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STATE OF THE UNION

Trump Tax Bombshell; Interview With Vermont Senator Bernie Sanders; Interview With Former New York Mayor Rudy Giuliani; Donald Trump Steps Up Attacks on Hillary Clinton's Marriage; The Mystery Candidate Who Worried Ronald Reagan. Aired 9-10a ET

Aired October 2, 2016 - 09:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


[09:00:13]

(BEGIN VIDEOTAPE)

JAKE TAPPER, CNN ANCHOR (voice-over): Bombshell. Pages from a Trump tax return sent to "The New York Times" by a secret source, what do they reveal?

Plus: late-night wars, Trump mocked on "SNL."

(BEGIN VIDEO CLIP, "SATURDAY NIGHT LIVE")

ALEC BALDWIN, ACTOR: I won the debate. I stayed calm, just like I promised. It is over. Good night, Hofstra.

(LAUGHTER)

(END VIDEO CLIP)

TAPPER: As Clinton attacks his 3:00 a.m. tweets.

HILLARY RODHAM CLINTON (D), PRESIDENTIAL CANDIDATE: His latest Twitter meltdown is unhinged, even for him.

TAPPER: And Trump launches another wild and unsubstantiated attack.

DONALD TRUMP (R), PRESIDENTIAL CANDIDATE: I don't even think she's loyal to Bill, you want to know the truth. And, really, folks, really, why should she be, right?

TAPPER: Are more to come at the next debates? The best political minds will be here with insights from the campaign trail.

(END VIDEOTAPE)

TAPPER: Hello. I'm Jake Tapper in Washington, D.C., where the state of our union is taxed.

Overnight, "The New York Times" publishing a copy of Donald Trump's 1995 tax returns, or at least some pages from it, revealing a $916 million loss from failed business projects. The law would allow him, theoretically, to use those losses to offset taxes on new income for as long as 18 years, "The Times" report. So, did Donald Trump pay any federal income taxes? His campaign's response -- quote -- "Mr. Trump is a highly skilled businessman who has a fiduciary responsibility to his business, his family and his employees to pay no more tax than legally required. That being said, Mr. Trump has paid hundreds of millions of dollars in property taxes, sales and excise taxes, real estate taxes, city taxes, state taxes, employee taxes and federal taxes" -- unquote.

That statement, you might notice, does not mention paying income taxes or dispute the authenticity of "The Times"-obtained document. But they do say it was illegally obtained.

Joining me now is former presidential candidate and Vermont Senator Bernie Sanders, who is a supporter of Hillary Clinton.

Senator Sanders, good to see you, as always.

Let me get your reaction to this news about Donald Trump and not paying federal income taxes. Some Trump supporters would argue, why should he pay any more taxes than the law requires him to. What do you think?

SEN. BERNIE SANDERS (I), VERMONT: Well, you know, Jake, this is exactly why so many millions of Americans are frustrated, they are angry, they are disgusted at what they see is a corrupt political system in this country.

So, what you have, at a time of massive income and wealth inequality, in the last 16 years, we have seen a 10-fold increase in the number of billionaires. And at the same time, many of these billionaires have loopholes that their lobbyists and their friends on Capitol Hill provide to them which enable them to avoid taxes, in some cases, not paying a nickel in taxes.

So, you have got the middle-class people working longer hours for low wages. They pay their taxes. They support their schools. They support their infrastructure. They support the military. But the billionaires, no, they don't have to do that, because they have their friends on Capitol Hill. They pay zero in taxes.

So, Trump goes around and says, hey, I'm worth billions, I'm a successful businessman, but I don't pay any taxes. But, you, you make 15 bucks an hour, you pay the taxes, not me.

That's why people are angry and want real change in this country.

TAPPER: Let's talk about that.

You hit the campaign trail with Hillary Clinton this week to promote your new joint college plan.

Take a listen what Hillary Clinton said about you and your supporters back in February when she was at a closed door fund-raiser. I want to make it clear this is just an excerpt of these comments. And it came from an e-mail hack. Take a listen.

(BEGIN AUDIO CLIP)

HILLARY RODHAM CLINTON (D), PRESIDENTIAL CANDIDATE: There's just a deep desire to believe that, you know, we can have free college, free health care.

It's a false promise. But I don't think you tell idealistic people, particularly young people, that they bought into a false promise.

His ideas are indefensible.

(END AUDIO CLIP)

TAPPER: You are out there working very, very hard for Secretary Clinton, trying convince your supporters to back someone that many of them did not trust.

What was your reaction when you heard that, calling your ideas indefensible, saying that you were selling them false promises?

SANDERS: Well, two things.

If you listen to the whole discussion that she had, a very important point that she made is that a lot of young people who went into debt, worked very hard to get a good education get out of school and can't find jobs commensurate with the education that they received.

And there's a lot of unhappiness about young people. And this is an issue that we must address. But the bottom line here is that I think that what Secretary Clinton and I have done since the election, since the primary nominating process, we have worked together in a number of areas.

[09:05:02]

Secretary Clinton has worked with me to make certain that public colleges and universities become tuition-free for all families earning $125,000 or less, that we double funding for community health centers, which means that we will have access to primary care for millions more Americans.

