Much has been written about Donald Trump’s apparent ability to not pay income taxes due to a $916 million loss stemming from a 1995 return. The question I’d like to address here is whether
Mr. Trump has a duty to pay more in taxes. Before I get much further, I’d like to add that I am not a fan of Mr. Trump, for various reasons.
But let’s examine an individual’s “duty” to pay income tax. How many of us have looked at our 1040 and said, “Boy, I think I got a good deal this year and because of that, I’ll send the Treasury another few thousand dollars?” The tax laws are complex, and yes they contain loopholes of all kinds, some of which Mr. Trump probably took advantage of.
I’d like to offer a couple of quotes from court opinions written by Judge Learned Hand (1872-1961), who served on the United States District Court for the Southern District of New York and later the United States Court of Appeals for the Second Circuit. Hand has been quoted more often by legal scholars and by the Supreme Court of the United States than any other lower court Judge.
In Gregory v. Helvering, a 1935 case that eventually made its way to the U.S. Supreme Court, the dispute centered on two aspects of the tax law: the business purpose doctrine and the doctrine of substance over form. There, Hand wrote in the majority opinion offered by the 2d Circuit Court of Appeals: “Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose a pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”
When the case progressed to the U.S. Supreme Court, the court agreed with Hand, citing that quote in the majority opinion.
A 1947 case, Commissioner of the IRS v. Newman, Hand offered a dissenting opinion that said, among other things: “Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands; taxes are enforced extractions, not voluntary contributions. To demand more in the name of morals is mere cant.”
I suppose that a majority of Americans would agree with both statements. I believe that the objections voiced regarding Mr. Trump’s matter is not whether he took advantage of the laws to create a loss carry forward that apparently resulted in his not paying federal income taxes for many years (we still don’t know if this is the case). Rather, I believe that the objection arises because the laws were constructed in such a way as to allow him to do so.
One cannot blame Mr. Trump directly for the construction of the tax law. That falls on our federal executive and legislative branches. Nor can one blame real estate developers for lobbying Congress for beneficial treatment. Everyone must realize that they’re not the only special interest group doing so. One can make arguments about the role of campaign contributions and whether or not to limit them would somehow result in a “fairer” tax code. Hopefully you can now see how far these relevant issues are from the issue surrounding whether Mr. Trump did something improper in the filing of his personal and corporate income tax returns.
Why are we therefore considering his personal ability to avoid income tax as an election issue? It would follow that the secrecy surrounding his tax return nondisclosure plays a part. I also suspect that our 24-hour news media likes to create easy-to-digest sound snippets to attract our attention. “Trump plays unfair with the tax code” makes an all-to-easy headline that doesn’t make any sense upon closer examination.
There are plenty of other reasons to feel uneasy about Mr. Trump. My column is not the proper forum for those issues. But I thought that I’d at least give you a tax attorney’s view on an issue that I believe really shouldn’t be an issue in this election.
The Sheppard Law Firm has its main in Fort Myers and also in Naples by appointment.
© 2017 Craig R. Hersch. Originally published in the Sanibel Island Sun.