, he was lambasted, threatened, and demonized for his taxes. Hypocritical left-leaning politicians (who know the tax “game” as well as any) painted the former president as an evil and greedy businessman who was constantly evading taxes. They repeatedly highlighted the disparity between his net worth and the amount he paid in taxes.
Those who publicly target Trump over his taxes typically choose one of two talking points. One group pushes the narrative that by paying a very small tax rate (comparably), Trump is actually far less wealthy and successful than he really is. Their elementary argument basically amounts to this: “Well, if he actually made as much money as people say he does, his taxes would be so much higher!”
The second group pushes a different narrative. They’re fine conceding the fact that Trump makes a lot of money, but they want to know why he doesn’t pay more in taxes. In other words: “He’s rich, so he must be evil! He should be taxed for being so evil!”
But do you want to know the truth? They’re both dead wrong.
Hate the man all you want, but anyone pushing either of these narratives is either a master manipulator of public perception or incredibly ignorant when it comes to economics and the role of taxation within organized government. Politicians tend to land in the former category, while most of the general public finds themselves in the latter bucket. But it doesn’t matter how old you are or what your political persuasion is; there’s still time for a wake-up call.
Why Most People Have it All Wrong
During his campaign for the presidency in 2016, Trump caught a lot of flak when he said, “I pay no taxes.” And while it was probably not the best thing to say (in terms of PR), the truth is that by paying little or no taxes, he’s actually doing precisely what the government wants him to do.
As contradictory as it may seem, the government doesn’t want anyone – Donald Trump, Joe Biden, or you – to pay taxes. The entire tax code is set up to incentivize people to not pay taxes. Because if you study tax credits and deductions, you’ll discover that they all serve the purpose of stimulating value creation.
People who add value to the nation are considered assets. Those who add no value are dependents. Assets make the country more valuable, while dependents leach value. And as cold as it sounds to label people like this, that’s the way the world works. You either add economic value or you don’t. As much as the government may pretend to love its citizens for who they are, economic value is the most important contribution a citizen can make. The incentives are tax breaks.
In other words, when you do something to create economic value in your community, state, or country, the government says, ‘We’ll reward you by lowering your tax burden.’ Smart entrepreneurs, investors, and everyday individuals like you and me can use this to our advantage.
Here are some examples:
- When you own your own business, you get certain tax breaks from the government. And as your business grows, you get more tax breaks. Why? Because you’re creating more value. You’re employing more people, generating more revenue, and strengthening the economy. The government wants you to keep growing, so they make it more enticing to do so.
- When you invest in real estate, you’re putting money into the economy. You’re also providing housing for people in your community. And depending on how you manage your properties, you may even employ other individuals and businesses (which adds even more value). In return, the government allows you to deduct expenses, depreciate the asset, etc.
- The same thing goes for growing your family. Why do parents get generous tax credits for having kids and paying for child care? Because they’re raising new humans who will ultimately become the next generation of value creators. (The government needs its citizens to reproduce – it’s as simple as that!)
These are very basic examples, but they should give you some idea of the interchange between value creation and taxation. And whether you’re Donald Trump or a middle-class, blue-collar worker with a modest income, the government ultimately wants you to pay less taxes.
The next time you hear the argument that people who don’t pay taxes are evil, consider what’s really happening behind the scenes. The individual pushing that narrative is either manipulative or ignorant. We need to give a voice to people who understand the truth.