And, by the way, apropos to Donald Trump not paying any taxes, she's come up with an estate tax proposal which will ask the very wealthiest people in this country, wealthiest families in this country to start paying their fair share.

TAPPER: Yes. I get that, Senator. But she's calling other ideas you pitched, not the ones that you two are working on together, but she called other ones false promises and said what you were doing was indefensible. That must bother you.

SANDERS: Well, look, we're -- of course it does.

But we're in the middle of a campaign. And I -- trust me. If you go to some of the statements that I made about Hillary Clinton, you can see real differences. So we have differences. There's nothing to be surprised about. That's what a campaign is all about. TAPPER: She also said this about your supporters. And let me also

remind people you should go and listen -- go to "The Washington Free Beacon" Web site. They have the whole comments. You should listen to them all. But she said this about your supporters.

(BEGIN AUDIO CLIP)

CLINTON: Some are new to politics completely. They are children of the great recession, and they are living in their parents' basement.

So, if you're feeling that you're consigned to being a barista or, you know, some other job that doesn't pay a lot and doesn't have much of a ladder of opportunity attached to it, then the idea that maybe, just maybe, you could be part of a political revolution is pretty appealing.

(END AUDIO CLIP)

TAPPER: What was your reaction to that, sir?

SANDERS: Well, I agree with her.

What she's saying is what I suggested a moment ago. There are young people who went deeply into debt, worked very hard to get a good education, and yet they are getting out of school and they can't find decent-paying jobs. And that's a major problem.

They are living in their parents' basements. And that's the point there.

So, I personally do believe we do need a political revolution, that we do need to transform the society, create decent-paying jobs, make sure that Donald Trump and his billionaire friends start paying their fair share of taxes, do what Donald Trump does not want us to do, address the crisis of climate change, transform our energy system, do what Donald Trump does not want us to do, raise the minimum wage to a living wage, and have pay equity for women.

So, I think that Secretary Clinton -- and, by the way, as I said, I just talked to her a few days ago -- she's prepared on all of those issues to move forward within the first 100 days of her administration.

And, on top of that, unlike Donald Trump, she understands that Citizens United Supreme Court decision is undermining American democracy. It has got to be overturned. She will be supporting a constitutional amendment to do that, so that billionaires cannot continue buying elections in this country.

TAPPER: Senator, what would you say to a Bernie Sanders supporter who listens to that tape and thinks, that sounds condescending, to call me a basement-dwelling barista that's buying false promises from Bernie Sanders, and I think she's just using Bernie Sanders to get elected?

What is your message to that Bernie Sanders supporter?

SANDERS: This is what the message would be.

Take a hard look, not at Hillary Clinton or Donald Trump. Take a hard look at the needs of the American people. And issue by issue, whether it is climate change, whether it is Citizens United, the need to overturn that, whether it is pay equity for women, whether it is raising the minimum wage to a living wage, rebuilding our crumbling infrastructure, a tax system that says to Trump and his friends they are going start paying their fair share of taxes, look at Clinton's positions, look at Trump's positions, understand that one or the other of those two will be the next president of the United States.

And after you take a hard look at those two candidates and their issues, I think the conclusion that the vast majority of people will reach is that Clinton is far and away the superior candidate.

TAPPER: A lot of Clinton advisers are worried, as I'm sure you know, that a sizable number of your former supporters might go to a third- party candidate such as Jill Stein or Gary Johnson.

Gary Johnson, the Libertarian candidate, struggled this week to name a foreign world leader whom he respects.

Take a listen.

(BEGIN VIDEO CLIP)

CHRIS MATTHEWS, MSNBC: Who is your favorite foreign leader?

GARY JOHNSON, LIBERTARIAN PRESIDENTIAL CANDIDATE: Who is my favorite...

MATTHEWS: Any -- just name anywhere in the country -- any one of the continents, any country. Name one foreign leader that you respect and look up to.

You have got to do this. Anywhere. Any continent, Canada, Mexico, Europe over there, Asia, South America, Africa. Name a foreign leader that you respect.

JOHNSON: I guess I'm having an Aleppo moment. The former president of Mexico...

MATTHEWS: No. Which one?

JOHNSON: I'm having a brain -- I'm having a brain...

MATTHEWS: Well, name anybody.

(END VIDEO CLIP)

[09:10:01]

TAPPER: I know you disagree with Gary Johnson on a range of policy issues, where you and Secretary Clinton agree. Do you think he's qualified to be president?

SANDERS: You know, that wasn't the most impressive interview I have ever heard.

But I think, more importantly than that, people make mistakes doing interviews. Look at his point of view on issues like the environment, on climate change, on the economy. And I think, if any of the people voted for me take a hard look what he stands for, I think -- and understand where he's coming from, they will not be supporting -- not be supporting him.

TAPPER: I want to ask you about Deutsche Bank.

Obviously, as you know, two weeks ago federal regulators slapped Deutsche Bank with a $14 billion fine for its mortgage-lending activities during the housing bubble between 2012 and 2014.

As you may know, the Clintons received almost a million dollars from Deutsche Bank for delivering four speeches behind closed doors. In light of the fine and the ongoing investigation, should they return that money?

