All the Presidents' Taxes: What We Can Learn (and Borrow) from the High-Stakes World of Presidential Tax-Paying

By Charles Renwick

Show us the presidents' tax returns! 

Of course we want to hold public officials accountable for paying their fair share. But just as importantly, we want to see how the

• Language: English
• Publisher: Lioncrest Publishing
• Release date: Feb 28, 2023
• ISBN: 9781544539386

Charles Renwick

Charles Renwick, CFA, CPA is the managing director of CMR Associates and serves as the CFO for multiple clients. He focuses on business tax strategies and management. He started his accounting career at E&Y. Charles is a graduate of the University of Georgia with degrees in accounting, economics, and political science. He is a member of multiple community organizations and is an active member of the Louisiana Society of CPAs.Charles and his wife, Lauren, live in Covington, Louisiana. In his free time, Charles enjoys watching his kids play youth sports and reading and writing about history, politics, and taxes.

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Copyright © 2023 Charles Renwick

All rights reserved.

All the Presidents’ Taxes: What We Can Learn (and Borrow) from the High-Stakes World of Presidential Tax-Paying

First Edition

Hardcover ISBN: 978-1-5445-3940-9

Paperback ISBN: 978-1-5445-3939-3

Ebook ISBN: 978-1-5445-3938-6

Audiobook ISBN: 978-1-5445-4024-5

To the future generation of voting taxpayers.

Contents

Introduction

Part One: American Taxes 101

Chapter 1: A Brief History of Taxes in the United States

Chapter 2: Show Us the Presidents’ Taxes

Chapter 3: Nuance in Tax Code

Chapter 4: Avoiding Taxes versus Tax Evasion

Part Two: Presidential Tax Strategies

Chapter 5: President Biden’s S-Corp Strategy

Chapter 6: President Trump’s Business Expense Strategy

Chapter 7: President Trump’s Strategy of Paying Family Members

Chapter 8: President Trump’s Real Estate Tax Strategy

Chapter 9: Fringe Benefits

Chapter 10: Avoiding the Death (Estate) Tax

Conclusion

Acknowledgments

About the Author

Introduction

President Richard Nixon was once quoted as saying, Make sure you pay your taxes; otherwise you can get in a lot of trouble.

Maybe he should have followed his own advice.

In 1973, President Nixon started to get into tax problems and was the first president to draw heated scrutiny from Congress and the public over his tax strategy. While the enormity of the Watergate scandal completely overshadowed his tax scandal, the tax scandal was politically explosive in and of itself.

Questions first started with the timing and appropriateness of his purported charitable donation of presidential papers. For a long period of time, presidents owned all of the papers that they created while they were in office, such as correspondence, personal records, and official records, even though they were created while fulfilling a publicly elected responsibility. They would donate these papers to the archives of their presidential library, which qualified as a charitable donation—and therefore counted as a tax deduction.

Charitable donations are tax deductible with certain limitations, and they get complicated when the donation is something other than cash. There are specific rules when it comes to nonmonetary donations because their value can be manipulated. In response to the dubious ethics of this tradition, Congress passed the Tax Reform Act of 1969, which limited the presidential paper donation to the cost of the paper for any donations made after July 25, 1969, effectively eliminating it.

Even though the law would go into effect in a few months, and Congress had taken a stance indicating the practice was problematic and illegitimate, President Nixon decided to donate his papers before the deadline to reap the benefits of the tax deduction.

In the spring of that year, he donated more than a thousand boxes of papers and claimed a deduction of $576,000. If that sounds like a lot of money to you for some papers, you’re not alone. It was a lot of money, especially for 1969. Adjusted for inflation, in 2022 this would be approximately $4,523,660.62!

Even though Nixon donated the papers before the deadline, attention shifted to whether or not the papers were really worth over half a million dollars and how that valuation was determined. In the nation’s mind, those papers already belonged to the general public. Because the president is a public official, the sentiment was that he took a deduction for something he arguably didn’t own in the first place that was a construct of his elected position and therefore paid for by the public.

Not surprisingly, people started asking questions. A public interest law firm published an article claiming that any deduction President Nixon took would have been inappropriate. The media caught on, the IRS commissioner weighed in, and Congress called for an independent audit. Of course, the White House argued the allegations were unfounded. The White House released a letter from President Nixon’s attorney stating that all deductions made were valid—and this acknowledgment just added fuel to the fire, as did President Nixon’s poor management of the situation.

A news organization published a claim that President Nixon paid little to no taxes in 1970, and another chimed in to say that if he did pay little to no taxes, he paid less than the average working family. Shortly thereafter, some specific numbers leaked claiming that President Nixon only paid $792.81 in federal income tax in 1970 (approximately $6,000 adjusted for 2022 inflation).

In response to mounting pressure from the public and media, President Nixon confidently submitted his tax returns from 1969 through 1972 to Congress for review. To his credit, this is something no one had done before.

Congress tasked a special committee called the Joint Committee on Internal Revenue Taxation (JCIRT) to make a fair assessment of President Nixon’s tax returns. Despite his confidence, the JCIRT concluded that the president seriously underpaid his taxes and that he actually owed the government $476,431 in unpaid taxes, penalties, and interest (more than $3.7 million adjusted for 2022 inflation).

