My taxes, your taxes, his taxes

The New York Times article on the President’s taxes received a great deal of attention… and mislead many people. Forget for a moment who they investigated or what you may think of him. That is irrelevant. What is relevant is the tax code and how it operates … the same for every American.

The article created false impressions about our taxes, who pays what and why. It was, in essence, well timed political propaganda.

Here’s why.

In 1987 I bought a vacation home. To afford that property I rented it during the summer and my personal use was limited by the IRC. The house was new construction so I had to buy appliances and furnish the entire house. All those expenses were tax deductible because it was rental property. I also took depreciation and deducted mortgage interest and the property taxes. The rent I collected was income. My expenses always exceeded the income. Does that sound familiar?

In the late 1970s I started a very small part-time business out of my home. I deducted against earnings the expense related to that business including a small percentage of my electric, internet and other bills for running the house. Those modest expenses offset a small portion of the small profit.

I invest in municipal bond mutual funds … for tax-free earnings. You can too.

I used a 401(k) and IRA for tax deferred or tax-free earnings, I used a flexible spending account for tax-free payment of medical bills. While working I paid health insurance premiums with tax-free dollars. All like millions of other Americans.

I take every deduction allowed under the law. I carry life insurance to leave to my heirs because the benefit is income tax free. Do you?

I did estate planning to minimize the chance of paying an estate tax although in the absence of winning the lottery, that’s no risk for me.

You see there is no difference between me and Donald Trump … except an awful lot of money. And there is no difference between you, me and Trump either. To one degree or another we can all take advantage of the tax laws. We all should honestly pay the minimum amount of taxes possible and it is up to the IRS (and our integrity) to assure that honesty.

Keep a few things in mind about our taxes.

  • Congress writes the tax code
  • The tax laws are about creating incentives
    • To buy a home or invest in real estate
    • To take financial risk for capital generation to drive our economy
    • To support municipal spending at the lowest cost possible
    • To start a business
    • To donate to charity
    • To help fund college
    • To encourage non-profit even religious organizations for social betterment.
    • To offset health care costs
    • And much more
  • The tax code applies to everyone and each person or organization tries to maximize the advantages it provides.
  • The tax code limits the benefits available to upper middle class workers.
  • There is no such thing a tax loophole. Every part of the IRC is there for a reason good or bad.

While the wealthy receive all the attention, because of that scrutiny and the high likelihood of an audit, they are least likely to commit tax evasion. That distinction falls to average Americans, especially those who work in businesses that deal with cash. Ever hear of “under the table?” Why do you think some businesses don’t take credit cards or are willing to “waive” the sales tax if you pay cash or make a check out to the individual and not the business?

Finally, keep in mind that nearly 44% of Americans pay no income tax because they are lower income or have deductions or losses to offset taxable income.

18 comments

  1. Tax code complexity begets the underground economy – and a whole lotta tax cheaters. If Trump filed his taxes and if he made it past the IRS auditors, then obviously, the issue is the tax code, not that Trump took advantage of it.
    https://www.investopedia.com/articles/markets/032916/how-big-underground-economy-america.asp

    Argues for a flat tax, a la Social Security taxes, without graduated rates – so as to capture more of the underground economy and to add a semblance of equity to the process – where similarly situated people pay the same amount and differently situated people pay different amounts. In the 1970’s, I always used the example of Nelson Rockefeller, and when marginal tax rates were higher, I would ask why does the government subsidize his wife more than mine?

    From an International Monetary Fund (IMF) study across nations and their tax systems: “Countries with relatively low tax rates, fewer laws and regulations, and a well-established rule of law tend to have smaller shadow economies.”

    If you want equity and “fairness” (treating me as I think I should be treated, not treating me relative to how others are treated), the options are clear, and the villains are as well (Congress writes the tax laws as they deem necessary to buy your vote).