SANDERS: Well, that's for them to decide.

But what this tells me and what this whole Wells Fargo fiasco tells me, Jake, is what I have been saying all along, is that the business model of the largest financial institutions in this country and, in fact, around the world is fraud. It is fraud.

That's what they do. Occasionally, they get caught after making huge amounts of money. And that's I believe why we need to reestablish Glass-Steagall legislation and why I believe we need to break up these large financial institutions. We cannot continue to tolerate, whether it's Deutsche Bank, whether it's Wells Fargo, whether it's Bank of America, the kind of fraudulent activity that we have seen for so long.

TAPPER: Lastly, sir, you were critical of the Clinton Foundation taking money from governments like Saudi Arabia during the primaries.

There's still talk of the Clinton Foundation continuing even if Secretary Clinton becomes elected president. Chelsea Clinton is planning to stay on board.

Do you think that that poses a potential conflict of interests, and should the Clinton Foundation shut down if Secretary Clinton becomes president?

SANDERS: Well, that's obviously something that the Clinton family is going to have to determine. But I think it does raise serious questions if foreign governments, for example, are making contributions to a foundation tied closely to what I hope will be -- who I hope will be the next president of the United States.

TAPPER: Senator Bernie Sanders, we always enjoy having you on. Thank you so much. Happy new year to you, sir.

SANDERS: Thank you. Thank you very much. TAPPER: After a rough first debate, Trump says he's preparing this

weekend for his next matchup and he says the Clintons' marriage is fair game.

His latest line of attack next.

(COMMERCIAL BREAK)

[09:16:58]

TAPPER: Welcome back to STATE OF THE UNION. I'm Jake Tapper.

Quote: "She's nasty, but I can be nastier than she ever can be."

That's what Donald Trump told "The New York Times" this weekend. And then he proved it at a rally last night.

(BEGIN VIDEO CLIP)

TRUMP: She can't make it 15 feet to her car.

(CHEERING AND APPLAUSE)

TRUMP: Give me a break.

(CHEERING AND APPLAUSE)

TRUMP: Give me a break.

(END VIDEO CLIP)

TAPPER: While he was working that crowd, "The New York Times" published a story revealing that the paper had seen pages from Donald Trump's 1995 tax returns, which suggested a near-billion-dollar loss, a deduction so huge, it could have allowed Trump to not pay any federal income taxes for as long as 18 years.

We have lots to talk about with top Trump adviser and former New York City Mayor Rudy Giuliani, who joins me now live from New York.

Mr. Mayor, thanks for being here.

RUDY GIULIANI (R), FORMER MAYOR OF NEW YORK: No, thank you very much, Jake. Nice to be with you.

TAPPER: So, Mr. Mayor I have got to start with this bombshell report in "The New York Times" that Donald Trump may have avoided federal income taxes for almost a generation.

Is your campaign disputing the authenticity of these documents from Donald Trump's 1995 tax returns that was mailed by an anonymous source?

GIULIANI: Well, all I have is "The New York Times" story to go by, so let me -- let me comment on it as if it's true. First of all, what you failed to leave out of what you said -- and

it's not your fault -- it's "The New York Times"' fault -- is that this is perfectly legal. And "The Times" makes that point about 26 paragraphs into the opinion.

Number two, "The Times" fails to point out that he has an obligation, as the head of a business, to take advantage of the tax advantages of and to use the lawful deductions and tax advantages that are available to you. I advise my clients to do that, because, if they don't do it, they get sued by their co-investors, by their investors, they lose jobs for their employees.

And the reality is, this is rather common in large, gigantic American businesses, loss carry-forwards.

TAPPER: But -- but, Mr...

GIULIANI: You might remember -- you might remember, a few years ago, it was pointed out that GE paid no taxes.

TAPPER: Yes.

GIULIANI: So, the reality is, this is part of our tax code.

The man is a genius. He knows how to operate the tax code for the benefit of the people he's serving.

TAPPER: Well, that's interesting, because, Mr. Mayor, you say that he's a genius.

Donald Trump said during the debate that not paying federal income taxes makes him smart. Does that mean that the rest of us who don't look for every possible loophole and provision to avoid paying our fair share of taxes, does that mean the rest of us are stupid?

GIULIANI: No, absolutely not.

In fact, 44 percent, 45 percent of America doesn't pay income tax.

TAPPER: A lot of them are below the poverty line, not -- they are not billionaires. They are below the poverty line, and they don't make enough to be taxed.

GIULIANI: But someone told them that they -- they -- they don't have to pay taxes.

And anybody that goes and has an accountant, H&R Block, or just goes online, figures out all the deductions available -- available to them. I mean, the reality is that most Americans take advantage of every deduction available to them. And, of course...

TAPPER: Most Americans pay federal income taxes, sir, and Donald Trump apparently did not.

[09:20:01]

GIULIANI: No, just a little bit over most Americans pay federal income taxes.

TAPPER: Yes, a majority of the American people pay federal income taxes.

GIULIANI: And very -- and very large businesses very often take advantage of these kinds of losses. Jake...

TAPPER: Do you pay federal income taxes? You're a successful businessman. Do you pay federal income taxes?

