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Presidential tax-paying and public trust: Why fairness matters to Americans

Why We Wrote This

As our senior Washington correspondent notes, how presidents treat their tax obligations as citizens can symbolize their character and their attitudes toward the business of American government as a whole.

Mary Altaffer/AP/FILE
Demonstrators participate in a march and rally in New York to demand President Donald Trump release his tax returns on April 15, 2017.

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Paying taxes is something voters – taxpayers themselves – watch critically and can relate to and understand. After all, the entire system rests crucially on self-assessments. Few returns are audited. Most Americans are willing to pay their fair share if they think others are (roughly) paying a fair share, too. Blatant cheating at the top can collapse this agreement. Look at Greece, where widespread political corruption has fed a culture of tax avoidance that costs the government revenues equal to 6 to 9 percent of the country’s GDP. This is the context for The New York Times’s massive investigation of the “tax schemes” President Trump participated in during the 1990s – actions that included instances of fraud, and greatly increased the fortune Mr. Trump received from his parents, according to the Times. Richard Nixon’s experience is a good case study in the reaction of voters to perceived manipulation of the tax system by high-ranking US politicians. “Make sure you pay your taxes. Otherwise you can get in a lot of trouble,” he told journalist David Frost in one of their famous post-presidential interviews.

Richard Nixon released his tax returns to try and prove he wasn’t a crook. It didn’t work out, quite – the numbers showed he’d taken big deductions that looked bad in the light of day.

Jimmy Carter released his full tax returns to bolster his image as a plain man of the people. They revealed his biggest assets as a family peanut business and a small amount of stock, both of which he put in blind trusts when he won.

George H.W. Bush released his tax returns because that was the political norm by the time he became president. They showed he was rich – but also generous, as he and first lady Barbara Bush donated 62 percent of their $1.3 million income to charity in 1991.

Gerald Herbert/AP/FILE
Copies of President George W. Bush's and first lady Laura Bush's 2005 tax returns, provided by the White House, are shown in Washington on April 14, 2006.

How presidents treat their tax obligations as citizens can symbolize their character and their attitudes toward the business of American government as a whole.

It is also something voters – taxpayers themselves – watch critically, and can relate to and understand. After all, the entire United States tax system rests crucially on self-assessments. Few returns are audited. Most Americans are willing to pay their fair share if they think others are (roughly) paying a fair share too.

Blatant tax cheating at the top can collapse this agreement. Look at Greece, where widespread political corruption has fed a culture of tax avoidance that costs the government revenues equal to 6 to 9 percent of the country’s gross domestic product.

This is the context for The New York Times’ massive investigation of the “tax schemes” President Trump participated in during the 1990s – actions that included instances of “outright fraud,” and greatly increased the fortune Mr. Trump received from his parents, according to the Times.

According to John Dean, who was Nixon’s White House counsel and is now often critical of Trump, it may take a while for the details of the Times report to register with voters, but it won’t be good for the president when they do.

“Nixon did not have Trump’s wealth but most Americans felt his tax cheating was bad ... Few Americans want a tax cheat as President,” Mr. Dean tweeted in the wake of the Times report.

Nixon’s experience is in fact a good case study in the reaction of voters to perceived manipulation of the tax system by high-ranking US politicians.

In November 1973, Nixon was trying to get the press off the developing Watergate scandal and the “Saturday Night Massacre” of Oct. 20, in which the president fired special prosecutor Archibald Cox and the attorney general and deputy attorney general resigned rather than be parties to that action.

Some limited candor might help, Nixon and his advisers thought. So on Nov. 17, 1973, the president held a question-and-answer session with newspaper editors at Disney World. Dogged by queries about his personal finances, Nixon fought back, saying he’d earned every cent received in public service.

“People have got to know whether or not their president is a crook. Well, I am not a crook,” Nixon said.

Days later he released his tax returns to try and prove this point. The documents did quiet some of the wilder charges against him, such as questions about the financing of his houses and suspicion that he was financially tied to billionaire Howard Hughes. But they showed that Nixon had made aggressive use of deductions, and paid relatively little in income taxes. In particular, Nixon had claimed a $576,000 deduction based on the perceived value of a charitable donation of his vice-presidential papers.

The deduction itself was legal at the time – Dwight Eisenhower had taken a similar course of action. But Nixon had wrongly backdated the timing of the donation. An investigation showed he owed a considerable amount in back taxes, which he paid.

Nixon lost the presidency because of his actions regarding Watergate. But the tax issue left a stain he couldn’t scrub off.

“Make sure you pay your taxes. Otherwise you can get in a lot of trouble,” he told journalist David Frost in one of their famous post-presidency interviews.

As for Trump, the tax issues involved are more complicated, and involve far larger sums of money. No president has been as wealthy as Trump. For that reason alone, the Times investigation is in unexplored American territory.

The paper describes some of the moves to evade estate taxes as “fraud.” Other aspects of Trump’s taxes might just be aggressive moves typical of wealthy Americans. As the response by Trump’s lawyer has noted, the Internal Revenue Service appears to have approved all Trump family tax returns at the time.

The most stinging aspect of the report, for the president, might be its assertion that he received at least $413 million from his father’s real estate empire over the years – calling into question his personal branding as a self-made building baron.

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