There are various dimensions to the New York Times revelations about Donald Trump's mid-1990s tax affairs, but the core issue driving his ability to avoid taxes for decades is --
In a few short years, he had amassed $3.4 billion in debt — personally guaranteeing $832 million of it — to assemble a portfolio that included three casinos and a hotel in Atlantic City, the Plaza Hotel in Manhattan, an airline and a huge yacht.
Trump amassed huge assets far beyond his original cash flow through debt; when those assets collapsed in value, he could take deductions as the owner while sticking creditors with big losses. All possible because of the distorted incentives created by debt finance interacting with the tax system.
With Shariah-compliant finance, everyone would have to be clear at the start about the sharing of risk and how it would be shared. It's why some serious economists think all property investments should be done through Islamic finance.
In a few short years, he had amassed $3.4 billion in debt — personally guaranteeing $832 million of it — to assemble a portfolio that included three casinos and a hotel in Atlantic City, the Plaza Hotel in Manhattan, an airline and a huge yacht.
Trump amassed huge assets far beyond his original cash flow through debt; when those assets collapsed in value, he could take deductions as the owner while sticking creditors with big losses. All possible because of the distorted incentives created by debt finance interacting with the tax system.
With Shariah-compliant finance, everyone would have to be clear at the start about the sharing of risk and how it would be shared. It's why some serious economists think all property investments should be done through Islamic finance.
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