GIULIANI: Well, that's between me and my accountant and the IRS. And the reality is, I pay my lawful tax, and he paid his lawful tax.

TAPPER: Well, let me ask you another question, sir.

Donald Trump has...

(CROSSTALK)

GIULIANI: And, Jake -- no, no, no, Jake, wait a second. This is really very unfair.

If he didn't take advantage of those tax deductions or tax advantages that he had, he could be sued, because he -- his obligation, as a businessman, is to make money for his enterprise and to save money for his enterprise. It would have been insane for him to take advantage of them.

TAPPER: Sued by whom? Who would sue him for his own personal income taxes?

GIULIANI: Investors in his business, people who loan money to his business, banks that loan money to his business.

If I have a $200 million loss carry-forward that I can use, and I don't lose -- and I don't use -- use it, and I end up costing my company $200 million more, don't you think a bank that I borrowed money from is going sue me for mismanaging my business.

TAPPER: Mr. Mayor, let me ask you another question.

(CROSSTALK)

TAPPER: Donald Trump, his pitch is...

GIULIANI: That's why you are -- that's why the simplistic analysis of an extraordinary, complex code is so unfair. The reality...

TAPPER: I think that there are a lot of very, very successful business men and women who pay federal income taxes and don't look for every single opportunity there is to avoid paying them.

But let me ask you another question. Donald Trump has been selling himself as a brilliant businessman.

GIULIANI: Wait a second, Jake. Wait a second. No, no. TAPPER: He has been selling himself as a brilliant businessman.

GIULIANI: No, wait a second.

TAPPER: He lost almost a billion dollars in 1995.

GIULIANI: You got to let me -- you got to -- you got to -- there are not very many smart businessmen who don't take advantage of the tax -- legal tax laws that are there.

And if they are, then they are not very good businessmen, and no one wants to go into business with them. They don't have very good lawyers and they don't have very good accountants.

TAPPER: OK.

But, let me ask you, sir, he's selling himself as a brilliant businessman. He lost almost a billion dollars in 1995.

GIULIANI: Correct.

TAPPER: That doesn't sound particularly brilliant to me.

GIULIANI: Well, yes it does.

TAPPER: It does?

GIULIANI: Since he came back. Since he came back. And he came all the way back.

And isn't that the history of America? I mean, people like Steve Jobs were fired -- was fired by Apple and came all the way -- and came all the way back. Churchill was thrown out of office twice and came all the way back.

It shows what a genius he is. It shows he was able to preserve his enterprise and then he was able to build it. And the idea that he could carry it forward for 18 years means that at no time in 18 years did he make $916 million.

And, of course, we know, last year, he made $685 million. We know that from his financial disclosure form.

TAPPER: But he hasn't released his tax returns. The only reason we know anything about this is because somebody released this to "The New York" -- somebody leaked this to "The New York Times."

GIULIANI: No.

We know -- we know that he made $680 million last year from his 104- page financial disclosure form...

TAPPER: All right, Mr. Mayor...

GIULIANI: ... which -- which describes considerably more about his finances than the tax return. And the reason... TAPPER: He's the first -- he's the first major party nominee since 1976 to not release his tax returns. If you're proud of that, that's great. But it -- I don't think he should be.

GIULIANI: And I am saying, the way all of you are treating this is a very good indication of why someone might not want to release their tax returns, because you take something that is perfectly legal, something he had no choice but to utilize -- and if he didn't utilize it, he would have been in a lot of trouble -- and you try to make it into -- he did no wrongdoing.

Meanwhile, Hillary Clinton has violated probably 30 federal statutes. He did nothing wrong. The headline should have been Donald Trump takes advantage of legal provisions in tax code. That's -- that's the story.

TAPPER: OK, that's an interesting -- that's an interesting headline. I think most Americans are probably interested -- most Americans pay their federal income taxes. Most Americans...

GIULIANI: Well, I don't know. You don't know most Americans, and I don't know most Americans.

TAPPER: I know that most Americans pay their federal income taxes, sir.

Let me ask you something. In 2012...

GIULIANI: I also know -- I also know that most Americans take advantage of every deduction and every legal opportunity there is to save some taxes, so they don't have to pay as much as they are paying to the government.

TAPPER: In 2012...

GIULIANI: And I know most Americans would -- I know most Americans would rather be paying lower taxes than a Donald Trump and 10 percent or 20 percent more under Hillary Clinton.

TAPPER: OK.

Mr. Mayor, in 2012, Donald Trump tweeted: "Half of Americans don't pay income tax, despite crippling government debt."

He is in that half that does not pay federal income taxes, despite crippling government debt. When he rails against the junky infrastructure, when he rails against La Guardia Airport, when he talks about how bridges are collapsing, is he not responsible, at least in part, for the fact that these things are not being repaired?

[09:25:00]

GIULIANI: No. No.

TAPPER: He's not at all?

GIULIANI: Absolutely not.

TAPPER: Not at all? No?

GIULIANI: The law is responsible for it.

If you have a sensitivity laws, you live by those laws. And the reality is, you are ignoring completely the fiduciary obligation that he has to all the people around him to run his business at the lowest possible expense.

