It is tempting for critics of Donald Trump to react to the New York Times bombshell article by accusing Trump of tax evasion, which is a crime. And it’s equally tempting for his defenders to insist that all he did was use legal avoidance techniques, available to anyone. The truth likely lies somewhere in the middle. But the president’s sheer volume of legally dubious tax positions poses an insidious threat to the rule of law.
The Times was careful to not accuse Trump of tax evasion. Proving criminal tax fraud, the kind that took down Al Capone, is extremely difficult. But respect for the rule of law is more than simply avoiding criminal behavior. It means abiding by our societal responsibilities without trying to game the system.
The Times documents numerous questionable positions, ranging from (relatively) small amounts to millions of dollars. Some of these are easy to follow and almost laughable, such as the $70,000 for hairstyling during Trump’s “Apprentice” years. The Internal Revenue Service and courts have repeatedly stated that personal grooming expenses are not deductible, even when required by an employer. When a Marine pays a barber for a haircut to comply with military rules, he cannot deduct it.
The president sets an insulting and dangerous example when he does so. He brags that he is “smart” for avoiding taxes. But all he does is take risks that ordinary Americans, who cannot afford aggressive advisers and attorneys who can fight the IRS, can’t expose themselves to. He acts like there are two different tax codes, one for the rich and one for everyone else.
Several other dubious positions jump out. Business owners can deduct litigation expenses related to their business, for instance a trademark dispute, but not the costs of running for office. Trump appears to have done just that, deducting expenses associated with the investigation of Russian contacts during the 2016 campaign.
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Under Trump’s signature 2017 tax cuts, individuals may only deduct $10,000 in state and local taxes a year, while business owners face no such limits. Since 2014, he has deducted $2.2 million on Seven Springs, a 200-acre country estate, by claiming he owns it solely for investment purposes. Nevertheless, a Trump website describes the estate as a “retreat for the family” and his sons have referred to it as “our compound.”
Suspicion also mars Trump’s deduction of $26 million in consulting fees. In some cases, third parties who worked on his projects cannot recall any outside consultants. In others, the fees appear to have gone to his daughter Ivanka Trump, who double dipped by also taking a salary from the Trump Organization for her work on the projects. It is hard to tell what tax play motivated treating these transfers as consulting fees, but the Internal Revenue Service has repeatedly challenged taxpayers who try similar tactics.
His attorneys would likely argue his positions, including the more complicated million dollar items, are plausible enough that he is not engaging in illegal tax evasion. Perhaps one can argue whether incurring civil tax penalties instead of criminal charges would mean that Trump still “broke the law” even if he did not “commit a crime.” But to the millions of working Americans who pay their taxes each year without trying to see what they can get away with, this is a distinction without a difference.
As president, Trump is the chief law enforcement officer of the United States. Following the tax law should mean more than complying with it by adopting an aggressively watered-down interpretation of his responsibilities. It should mean complying with the full spirit of the law. Jimmy Carter understood this so well that he voluntarily contributed $6,000 to the Treasury after he owed nothing for the tax year 1977. And according to tax historian Joseph Thorndike, that was after searching “long and hard” for a way to pay something.
Instead, Trump continues to search long and hard for just-plausible-enough ways to push the limits of the tax law. The Times article makes crystal clear that he has spent the last two decades trying to see just how far he could bend the boundaries of the tax law without breaking them. Time and again, Trump has taken exceptionally aggressive positions, thumbing his nose at working Americans who do their best to file their taxes accurately and pay what they owe.
In doing so, he implicitly encourages others to game the system and makes Americans doubt whether the laws of this country apply equally to all. For a president, stretching the rule of law until it breaks is just as dangerous as flouting it criminally.
Miranda Perry Fleischer is a professor who focuses on federal tax law with University of San Diego Law School and member of Checks and Balances.