Yes, Trump Is Still A Billionaire (Even Though He Paid So Little In Taxes)

News broke Wednesday morning that Donald Trump paid $0 of income taxes in 2020, rekindling a longstanding theory that the former president is not actually a billionaire.

That theory is wrong. In fact, Trump’s assets are worth an estimated $4.3 billion, making his net worth $3.2 billion after accounting for $1.1 billion of debt. The former president owns real stuff—mansions, golf courses, office buildings—that throw off real cash, even if his tax returns might suggest otherwise. Gaming the tax system has long been a point of pride for Trump, who bragged that it “makes me smart” in a 2016 presidential debate.

How could someone have so much money yet declare so little income? It’s a question Forbes addressed two years ago, after the New York Times revealed that Trump paid $750 in taxes in 2017. Trump’s finances have changed since then, but the answer to that question has remained consistent.

The scandal, as explained in this story from September 2020, is not just that Trump paid so little in taxes—it is that he did so while remaining quite rich.

“Is Donald Trump really a billionaire?” everyone seemed to be asking Sunday night, after the New York Times dropped a bombshell report about the president’s taxes, which detailed big losses in some years and limited income in others. The answer: Yes, he is indeed.

In fact, Trump is a multibillionaire, worth $2.5 billion, by our count. His portfolio, which includes commercial buildings, golf properties and branding businesses, is worth an estimated $3.66 billion before debt. The president has a fair amount of leverage—adding up to a roughly $1.13 billion—but not enough to drag his net worth below a billion dollars.

To understand how Donald Trump could be so rich—yet look so poor—it’s essential to comprehend the difference between what we’ll call (a) taxable income and (b) operating income. Taxable income is the amount people tell the Internal Revenue Service they earned, after subtracting a bunch of things like depreciation, interest, past losses and, in Trump’s case, questionable business expenses. Operating income captures the amount businesses make from their standard operations, ignoring a bunch of fancy accounting tricks and financial maneuvers.

Many of Donald Trump’s businesses generate a huge amount of operating income, even though his IRS filings reportedly show very little taxable income. That’s important because operating income, not taxable income, is a key factor in determining the value of a real estate asset. Investors want to know how much a building throws off in annual profits. What happens after that on a personal tax return—the level of financial wizardry that a seller might use to make their operating profit look like a loss, and thereby avoid taxes—doesn’t matter much to a potential buyer.

“There’s the tax world, and then there’s the real world,” says Eric Anton, a commercial real estate broker in New York City. “They’re totally different.”

Trump’s operating income is real and documented, laid out in paperwork from local tax offices, the Securities and Exchange Commission and the president’s business partners. Don’t be fooled: The news is not that the president is broke (the Times story notes that tax returns do not list someone’s net worth). The news, instead, is that Donald Trump seems to have avoided paying much in taxes despite significant operating profits at certain properties. In other words, he figured out how to share very little of his fortune with the country he now leads.

Determining Donald Trump’s net worth is just one big math equation: add up the value of the assets, subtract the value of the liabilities. Of course, figuring out what an asset is worth isn’t always easy. For a commercial real estate building, it requires examining the location, the square footage, the valuation multiples and the income—the net operating income, that is.

Consider 40 Wall Street, a skyscraper in New York City that Donald Trump controls. Documents filed with the Securities and Exchange Commission show that Trump’s net operating income was $18.1 million in 2019. There are 1.2 million square feet in the building, according to a different document filed with the SEC.

In interviews conducted a few months ago, eight New York City real estate experts suggested multiples to apply to those income and square footage numbers. On average, they thought the net operating income should equal about 5.4% of the value. That would suggest the asset was worth $336 million. The same experts, however, also suggested valuing the building at about $400 per square foot. That works out to a total value of $466 million. Coming up with an exact valuation is difficult, but taking the average of the two methodologies and calling it $401 million seems to be a fair approach.

Repeat a similar exercise across Trump’s entire portfolio, and the assets add up to an estimated $3.7 billion. A key variable in almost every calculation is net operating income. It may get wiped out by the time Trump’s accountants finish preparing his taxes, but there’s no denying it’s there at the start, given that it’s documented on plenty of other paperwork.

The president’s partner at 555 California Street, a publicly traded real estate firm named Vornado, disclosed in public filings that its 70% share of the building kicked off $60 million of net operating income in 2019; that means Trump’s 30% stake produced $26 million. A document connected to a loan against 1290 Avenue of the Americas, another building in which Trump holds a 30% interest, lists $96 million of 2019 net operating income, suggesting the president’s share was $29 million. In addition to the $18.1 million of 2019 operating income at 40 Wall Street, SEC filings list $13.3 million at Trump Tower, $1.7 million at Trump Plaza and $600,000 at Trump International Hotel & Tower. The city of New York estimates operating income for the commercial spaces inside Trump World Tower ($1 million), Trump Parc ($600,000), Trump Parc East ($900,000) and Trump Park Avenue (roughly $2.4 million). A Trump Organization representative told Forbes in September 2019 that the president’s store at 6 East 57^th Street hauled in $10.7 million of profit annually. Altogether, Trump’s interests in those buildings, which also include residential space in several of them, are worth an estimated $2.3 billion before subtracting debt.