Every businessman takes advantage of it, including Warren -- Warren Buffett. And Warren Buffett think we should be paying 90 percent in taxes. So, why doesn't he voluntarily send in that extra 40 percent? Let him voluntarily make out a check and send it in if that's what -- he does exactly the same thing. He takes advantage of the law.

TAPPER: Mr. Mayor, I have one last question for you.

Donald Trump launched a wild and unsubstantiated attack against Hillary Clinton last night. Take listen.

(BEGIN VIDEO CLIP)

TRUMP: I don't even think she's loyal to Bill, you want to know the truth.

(CHEERING AND APPLAUSE)

TRUMP: And, really, folks, really, why should she be, right?

(END VIDEO CLIP)

TAPPER: Mr. Mayor, is that normal, stable behavior for a presidential nominee to launch an unsubstantiated attack?

GIULIANI: Well, after -- after she called him a racist and misogynist, a xenophobic, I don't know, schizophrenic, and I don't know what else she called him at the end of that debate, I think it's fair -- it's fair game.

TAPPER: Just to make stuff up, just to say wild accusations, Hillary Clinton is cheating on Bill, no proof of it whatsoever? Everything is fair game?

GIULIANI: What -- what -- that was a sarcastic remark pointing out that Bill Clinton has, you know, quite a past, and Hillary Clinton has done quite a job on attacking the people who were victims of Bill Clinton.

And not only that. She poses as a feminist, and she's taken money from countries that stone women, kill women, have women...

(CROSSTALK)

TAPPER: Bill Clinton is not the nominee, sir. Bill Clinton is not the nominee. And this is my last question for you.

GIULIANI: And he is...

(CROSSTALK)

TAPPER: Is the Trump campaign -- is Donald Trump and the people around Donald Trump really the ones to be casting aspersions on the marriages of anyone else?

GIULIANI: It isn't a marriage. It isn't the marriage. It's the way she goes on the attack and tries to hurt victims of sexual predations. I mean, she's the one who says that victims should be taken seriously.

TAPPER: That wasn't about her marriage? Him saying that she's not loyal to Bill isn't about her marriage?

GIULIANI: I am saying the problem with Hillary Clinton has nothing to do, as far as I'm concerned, with her marriage. It's her protection of Bill Clinton for 20 or 25 years against allegations of rape, taking advantage of an intern, and going on the attack and trying to make those women appear to be insane in some cases.

Also, it's her posing as a feminist and taking millions, if not hundreds of millions of dollars, from countries that kill women, stone women, don't allow women to drive, don't allow women to have rights, use women as property.

TAPPER: I just -- I just -- I -- I mean, I just find it hard to believe that Mr. Trump would want to start leveling accusations about people's marriages.

But that's all the time we have, Mr. Mayor.

GIULIANI: I think the -- I think the accusations are about Hillary Clinton taking money from countries that kill women.

TAPPER: The accusation was that Hillary Clinton was cheating on Bill. That's what the accusation was.

GIULIANI: That's...

TAPPER: It was an unhinged and wild accusation. I can understand why you can't defend it, because it's indefensible.

Mayor Giuliani, thank you so much. I appreciate it.

GIULIANI: Well, that's your opinion. And thank you for allowing me to reply to that.

TAPPER: All right, sir, thank you so much.

Coming up: "Saturday Night Live" actually delayed the start of their season to tackle the first debate. So, was it worth the wait?

(COMMERCIAL BREAK) [09:32:35]

TAPPER: Donald Trump says she's nasty but I can be nastier than she can ever be. That is not a "2 Live Crew" album title. That is what he actually said. Is that a preview of what's to come at the next debate?

Republican Congressman Ryan Zinke of Montana joins us. Neera Tanden, president and CEO of the Center for American Progress, also part of Clinton's transition team. Rachel Campos Duffy is with us. She's the spokeswoman for The LIBRE Initiative. And CNN political commentator Van Jones is here with us.

OK. So, congressman, I don't think she's loyal to Bill if you want to know the truth is what Donald Trump said yesterday. You heard Mayor Giuliani try to talk about other things that call into question Secretary Clinton, things that Donald Trump did not say. Is this a good path for your nominee to get the White House?

REP. RYAN ZINKE (R), MONTANA: You know, I think what we need to focus on is what counts economy, national security. Get back who -- to what's happened where we created vacuums around the world. Economy when you look at -- in my lifetime there has been two presidents that had it right as far as taxes goes, John F. Kennedy and Ronald Reagan.

TAPPER: Mm-hmm.

ZINKE: Both of them looked at a plan that says we have to lower taxes and to raise taxes as an example, let's talk about that. Is it whether you raise taxes on individuals or small businesses or corporations, it means the same thing, less jobs.

TAPPER: So this sounds like to me --

ZINKE: No.

TAPPER: You don't think you should be talking about Hillary Clinton's marriage.

ZINKE: I think we need to prioritize what we're talking about. America is ready for change in the right direction.

TAPPER: Rachel, stage an intervention with your nominee. What do you think he should be talking about?

