C'mon, didn't everyone evade taxes in their youth?

Published on Thursday, 4 October 2018 19:03
Written by Daniel W. Drezner

I am outraged - OUTRAGED! - at recent stories talking about Brett Kavanaugh’s youthful indiscretions as if they are all so bad. I mean, that New York Times story about Kavanaugh being involved in a bar fight? Who hasn’t done this?

And now the New York Times is going after President Trump for - get this - not paying so much in taxes:

“The Times’s investigation, based on a vast trove of confidential tax returns and financial records, reveals that Mr. Trump received the equivalent today of at least $413 million from his father’s real estate empire, starting when he was a toddler and continuing to this day.

“Much of this money came to Mr. Trump because he helped his parents dodge taxes. He and his siblings set up a sham corporation to disguise millions of dollars in gifts from their parents, records and interviews show. Records indicate that Mr. Trump helped his father take improper tax deductions worth millions more. He also helped formulate a strategy to undervalue his parents’ real estate holdings by hundreds of millions of dollars on tax returns, sharply reducing the tax bill when those properties were transferred to him and his siblings. ...

“By age 3, Mr. Trump was earning $200,000 a year in today’s dollars from his father’s empire. He was a millionaire by age 8. By the time he was 17, his father had given him part ownership of a 52-unit apartment building. Soon after Mr. Trump graduated from college, he was receiving the equivalent of $1 million a year from his father. The money increased with the years, to more than $5 million annually in his 40s and 50s.”

Already The Washington Post’s Philip Bump is arguing that the Times story punctures one of the most important elements of Trump’s self--mythology - that he earned his millions through hard work and business savvy.

This is so typical of the New York Times. It did not bother to ask ordinary Americans whether they, too, had engaged in tax avoidance. I have set up dozens of tax avoidance schemes - ask the guys I grew up with. I don’t know one guy, including myself, who wasn’t setting up tax shelters in high school.

Back in the day, I remember hanging out with my high school friends - I don’t remember their real names, but their nicknames were Short Form, Rothy, 1040EZ, and the Itemizer. We used to hang out at Rothy’s place after school. We would grab some extra tax forms from the post office and practice itemizing our deductions. dreaming about how we’d devise our own offshore anonymous shell corporations when we grew up. I just checked my old calendar - which I declared as an expense in 1987 - and it reminded me about those good old days, when my buds would come over and we would pore over the Internal Revenue Code before summer camp started.

I was the one who would organize Shelter Week. We would go down to the Connecticut shore and rent a house for the week. The person who ginned up the most bogus story about how the house rental was really an act of charitable giving didn’t have to pay any rent.

When I went to college, I could not wait to take my first course in tax avoidance. You never forget your first tax shelter. My friends and I studied hard, partied hard but avoided paying taxes the hardest. We all came from good families, which meant we did whatever was necessary to lower our families’ overall tax obligations.

I liked tax avoidance. Sometimes I liked tax avoidance too much, but I never knowingly engaged in tax evasion. I knew there was a line, and while roughhousing a 1040 form was one thing, abusing it was another. There would have been consequences. Back in my youth, the IRS wasn’t the toothless enforcer it is now. Avoiding taxes in the 1980s meant you were a man; evading taxes meant that Ronald Reagan would personally come after me.

The day after I graduated from college I set up my first anonymous shell corporation in the Cayman Islands. All my college friends did the same - Rothy, the Schwabmeister, Mr. Refund, Richie Richster and Donald Trump Jr. We were struggling tax avoiders, without that much cash on hand, because it was tied up in some offshore special purpose vehicles that had to stay off-book. But those were great times, because we were confident that, once our parents died, that we would inherit massive amounts of wealth.

As an adult, I now rely on my lawyers and accountants to ensure that I avoid and not evade taxes. It is easy in 2018 to draw the wrong the conclusions about such youthful shenanigans. Some of the nicknames we developed especially for this activity would probably sound strange to modern ears. A “Devil’s Triangle” means that you had confused geography and opened up an offshore account in the British Virgin Islands rather than the Caymans. “Spanking the Monkey” meant that you listed your pet chimp as a legal dependent. And “Rogering Lady Liberty” just meant that you had gotten really good at the tax evasion - I mean, avoidance, not evasion - game.

This is a scary time for young men who might have fiddled with their taxes. It’s a great time for dames, because there is no way they could have gotten their pretty little heads around the tax accounting arcana. I just hope that ordinary Americans realize that Donald Trump is just like ordinary Americans. Because, in my elite experience, most ordinary Americans go to prep school and have a net worth exceeding seven figures by the age of 18.

Daniel Drezner is a professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University.



Posted in The Bristol Press, Column on Thursday, 4 October 2018 19:03. Updated: Thursday, 4 October 2018 19:05.