Trump’s golf portfolio is more complicated. He owns ten traditional U.S. golf clubs, which generated $108 million of revenue in 2019, according to an analysis of the president’s annual financial disclosure report. It’s hard to determine the operating margins on those properties, but past performance offers a clue. A 2014 income statement from the Trump club in Westchester County, New York, shows income of $1.1 million on $5.6 million of revenue, which suggests margins of 20%. Documents connected to the Trump club in Jupiter, Florida, show margins of 19% in 2013, 13% in 2014 and 13% in 2015. After hearing those figures, seven golf experts still estimated pre-Covid margins at an average of 21%, which would suggest the operations were throwing off a combined $23 million last year. If the properties were in fact producing that much, they might be worth a combined $200 million today. Even if they’re all losing money, they should still be worth at least $100 million.

The Times story does not list the income at all of Trump’s golf clubs, but it does dig into details at his golf resorts, which were already known to be in trouble. European regulatory filings list losses year after year at the president’s three properties overseas. At Trump National Doral, the president’s resort in Miami, net operating income dropped from $13.8 million in 2015 to $12.4 million in 2016 and $4.3 million in 2017, according to documents obtained from local officials. A representative for the Trump Organization told Forbes that profits ticked up to $9.7 million in 2018. The Times reports that Trump bought Doral for $150 million and then shelled out an additional $213 million on it, suggesting a total investment of $363 million. Forbes estimates it’s worth $153 million. By that math, the president is now $210 million in the hole.

In mid-September, Forbes reported that Doral and the Trump International Hotel in Washington, D.C., seemed to be struggling financially. The Times story confirms that—and adds more specifics. The D.C. hotel opened in 2016 and, by 2018, Trump had already declared tax losses of $55.5 million there, according to the Times. Still, the property is worth something. One investor offered $175 million for it before the coronavirus decimated the hotel industry. The Trumps turned that offer down. Forbes now figures the hotel is worth closer to $168 million. It seems certain that it is continuing to hemorrhage cash.

There are plenty of other revenue-generating properties in Trump’s portfolio, including a 50% share of a hotel-condo collection in Las Vegas, a licensing business and Mar-a-Lago. All of those take in good money. Then there are the toys, which don’t: the airplanes, helicopters and homes in New York, Florida and St. Martin. But even if they’re not making much money, they’re still worth plenty.

Add up all of Donald Trump’s assets—the ones that throw off big cash, the ones that lose serious money and the ones that don’t really operate as businesses—and the total hits that $3.7 billion figure. Real assets worth real money. But that’s not Trump’s net worth. In order to figure that out, you have to consider liabilities.

Trump has previously proclaimed himself the “king of debt,” a nickname that fit early in his career, as he teetered toward bankruptcy, and more recently as president, as he has accumulated massive federal budget deficits. As a businessman, Trump has played it a bit safer lately. No doubt, his estimated $1.1 billion in debt is a tremendous amount of leverage. But considering Trump’s $3.7 billion in assets, most of his bankers should still be able to sleep at night.

A big chunk of Trump’s liabilities is concentrated in 1290 Avenue of the Americas in New York City and 555 California Street in San Francisco, the two skyscrapers he owns in conjunction with Vornado. In its most recent quarterly filings, Vornado disclosed $950 million of debt at the New York property and $543 million at the San Francisco one. That adds up to $1.5 billion in total debt, and Trump’s 30% share amounts to $448 million.

The president owes hundreds of millions more on other Manhattan buildings, as documented in SEC filings and property records. At Trump Tower, he has a $100 million loan. At 40 Wall Street, he owes $139 million. At Trump Plaza, $13 million. At Trump International Hotel & Tower, $6.5 million. At Trump Park Avenue, an estimated $10 million. That’s another $268 million, bringing the tally to $716 million.

The president borrowed $125 million through two publicly recorded mortgages at Doral. His company secured an agreement to borrow $170 million against the D.C. hotel. The Times story lists a balance on that loan of $160 million. It’s possible that Trump has paid some of it down. The president’s financial disclosure report lists liabilities against his Chicago tower of more than $75 million. Tack on at least another $360 million to make it $1.1 billion.

Trump has an $11 million mortgage against a mansion in Palm Beach, plus another loan against a palace in Bedford, New York. He took on one loan at his golf club near D.C. and two mortgages at one of his New Jersey golf courses. Include those, and the total still rounds to $1.1 billion.

Having debt requires paying interest, which reduces the profits Trump has to declare on his tax returns. But the president also seems to be employing far more unusual methods to limit his tax bill.

Donald Trump has long prided himself on gaming the tax system. “Makes me smart,” he famously declared in a 2016 presidential debate. It also might make him vulnerable to investigators scouring his financial picture.

There’s a lot to consider. For example, Trump appears to have had his daughter Ivanka serve as a “consultant” for his real estate firm, at the same time that she was working as an employee of the firm. Donald Trump wrote off $26 million in “unexplained” consulting fees from 2010 to 2018, according to the Times. “If the payments to his daughter were compensation for work, it’s not clear why [Donald] Trump would do it in this form,” the Times says, “other than to reduce his own tax liability. Another, more legally perilous possibility is that the fees were a way to transfer assets to his children without incurring a gift tax.”

The Times also details extravagant expenses—including over $70,000 of hairstyling charges—written off as business costs. The Trump Corp., a business 100% owned by Donald Trump, wrote off the fees paid to Alan Futerfas, an attorney that represented Donald Trump Jr. in the Russia probe, according to the newspaper. In another questionable move, Trump labeled his mansion in Bedford, New York, as an investment property, paving the way for him to write off $2.2 million of property taxes, according to the Times.

These machinations—and many more detailed in the story—proved successful. In 2016 and 2017, according to the Times, Trump paid just $750 of federal income taxes. The scandal isn’t that he’s broke and paying those meager sums—it’s that he remains quite rich.