RACHEL CAMPOS-DUFFY, NATIONAL SPOKESPERSON, THE LIBRE INITIATIVE: Well, he should be talking about the issues but let's not forget, I mean, Designee should be talking about the issue. But let's not forget, I mean, either some footage that was leaked this week of Michele Obama who was just as ferocious during the primary with Barack Obama when she said --

TAPPER: (INAUDIBLE).

CAMPOS-DUFFY: Wait a minute. She said -- wait a minute. She said, you can't go into the White House if you can't take care of your own house. It's very clear what she was talking about. But it's a dangerous road for him to take because a woman going against a woman and if he tries to do this at the debate it could be -- it could be treacherous for him. He has to handle it very carefully. But he's right to go after him if she tries to pull the war on women on him.

TAPPER: Van.

VAN JONES, CNN POLITICAL COMMENTATOR: Well, but he's not right to just make up stuff and lie. I mean -- first of all I think that you've seen --

CAMPOS-DUFFY: Well, I didn't say that comment was true. I'm saying this is in the context of infidelity and who's an enabler, and who's -- I mean -- it's a bad topic but it's (INAUDIBLE) --

TAPPER: It's a good topic for Donald Trump?

CAMPOS-DUFFY: Well, it's not a good topic but if she brings the war on women to him he has got to push back (INAUDIBLE).

JONES: Yes. Or maybe he can just stick with his strategy.

[09:35:02]

Here's a problem that you have. When you're president of the United States guess what? Sometimes somebody may say something mean about you. You can then tear up your playbook and go on a weeklong rant and tear tweeting in the middle of the night.

What happened to him was he was doing well. He was doing frighteningly well. I was terrified 10 days ago this guy was going to be able to be disciplined. Hillary Clinton in 15 minutes said two or three things and threw him off his game and he has not been able to recover since the debate. That's important. And that's dangerous for the country.

NEERA TANDEN, PRESIDENT AND CEO, CENTER FOR AMERICAN PROGRESS: I mean, I think -- I think -- I think the reality, and just to go off what Van said, I think the reality is that we are in day six of the meltdown. He did terrible -- he had a terrible debate performance. Everybody sees that. He sees the state polls moving towards Hillary. 11 state polls were out this week. She's beating him in every single one. He can't take that. And so this is the latest meltdown.

I think, if you want to have someone be commander-in-chief -- we are seeing in real-time that Donald Trump is not capable of dealing with the stress of being president because he's showing us in real-time that he lashes out. He attacks people. He says crazy things attacking her and her marriage when he has a history of -- he's on his third marriage. He's had affairs. It's a terrible thing. No one should talk about those (ph).

CAMPOS-DUFFY: But he's point -- but he's point about the marriage -- I'm not disagreeing that he needs to get back to topic. But his point about the marriage is not whether Bill had an infidelity or not. His point is -- goes back -- goes back to her role in it. And let's be honest she had on her --

TANDEN: OK.

CAMPOS-DUFFY: Wait a minute. She had on her website all women who were raped need to be believed and that was mysteriously was removed and there -- from her website --

(CROSSTALK)

TANDEN: OK --

(CROSSTALK)

TAPPER: OK. That's not her point. The point he made yesterday was a wild and baseless allegation...

TANDEN: Exactly.

TAPPER: ... that Hillary Clinton has not been faithful to Bill.

Congressman, is that what your nominee -- you want him to win. You want --

ZINKE: I do.

And what's important to me and I think what's important to America is this. Is that national security, law and order. You look what's happening overseas. Let's focus this election about America. And all Americans is --

TAPPER: Why are you talking to me? Talk --

(CROSSTALK)

ZINKE: I'm talking -- you're in the Clinton admin -- you're in the Clinton transition team, right?

TANDEN: We had a -- we had a great debate -- we had a great debate on those issues and he --

ZINKE: Well, wait a minute. Wait a minute. Wait a minute. Wait a minute. It's my turn.

TAPPER: Right (ph).

ZINKE: Now you're in the Clinton -- Clinton team for the transition. All right? I'm in no team. I'm on America's team. I spent my life fighting over there so it wouldn't come here.

So I think as America we need to focus on making sure we deal with the problems overseas, deal with an economy here so we can make sure we have --

(CROSSTALK)

JONES: ... economy. I got to say -- (CROSSTALK)

ZINKE: Wait a minute. So we can afford to make sure we keep a strong military, afford to keep the promises we made. This is what this election is about. Status quo --

JONES: You should run for president -- well, you should run for president of the United States as a Republican because you sound great and your candidate doesn't.

ZINKE: Well, I say what we need but we need as an American status quo is not working for anybody.

(CROSSTALK)

TAPPER: Let's just Van have the last word in this (INAUDIBLE).

JONES: OK. On the tax issue part of the thing that makes no sense about -- in the last block this was his personal income tax.

Hillary Clinton decided on her personal income tax not take to take every deferment. Apparently Donald Trump decided to lose a billion dollars and then winds up a winner on his tax forms. Listen that makes Americans upset. Because no matter what ordinary Americans do they can't seem to win. And no matter what this guy does he can't seem to lose because he's obeying rules he helped to write for himself.

TAPPER: All right. Everybody -- everybody stay right --

(CROSSTALK)

TAPPER: Everybody stay right -- right here. We're coming back. We're coming back.

