🎄 The Santa rally

View in Browser

Tonight: What we know so far about the Trump tax documents (spoiler alert: he pulled the rich-guy move and paid next to nothing in income tax while in office). Plus: The Santa Claus rally has arrived on Wall Street. Let's get into it.

By Allison Morrow

💸 TRUMP'S TAXES

After years of Donald Trump defying convention and refusing to release his tax returns, US lawmakers are now preparing to release six years' worth of financial documents to the public. Just in time for Christmas...

Here's the deal: The House Ways and Means committee a few weeks ago obtained Trump's tax returns for 2015 through 2020. Yesterday, the committee released a report on the documents, and in a few days it will release the actual tax returns (once they're stripped of sensitive information like Social Security numbers).

So, what have we learned so far? Here are the highlights, courtesy of my CNN colleagues:

#1. The IRS repeatedly failed to audit Trump while he was in office.

Despite an IRS mandate to audit the president, that program was "dormant" during Trump's term, the report says. The IRS opened only one "mandatory" audit in the term, for his 2016 tax return. And that didn't take place until the fall of 2019.

It's not clear why the IRS wasn't more active in auditing Trump's returns while president. And look, I get it, working for the IRS probably sucks, but like, the one fun part might just be seeing the president's dirty secrets before the rest of the world, no?

"The IRS was asleep at the wheel, and the presidential audit program is broken," said Sen. Ron Wyden. "There is no justification for the failure to conduct the required presidential audits until a congressional inquiry was made."

Many Democrats, including those on the committee, as well as tax policy experts, say that a lack of resources, including manpower to handle highly complex audits like those of Trump, may also be a factor.

"It's easy to find the IRS deficient. They're starved for resources," said Steven M. Rosenthal, senior fellow in the Urban-Brookings Tax Policy Center at the Urban Institute. "Rich guys can take advantage of the tax law because the IRS doesn't have the resources to go after them."

The IRS didn't respond to a request for comment.

#2. Trump paid $0 in federal income taxes in his last year as president

Like a lot of rich people, Trump deploys a bunch of aggressive strategies to avoid paying income tax. (See also: Elon Musk, Jeff Bezos, et al)

In the middle two years of his presidency, Trump reported a stunning reversal of fortune that led to a considerable tax bill. In 2018 and 2019, he paid $1.1 million in taxes as his income surged.

But in 2020, as the pandemic raged, Trump reported a loss of nearly $5 million. He paid $0 in federal income taxes that year.

#3. Questionable charitable deductions

The report raises questions about the accuracy of some huge charitable deductions Trump claimed on several tax returns.

In 2015, he claimed a $21.1 million deduction for donating 158 acres of his 212-acre property called Seven Springs in North Castle, New York. The donation, which was made to a land trust, is a focus of the Manhattan district attorney's criminal investigation of the Trump Organization's finances.

The IRS allows an income tax deduction for owners who give up rights to their land for the purpose of conservation, but the IRS has raised questions about whether the value of Trump's land donation was inflated.

The report also raised questions about cash donations that Trump claimed as charitable deductions.

In 2016 and 2017, Trump claimed nearly $1.2 million and $1.9 million, respectively, in charitable contributions, the bulk of which were made in cash. Trump, again, had no taxable income in either year, but he was able to carry forward the deduction to future years, further limiting the amount of federal income tax he had to pay. The committee said the large cash contributions merited a review.

What's next: We're awaiting the committee's release of the actual returns.

Meanwhile, Chairman Richard Neal has proposed legislation that would codify the mandatory audit program "to require the IRS to conduct mandatory audits while a President is in office and publicly disclose related returns and return information."

House Speaker Nancy Pelosi said the House will "move swiftly to advance" that bill.

They'll have to be very swift — Democrats hand over control in the House to Republicans on January 3.

QUOTE OF THE DAY

"I will resign as CEO as soon as I find someone foolish enough to take the job!"

Elon Musk confirmed he will step down as Twitter's chief executive, but only when he identifies a successor, directly addressing for the first time a Twitter poll he created this week in which millions of users voted for him to leave his post.

He'll still own the company, of course, and he said he would continue to "run the software & servers teams" at Twitter even after he finds a new CEO. Given the chaos that Musk's reign has ushered in — a gutted staff, an advertiser exodus, the surge of hate speech on the platform — we're not holding our breath for a successor.

🇨🇳 WHIPLASH

After nearly three years of China's strict zero-Covid strategy, the country is loosening its grip. Perhaps a bit too much.

See here: Just weeks ago, catching Covid in China meant being taken to government quarantine for an indeterminate stay. Your entire residential building would be locked down, trapping your neighbors in their homes for days or weeks, my colleagues Jessie Yeung and Cheng Cheng write.

But now, China has done a 180, with millions of people being told to keep going to work — even if they're infected. The abrupt shift suggests Beijing is trying to undo the pain that zero-Covid inflicted on China's economy and its people. But it's also creating whiplash.

Several cities, collectively home to more than 100 million people, recently issued directives to public sector employees to encourage asymptomatic and mildly ill workers to "go to work normally after taking protective measures as necessary for their health status and job requirements."

That's a drastic shift in protocol in China.

Under zero-Covid, residents experienced an incessant cycle of lockdowns that have gutted China's economic growth, upended supply chains and a contributed to a cratering of the real estate sector (which accounts for about 30% of China's GDP.)

This shift in priority is clearly reflected in the government's messaging, with state media downplaying the severity of the Omicron variant and emphasizing the importance of economic recovery.

In a nation with almost no natural immunity to Covid, that's a risky move. Cases are already rising. A nationwide reopening would threaten to overwhelm local health systems.

Some are venting online, saying the new policy prioritizes the economy at the expense of workers' wellbeing.

"If you get sick, you will either need to ask for leave and deduct your wages, or continue to work," one Weibo user wrote.

Another remarked: "It sounds like placing money over life."

Read Jessie and Cheng's full report on the situation in China here.

WHAT ELSE IS GOING ON?

💸 Lawyers for Sam Bankman-Fried are negotiating with federal prosecutors in New York on a bail arrangement that would enable him to avoid detention, people familiar with the matter told CNN.

💊 Walmart said it has reached settlement agreements with all 50 US states as part of a $3.1 billion nationwide opioid settlement announced last month.

🎄 Here comes the Santa Claus rally: Stocks surged Wednesday as investors cheered healthy results from two of America's leading companies and a surprisingly strong reading on consumer sentiment.