President Nixon claimed that an independent appraiser had valued his papers at $576,000 and that the deduction was so large that it became subject to various carryover provisions and therefore was taken over a period of years. In their April 1974 report, however, the JCIRT sidestepped the alarming valuation concern and instead found issues with technicalities, such as papers signed with the incorrect date, and disallowed 100 percent of the charitable donation of his presidential papers.

To make matters worse, the JCIRT also found that President Nixon had failed to properly report capital gains on the sale of various real estate assets.

In the end, President Nixon agreed to pay the full outstanding amount calculated by the JCIRT—with the exception of some penalties and interest that were outside of the statute of limitations, so the final amount ended up being $432,000 ($3.4 million adjusted for 2022 inflation).

And things only got worse for him moving forward. President Nixon limped from one crisis to another. Eight months after submitting his taxes to Congress, President Nixon resigned from office, the first president of the United States ever to do so.

Timeline of President Nixon’s Fall

May 1973: Watergate Special Prosecutor Archibald Cox was appointed.

October 1973: Vice President Spiro Agnew resigned, and Gerald Ford was nominated to replace him.

October 1973: Saturday Night Massacre took place (when President Nixon fired Special Prosecutor Archibald Cox and accepted the resignations of Attorney General Elliot Richardson and Deputy Attorney General William Ruckelshaus).

December 1973: President Nixon handed over his taxes to Congress.

March 1974: Watergate Seven were indicted.

April 4, 1974: JCIRT released report/findings.

April 5, 1974: Dwight Chapin (a Nixon aide) was convicted of lying to a Grand Jury.

April 16, 1974: Subpoena was issued for White House tapes.

June 15, 1974: All the President’s Men was published by the two Washington Post journalists who broke the Watergate story, Carl Bernstein and Bob Woodward.

August 1974: President Nixon resigned.

A Landmark Moment

Although President Nixon’s tax scandal pales in comparison to Watergate, it definitely altered public opinion on wanting transparency when it comes to those running for president. It was a landmark moment for the public perception of presidents and afterward created the tradition of presidents releasing their tax returns to prove their fitness for office. The media also realized that the onus was on them to ask the tough questions because they have the responsibility to hold elected officials accountable. Today, scrutinizing presidential tax returns is an established precedent in our democratic process.

So why, then, didn’t President Donald Trump release his tax returns? What was the outrage when Mitt Romney released his in 2012? What were the problems with John Kerry’s in 2004 and Ted Cruz’s in 2016? And why did President Jimmy Carter make an arbitrary tax payment in 1976? We’ll tackle these questions, and more, in the pages that follow.

But first, let’s take a deeper look at why the public now expects presidential candidates to publish their tax returns—and why I want them to publish their tax returns, too!

The Five Questions

When it comes to the public, innocent until proven guilty doesn’t apply to presidential taxes. If anything, silence raises more questions, and the nation will keep pushing until they know the truth about their elected frontman.

Taxes are a crucial window into a candidate’s motivations hidden behind their carefully crafted public image for the sake of a campaign. Questions about tax strategy might not seem as important as international policy or views on social rights, but taxes give us insight into the dealings and ethics of presidential candidates and help the public determine if that candidate is trustworthy enough to lead the country, make major decisions, and change the course of history.

Although presidential candidates are not required by law to publicize their tax returns, the public expects candidates to release them because tax returns help answer important questions that speak to the candidate’s fitness for office. Specifically, taxes help answer four important questions:

Are they a cheater? Cheaters are generally disqualified by the public on the basis of dishonesty.

Is there a conflict of interest? Identifying conflicts of interest determines if the president can be trusted to make policy that truly benefits the American public or if they are misusing their power for personal gain.

Are they paying their fair share? America was founded on the principle of fairness, and deliberating fair tax practices helps the public decide if the president is worthy of being the head of a democracy.

Do they have any foreign business dealings? Foreign business dealings, like conflicts of interest, must be investigated to ensure a candidate is fully committed to representing the interests of our country or if they’re inclined to further the affairs of a foreign country.

These are salient concerns, and publishing tax returns allows the public to answer (or get closer to answering) these questions.¹ But there’s a fifth question we need to ask that is the driving force behind this book:

5. What can we learn and borrow from them? We know that presidents use sophisticated accountants and attorneys to structure their taxes, so what insights can we glean from their tax returns to benefit ourselves?

That’s what I aim to answer with this book.

Don’t Knock Them; Copy Them

Even though taxes are complex, people like reading stories that have been reduced to simple concepts. For example, in a September 2020 article, the New York Times reduced multiple years of President Trump’s taxes to a simple headline, Long Concealed Records Show Trump’s Chronic Losses and Years of Tax Avoidance, but it’s unlikely that this is the full story.

Although the media is a business of viewership, and sensational headlines get more attention, you still may feel frustrated, or even angry, that President Trump and rich people like him potentially don’t pay much in taxes. Here you are, doing your civic duty in paying your fair share of taxes, but with reports of certain politicians getting major tax breaks and exploiting loopholes, it sure doesn’t look like they are paying their fair share.

According to the IRS and our tax code, however, they are.

The wealthy, elite, and elected generally pay considerable taxes but also understand the concepts of how to legally pay as little tax as possible. Saving money on your taxes is not sleazy or dishonest—despite what the media says in their often biased articles.

The good news is that you don’t have to be in the Oval Office to use the same tax strategies that presidents have used. These tools are for you whether you make $50,000 a year or more than $1,000,000. If our highest elected officials