Saturday, April 26, 2008

Tax Hypocrites.


Consider, for instance, the tax returns of Franklin D. Roosevelt. The returns were not released during FDR's presidency, but had they been, they would have proved an embarrassment. Tax Analysts has recently acquired from the National Archives copies of the tax returns that Roosevelt filed between 1913 and 1937. And as a group, they reveal something striking: Roosevelt -- a vicious and moralistic scourge of tax avoiders everywhere -- had a penchant for minimizing his own taxes.


Throughout his 12 years in office, Roosevelt was a frequent critic of Americans who tried to avoid taxes, even using legal means. "Mr. Justice Holmes said, 'Taxes are what we pay for a civilized society,'" Roosevelt told Congress in 1937. "Too many individuals, however, want the civilization at a discount."


Roosevelt reserved special scorn for the "clever little schemes" devised by tax lawyers, insisting that they posed a threat to the tax system, and even to society as a whole. "In this immediate problem the decency of American morals is involved," he declared. "The example of successful tax dodging by a minority of very rich individuals breeds efforts by other people to dodge other laws as well as tax laws."


Roosevelt's 1937 message on tax avoidance decried a variety of popular techniques, including the use of overseas and domestic personal holding companies, the creation of multiple trusts for the support of family members, and the incorporation of money-losing country estates and personal yachts.


Such bombast carried the day in 1937, when FDR pushed a tax bill through Congress that tried to eliminate some of the more glaring loopholes. Other high points in Rooseveltian tax policy -- including the Wealth Tax Act of 1935, the undistributed profits tax of 1936, and the tax bill veto of 1944 -- were also rooted in a conviction that rich Americans were gaming the tax laws.


But Roosevelt's tax returns reveal him to be something of a hypocrite. At various points, both before and after his election to the White House, he indulged in the sort of tax avoidance that he claimed to find so objectionable.

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