Coming up how will Trump handle these revelations about his taxes? Will it matter to voters? Stay with us.

(COMMERCIAL BREAK)

[09:42:53]

(BEGIN VIDEO CLIP)

KATE MCKINNON, COMEDIAN: He hasn't released his tax returns which means he' either not that rich...

ALEC BALDWIN, ACTOR: Wrong.

MCKINNON: ... not that charitable...

BALDWIN: Wrong.

MCKINNON: ... or has never paid taxes in his life.

BALDWIN: Wronger. (LAUGHTER)

(END VIDEO CLIP)

TAPPER: Alec Baldwin brought in to play Donald Trump from now at least until November. Perhaps afterwards. We're back with our panel.

Let's talk about this tax issue. Mayor Giuliani and Bernie Sanders not surprisingly had different takes. Mayor Giuliani said Trump is a genius for not paying any federal income taxes. Bernie Sanders said, this is what Americans hate about Washington and how the fix is in.

What do you think? How do you think it's going to play with voters?

CAMPOS-DUFFY: Well, I think this says more about our tax code than Donald Trump.

You're right. I think what people hate is the tax code. It's absolutely rigged to benefit those who can afford lawyers, who can afford lobbyists to carve them out of it and what we need to do is have a discussion about how do we simplify it and make it more fair. And that's something that hasn't happened for eight years under Barack Obama.

JONES: Well, the president want a comprehensive tax reform --

(CROSSTALK)

CAMPOS-DUFFY: This is something we need to deal with. Paul Ryan has a great plan -- Paul Ryan has a great plan and no one wants to take it up. The president is not interested in it.

JONES: That's not true. And --

CAMPOS-DUFFY: And the president -- this administration is the epitome of cronyism if you are an environmental group --

TAPPER: Good pivot. Good pivot.

(LAUGHTER)

CAMPOS-DUFFY: If you're an environmental group you get a tax break.

TAPPER: I appreciate it.

CAMPOS-DUFFY: I'm sorry.

TAPPER: As an Olympic judge I give you 10 points. But the point is we're talking about this specific campaign issue, Donald Trump paying no taxes after a $900 million loss. Let's talk about voters.

CAMPOS-DUFFY: But let me just say he did not -- But, Jake, he did -- but let me just say he did not -- whether you like the tax code or not I don't like it. He did not break the law. Hillary Clinton and destroying her documents broke the law.

TANDEN: Oh my God. Oh my God.

CAMPOS-DUFFY: Broke the law. Absolutely. She had --

TAPPER: All right. Let's let Van talk.

CAMPOS-DUFFY: Go ahead.

JONES: May I have my turn?

CAMPOS-DUFFY: Yes.

JONES: All right. Thank you.

So, here's the thing it is, in fact, true that if Donald Trump lost a billion dollars -- think about this lost a billion dollars he could wind up as a winner, legally in his taxes for a generation. Why is that? Because he's a genius? It's because billionaires have armies of lobbyists to write the rules, to help write the rules.

Here's your deal. If you're obeying horrible rules that you helped to write it doesn't make you a genius it makes you a part of the corruption.

[09:45:05]

TAPPER: Why do you say he helped to write them?

JONES: I say -- I say that he lobbies. His -- and people like him have an army of lobbyist. They go up to the Capitol and they say, put this loophole in -- put this loophole in. So they're building a playbook. So then guess what? They follow the rules that they in a corrupt way helped to write.

TAPPER: Congressman...

JONES: That is not a genius. You're part of the corruption.

TAPPER: ... let me ask you. During the -- during the break you were waxing poetic about the American people feeling that the American dream was unattainable.

ZINKE: On both sides.

TAPPER: On both sides. Yes and I mean it very sincerely.

Is this not the kind of thing that might bother them though?

ZINKE: You know, here is where we have come is we understand the tax code is too arbitrary, too complex. And American citizens when you go down to do your taxes, no one says, you know, can I pay more?

(CROSSTALK)

ZINKE: And if Miss Clinton says it's because of political purpose and not because she's a great person of charity. But the deal is this...

(CROSSTALK)

TAPPER: ... charitable (INAUDIBLE).

ZINKE: ...is not paying taxes, if the tax code allows you to take a loss over a period of time because you did take a billion dollar loss and recover from it it's legal and it's appropriate. If we don't like the tax code --

(CROSSTALK)

TAPPER: ... saying it's not legal though. The point is whether it's appropriate, whether it's --

(CROSSTALK)

ZINKE: I think it's smart business.

TAPPER: Smart business?

ZINKE: Smart business.

TANDEN: So I think it belies, it puts the con in everything he's been saying for the last year.

He's claiming to be the champion of working people and he has not released his taxes. He can clarify all of this. If it's legal great release your taxes. Do what every other person has done, release your taxes.

He's been hiding the information because he knows that saying you're a great businessman when you lose a billion dollars on casinos really hard to do but somehow he managed to do it and then telling everyone they are working hard and they deserve a break when their taxes, they are paying their tax and you use every loophole to not pay your taxes and this argument that he would be sued by people. It's a charade. These are his personal income taxes not -- he doesn't have shareholders that would sue him. These are his personal income taxes and it shows that he's a hypocrite on his most basic argument of being a champion of the working people because he's basically saying, I'm going run these cons you have to pay your taxes but I'm not going to.