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  2. You are totally missing or ignoring the point, Mr. Quinn. The fact that those were Trump’s tax records is FAR from irrelevant! Point #1: Trump is a complete failure as a business man. Point #2: His massive $421,000,000 indebtedness is a grave national security issue! We know that US banks stopped lending Trump money years ago because he was a financial failure and the risk was too high. Trump’s own son bragged that they could get all the money they needed from Russia. That is a matter of public record. The information didn’t tell us who Trump is indebted to, but Trump’s foreign policy actions and statements while he has been in office strongly indicate that he is indebted to Saudi Arabia and to Deutsche Bank laundering money from Russian oligarchs. If you have to ask what foreign policy actions and statement I am referring to, you won’t understand the answer. Trump is financially compromised personally to at least Russia and Saudi Arabia and perhaps Turkey and that poses a huge national security threat to our nation!

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    1. Please name one politician who isn’t indebit to somebody else. The office of the president only pays $400k. But in 2016, the total cost for that election cycle was $6.5 billion (congress included). Somebody bought a lot of politicians. How is it that after the politicians leave Washington, they are millionaires? Trump is no different than any other hedge fund. He spent other people’s money.

      Now would I do business with him? No. But do I want the Left in charge of my civil rights and to have them tax me? NO. Once again there little choice on who to vote for because the media and the parties pick who stays relevant in the primaries.

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    2. The point of the article was not Trumps business dealing but his taxes. The point was to point out that paying $750 was not illegal. Frankly don’t be so sure any of this means business failure and who cares anyway. I am more concerned about that state of the finances of members of Congress, many of whom are far in debt and several having a negative net worth, both making them highly susceptible to influence which is rampant.

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      1. No argument there, but Congress isn’t trying to weaken NATO to please Putin – Congress isn’t selling arms to Saudi Arabia against the will of Congress and Congress didn’t withdraw our troops from Syria and let our Kurdish allies get slaughtered to please Erdogan of Turkey – I could write pages more, but you get the idea I am certain.

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    3. Wilson – Term Limits? There are already term limits, run someone new during the primaries and you can replace any and all of Congress. But, the problem is idiots who vote the party ticket and not for who is the best to hold the office allows over 90% to get reelected. And do you really think the political elite in Congress would ever pass a term limits bill or that the SCOTUS would rule that it is Constitutional. Sure Trump has problems, but what about Biden, His son’s investment company took 1.5 Billion from the BOC controlled by the Chinese Government. Democrat presidential candidate Joe Biden delivered a speech in Macomb County, Michigan, on Wednesday, slamming the practice of outsourcing. Unmentioned was his son Hunter’s ties to a Chinese government acquisition of a Michigan company that is delivering jobs to China, Mexico, Europe, and South America. Hunter Biden, the youngest son of former Vice President Joe Biden, appears to have kept his ten percent stake in an international private equity firm with ties to the Chinese government, months after resigning from the company’s board of directors. What about Hunter’s involvement with the Ukrainian gas company, $80,000 per month with no experience in the natural gas business? Why do so many politicians enrich their family and friends while working for government? That is the question you should be asking, not believing the biased media reports of Trump bad, Biden good. They are both bad in many ways, but at least Trump is giving his Presidential salary to charity, I do not think Biden would do that.

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      1. If Trump really is giving his salary to charity, which is doubtful; he won’t miss it because Ivanka, Jared, Donny Jr. and Eric are grifting and scamming the American taxpayers for millions of dollars each month that this fraud remains in office. Our doctors and nurses are woefully short of PPE still today because Jared intercepted shipments to state governors and sold it to other nations.
        BREAKING NEWS: Trump didn’t allow anyone to be included in his meeting with Putin in Helsinki because he didn’t want to be photographed wearing knee pads.

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  3. I don’t care about Trump’s taxes anymore than I care about your taxes. I only care about how little taxes I must pay and still be legal. End of story.

    As you pointed, the tax code is very complex and congress made that way. Every tax season you hear of horror stories of where someone calls the IRS three times and gets three different answers. If it wasn’t complicated, there won’t be a need for an army of accountants and tax lawyers going to court to figure out the tax laws. Even during the current pandemic you saw the big accounting houses and trade groups trying to explain the various tax implications of the stimulus packages only to have the IRS “clarify” their own rules.

    If American had a simple tax code of one line that say you paid a flat tax on your income, I am sure within one term of Congress that would be turned into a book long full of exceptions and definitions of what income is.

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      1. Can’t say about the apathy. Ignorance is being taught in public school and colleges. What people don’t know about America and world history is scary. We are doom to repeat history.

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