News Item
"Vice" featured Pace University's Haub Law School Professor Bridget Crawford in "Trump's America Is a Great Place to Cheat on Taxes"
Last week, the New York Times released the most comprehensive look into Donald Trump's financial history ever compiled. Not only did it debunk the president's oft-repeated etiological myth about having only received a $1 million loan from his dad, Fred, which he later had to pay back with interest—it showed how the father-son team systematically cheated on taxes.
Though the Times published a couple of TL;DRs of its own 13,000-word article, here is an even more condensed version: Trump was a millionaire by the time he was eight, in part because his father made him a banker or a landlord on various building projects. His family also used grantor-retained annuity trusts (GRATS) and a fake company called All County Building Supply & Maintenance to ultimately transfer more than $1 billion in wealth to their kids. All of this should have led to a tax bill of about $550 million, but they only paid $52.2 million. (The Trumps also had a tendency to devalue or inflate the value of properties based on their needs, chipping away even more at what little they paid the government.)
The extent to which elites play by their own rules is an old story, one perhaps most glaringly revealed back in 2016, when the so-called Panama Papers leaked. That trove of documents showed how seemingly every 1 percenter in the world was stashing wealth in shell companies created by a now-notorious law firm called Mossack Fonseca, leaving it up to the other 99 percent to pay a disproportionate amount in taxes. The following year, a sort of sequel came in the form of the Paradise Papers scoop implicating more than 120 politicians from around the world in similar schemes of quasi-legal tax avoidance.
But the new Times piece, and the massive amount of documents it relied upon, suggested the best way to grift the government might not be by offshoring (or often legal tax avoidance) at all, but rather by engaging in a series of bald-faced crimes (a.k.a. tax evasion) and hoping the government didn't catch you. Conversations with tax lawyers and experts suggested offshoring remains a huge and sprawling problem that governments need to rein in, and it's worth remembering that Trump's name was sprinkled throughout the Panama Papers. But straight-up tax evasion that doesn't involve tropical locales is an incredible drag on the system in its own right.
"As to which problem is 'bigger,' it is difficult to say without further research, but in terms of sheer number of people involved, I think one would find more non-compliant taxpayers right under the nose of Uncle Sam than basking in a tax haven like the Cayman Islands," Bridget Crawford, a scholar of taxation at Pace University Law School, told me.
Crawford, who described herself as a "classic lefty liberal lawyer" with 25 years of experience giving advice to wealthy families, said that—despite being loathe to admit it—a lot of what was outlined in the Times's expose has tended to be relatively common for the country's elites.
"The notion of creating a partnership with your children, for example, rich families do that all the time to transfer wealth from one another," she said. "That's kind of plain vanilla estate planning for the ultra wealthy."
More galling, she said, was the systematic underreporting of gifts and the invention of the All County company, perhaps the wildest revelation in the Trump expose. Crawford suggested the Trumps got away with all of this in no small part because the IRS simply hasn't been equipped to catch every bad actor. The wealthy know this, and often gamble on it.
"Rich people often call that playing the audit lottery," she said.
This is not likely to get better any time soon. With the rise of the Tea Party, the IRS became an even more politicized entity with mainstream Republicans like Ted Cruz calling to abolish it. And in February, Trump appointed tax lawyer Charles Rettig as head of the agency—a move nonprofit news service DCReport called tantamount to "making El Chapo head of the DEA" because his claim to fame was defending people in court accused of doing some of the very same things Trump's family did.
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