TAPPER: Let me just say --

(CROSSTALK)

TAPPER: We only have a couple -- we only have a couple of minutes. There's a couple of sodium pentothal questions I want to ask -- you too specifically.

CAMPOS-DUFFY: OK.

TAPPER: OK? Van, the recording of Hillary Clinton talking about Bernie Sanders, talking about Bernie Sanders supporters is it damaging? Does it bother you?

Sodium thiopental in your arm. JONES: You know what? I was -- I was -- I was prepared to be outraged. I really was because I think that the Clinton wing has sometimes been very condescending towards the Sanders wing. But this really -- when you listen to the full thing she's actually trying to explain in a quite sympathetic way people who may not understand the Sanders voters.

And so I think that this has much to do about nothing.

TAPPER: All right. Rachel Campos-Duffy, I want to ask you about the Alicia Machado incident because you had (INAUDIBLE) has to do with Latinos, involving politics.

CAMPOS-DUFFY: Can I just say that -- I'm jump on this really quick. OK. OK. OK.

TAPPER: No. I want to know honestly the Alicia Machado incident and how you think it's playing in the Latino community among Democrats and Republicans and Independents. Does it bother people that Donald Trump keeps going after this one?

CAMPOS-DUFFY: It's hurting him. He needs to win suburban moms and he needs to win Hispanics and those are going to be very pivotal demos in this election.

If you think it's playing a lot on American media look at Spanish TV.

TAPPER: Yes, that's what I want to know.

CAMPOS-DUFFY: It's all over the place. It's hurting him. What he should have done is pivot it and said, listen, Alicia Machado comes from Venezuela. She just became a citizen. Venezuela is a poster child of where socialism leads (ph) us. They are eating their own pets right now. They're starving. And it's political corruption and human rights abuses.

She wants to talk about what happened 20 years ago. What I said to Alicia Machado I want to save this country from going -- continuing down the path of socialism that Barack Obama took us and that Hillary Clinton has promised to do again.

(CROSSTALK)

TAPPER: ... what I'm saying.

(CROSSTALK)

TAPPER: Is it too late for a Campos-Duffy to think (INAUDIBLE) -- Campos-Duffy (INAUDIBLE).

CAMPOS-DUFFY: It's true. And you know what? That's a message Hispanics intuitively understand. And all those kids in the basement, all those moms -- all those moms with kids in their basements --

(CROSSTALK)

TAPPER: We got to go. This is a great --

(CROSSTALK)

TAPPER: You continue talking in the green room but I have to take a break.

After the break the mystery candidate who worried Ronald Reagan. It is the subject of this "State of the Cartoonion," next.

Thanks one and all. Great job.

(COMMERCIAL BREAK)

[09:53:46]

TAPPER: Well, this year's prop of presidential candidate are certainly animated. None of them are actually well, animated.

Previous election years we have seen cartoon characters run for president. That's the subject of this week "State of the Cartoonion."

(BEGIN VIDEOTAPE)

TAPPER (voice-over): From Papa Smurf to Pogo. Huckleberry Hound to Fred Flintstone. Lots of cartoon stars have launched presidential campaigns.

But it was America' favorite dog who may have come closest to the White House. As detailed in the new exhibit at the Charles Schulz Museum the 1968 Snoopy for president push complete with its own theme song, at least according to Lauren (ph) garnered so many write-in votes for Snoopy that California actually changed the law to ban fictional characters as write-in candidates. In a letter to Peanuts creator Charles Schulz the former governor to California, Ronald Reagan, wrote in 1980, "Anything you can do to talk Snoopy out of running will be appreciated. How would he feel about a cabinet post?"

Snoopy never made it to Washington Peanuts has proved (ph) impressions (ph) about politics Woodstock got caught up in an identity politics.

[09:55:02]

Lucy imagined America's first woman president. " By the time I've grown up we'll probably have a woman president," she says in a March 1984 strip. "You know what that means, don't you? It means I won't get to be the first one. Boy, that makes me mad."

In the 1972 T.V. special, "You're Not Elected, Charlie Brown," Linus experiences something so many politicians have, the campaign gaffe.

LINUS VAN PELT, PEANUTS CHARACTER: Rather than campaign talk I decided to say a few words about the great pumpkin.

TAPPER: Ouch.

LUCY VAN PELT, PEANUTS CHARACTER: Oh you blockhead. TAPPER: Still, given the vitriol of this year's election.

TRUMP: Wrong.

CLINTON: That is --

TAPPER: It's hard not to long for the days when a beagle was on the ballot.

(END VIDEOTAPE)

TAPPER: All right. Thanks to Jeannie Schulz and the Charles Schulz Museum.

To see the actual candidates face off make sure you're watching Tuesday for the one and only vice presidential debate right here on CNN. Special coverage begins at 4:00 p.m. Tuesday on "THE LEAD."

Thanks for spending your Sunday morning with us.

"FAREED ZAKARIA GPS" is next.