Last night, the New York Times published what could be the first of many October surprises in this election. In a bombshell report, a Times reporter received through traditional mail an envelope from an unknown source containing documents from Donald Trump's 1995 tax return. Before going any further, note that the legal and editorial significance of how the New York Times got these documents is that the paper has no knowledge of nor obligation to protect a confidential source, potentially risking fines, jail time, accusations of complicity, etc. Those curious about the possible legal ramifications for the newspaper and Trump's threat of legal action should read this editorial by my former media law professor.
The lead: in declaring a $916 million loss on his 1995 tax returns, Trump could potentially have legally avoided paying federal income taxes for as long as 18 years. Put into perspective, a $916 million loss is enough to wipe out more than $50 million a year in taxable income for 18 years.
Recall that Trump's refusal to release his tax returns - something done by every major party nominee since 1976 - has been THE big question surrounding his campaign. It was also the subject of one of Hillary Clinton's more effective attack lines during the presidential debate last Monday, speculating that he paid no federal taxes. In response, Trump seemingly confirmed the charge, saying "That makes me smart."
One of the reasons journalists and political observers were speculating that Trump refused to release his tax returns was the idea that it had something so potentially explosive or embarrassing, that he figured it would be better to take the political damage from not releasing the information. Based on this tax return, it's easy to see why that would be the case. Imagine running for the presidency on the basis of your business acumen while at the same time having admitted that you declared almost $1 billion in losses in a single year. On top of that, imagine having to admit not paying any federal income taxes for nearly two decades. For context from the not-so-distant past, Associated Press reporter Lisa Lerer tweeted, "I'm old enough to remember when Romney's 13.9% tax rate seemed like a big political liability. Seems amazing now." Trump has also written several tweets commenting about taxes over the years which are backfiring on him today.
The Trump campaign issued a terse statement without attribution to anyone saying in part, "The only news here is that the more than 20-year-old alleged tax document was illegally obtained, a further demonstration that the New York Times, like establishment media in general, is an extension of the Clinton Campaign, the Democratic Party, and their global special interests." Note the discrepancy of calling the documents "alleged" while simultaneously calling them "illegally obtained." How does a person illegally obtain alleged documents? If the documents were fake, the Trump campaign would have said so. His former accountant who prepared the return also confirmed their authenticity on the record for the story. A Trump attorney sent an email to the New York Times arguing that the publication of the documents was illegal because Trump had not authorized their release. He also threatened the paper with "prompt initiation of appropriate legal action." Also worth keeping in mind is the fact that the Trump campaign gleefully pushed hacked emails stories about Hillary Clinton and the Democratic Party without regard for the legality of how they were obtained. Republican operative Roger Stone - who has ties to the Trump campaign - took to Twitter to seemingly tease a new WikiLeaks release: "Wednesday @HillaryClinton is done. #Wikileaks."
Politically, the fallout of this story will be immediate and lasting. For the past several weeks, Donald Trump has avoided speaking to the press except friendly conservative media outlets like Fox News - particularly Bill O'Reilly, Sean Hannity, and Fox and Friends. After this story, it's highly likely he won't even talk to them. Assume he will stay away from the media and will not address the issue until he takes the stage for the second presidential debate a week from today. Then again, we might want to keep an eye on his Twitter feed at 3 a.m.
The story also puts his surrogates and campaign representatives in an impossible position. They can complain about the illegality of the document being leaked, but not much else. Rudy Giuliani tried arguing it showed Donald Trump was an "absolute genius," and Chris Christie called it "a very, very good story for Donald Trump." They can argue that Donald Trump did what was allowed by the tax code and there's nothing wrong with it, but at the same time it is impossible to spin the underlying fact that he declared $916 million in losses, and that he possibly didn't pay federal income taxes for the next 18 years.
The timing is spectacularly bad for the Trump campaign. Coming off a disastrous debate performance and a week in which he wasted the news cycle with pointless attacks on Alicia Machado, this was probably the worst thing that could have happened. On top of that, the story broke a week before the second presidential debate and - assuming the subject comes up during the vice presidential debate next Tuesday - that means the story has a solid week to gain traction before debate moderators Anderson Cooper and Martha Raddatz get an opportunity to ask Trump about it, and another seventeen days before Chris Wallace gets a shot at it during the third and final presidential debate. That means there will be plenty of time for the New York Times and other news organizations to do follow up reporting and potentially find out even more about his finances.
If the story had broken a few days before the election, its impact might have been marginal. It takes time for a story like this to sink in and penetrate the national discourse. Now, the Trump campaign is going to spend the last five weeks of the election dealing with it, while the Clinton campaign is going to cackle with glee as they push the story. New ads and talking points are probably being developed as of this writing. You can also read the official statement from Clinton campaign manager Robby Mook here.
It's also worth noting that one of Donald Trump's triggers is attacking his business record, particularly the idea that he is not as successful or as wealthy as he would have people believe. The tax return goes directly to the heart of that argument, and rest assured Hillary Clinton will do her best to bring it up every opportunity she can get.
Beyond the political ramifications is the impact on Trump's business image and brand. The reporting on his foundation and his business practices to date during this election has already tarnished his reputation as a businessman and philanthropist, and that doesn't even take into account the explosive comments he has made about Muslims, immigrants, women, and others. Now every potential business partner, investor, or client in the world knows that Trump lost almost $1 billion in one year. Who in their right mind would want to go into business with him now?
This story is huge and is not going away any time soon. It will dominate coverage at least through the next week leading up to the second debate, and likely well into November. When journalists and historians look back and write the story of this presidential campaign, the events of the last ten days of September will be pivotal.