STUMP » Articles » Taxing Tuesday: Shenanigans! Illegality! Something! » 9 October 2018, 03:02

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Taxing Tuesday: Shenanigans! Illegality! Something!  

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9 October 2018, 03:02

Today is going to be about shirking one’s taxes, a great American pastime. I actually learned of both of these while doing the prior Taxing Tuesday post – I allowed in tweets on Trump, but let others go.

Time to look at the supposed fraud, or whatever.

I’ll get to the Trump coverage in a bit, but let’s check who else has some tax shenanigans in the news.

In all these, keep in mind I am not a tax lawyer, and am just reacting from what I consider a common sense point of view.

DELIBERATELY MAKING A PROPERTY UNINHABITABLE TO AVOID TAXES

Game of thrones? Watchdog sees ‘scheme to defraud’ in Pritzker toilet tax break

Cook County’s chief watchdog has concluded that more than $330,000 in property tax breaks and refunds that Democratic gubernatorial candidate J.B. Pritzker received on one of his Gold Coast mansions — in part by removing toilets — constituted a “scheme to defraud.”

Cook County Inspector General Patrick Blanchard also recommends in the confidential report that Cook County should try to recover the money from the billionaire.

Asked whether he would repay his tax savings, Pritzker on Monday afternoon said only, “We’re going to follow whatever the recommendations, whatever it is.”
….
The Chicago Sun-Times reported last year that Pritzker bought the historic mansion next door to his home, let it fall into disrepair — and then argued it was “uninhabitable” to win nearly $230,000 in property tax breaks.

The toilets had been disconnected, and the home had “no functioning bathrooms or kitchen,” according to documents Pritzker’s lawyers filed with Cook County Assessor Joseph Berrios.

But the Sept. 28 inspector general’s report found that Pritzker actually saved more — $331,432.03.

Let’s see. Why did Pritzker buy the building next to his and deliberately disable it?

Sounds like he was expanding his original home in a remodel that would extend where this building was, and it’s not like he wanted to pay taxes on the portion that was unusable. But he wouldn’t be able to tear everything down at once, so he had the bare minimum done to make it clear that he wasn’t living in the other building.

I’m not seeing how this is fraud. He didn’t actually live in the other portion of the house at the time – it really was uninhabited, if nothing else. I assume the assessment went up when the house was again habitable, and had bright, shiny new things to tax in it.

Cook County could have taxed people for vacant or uninhabitable houses, but that’s not their rules, as I understand it. Ok, let’s look at the commentary in the Sun-Times:

“I’ve been saying all along that there are flaws in the property tax system,” Pritzker said. “We followed the rules.”

Pritzker said he has restarted the remodeling project on the house and no longer takes the tax cut for the property being uninhabitable.

Rauner’s campaign said the report “proves what we knew all along — JB Pritzker is a fraud.” Campaign spokesman Will Allison called what Pritzker did “fraudulent tax dodging” and proof that Pritzker “lied to voters.”

I dunno, it sounds legit to me. Keep in mind I do not like Pritzker as a politician, and I can only imagine how bad Illinois finances will get with him as governor (not that Rauner has been able to accomplish much), but this really does sound like hewing to the rules.

Is it really Pritzker’s fault that 1. Cook County has silly property tax rules and 2. Cook County is really desperate for tax money?

Ok, he may have a hand in #2.

Other people’s comments:

Real estate experts say Prizker’s toilet troubles could be criminal

The report contains a subpoenaed email from one contractor to another telling them Pritzker’s wife wants the home made uninhabitable before an appraisal.

“MK [Pritzker’s wife] is now getting back into the task of cleaning up 1431 N. Astor,” read an email from a contractor to another. “She is going to have the house reassessed as an uninhabitable structure. To do this, she would like to have us pull all toilets and cap all toilet lines in the house. Then, after the assessment, she would like us to put the first floor toilet back in and have this as the one functioning bathroom in the place.”

Ah HA!

Okay, now I’m seeing what the fraud is. They made it “uninhabitable” for the few hours when the assessment was done, and then made it re-habitable on the sly.

If only they had kept it uninhabitable during the whole renovation, they wouldn’t have had this problem.

Some other comments:

Greg Hinz at Crain’s: Pritzker’s toilet scandal: Who leaked the report—and how bad is the damage?

Which leads back to the question of who leaked the report. It appears not to be Rauner, since all of those who got the report are Democrats.

Some are speculating that Preckwinkle, who now is running for mayor and could use backing from state Democratic Chairman Mike Madigan, let the report out to weaken Pritzker some in the battle for dominance that’s likely to occur between Madigan and Pritzker next year. Preckwinkle’s office denies that.

That’s the fun of Illinois political battles: it’s almost all Dems whacking each other, which is always good as a spectator sport.

Jim Dey: Phony paper in Pritzker toilet caper dogs campaign

Rich Miller of CapitalFax speculated along similar lines that “Speaker Madigan probably wouldn’t mind a weakened Pritzker.”

Miller, who received a copy of the report, wrote that he “didn’t get it from anyone of the list of senders or recipients” or any of their associates.

“I have no idea how the person who sent me the report obtained it,” said Miller, who said he is “bound (to secrecy) by my word as to how I obtained a copy of it.”

As if that wasn’t enough bad news for Pritzker, Forbes magazine published its list of billionaires this week. It reported Pritzker’s net worth fell from $3.4 billion in 2017 to $3.2 billion in 2018. He’s still ahead of his sister, Penny Pritzker. She’s worth a piddling $2.7 billion.

No wonder he’s had to scrimp on his taxes.

Mark Glennon: Will Federal Indictments Surface In Pritzker’s Toity Bowl Troubles? – Quicktake

An obscure footnote — No 41 — may turnout most important in J.B Prtitzker’s property tax problem.

….
The presumption is that neither the Cook County State’s Attorney nor the Illinois Attorney General would pursue the fraud charges. (They’re both Democrats and this is Illinois.)

And that’s where footnote 41 comes in. It specifies potential federal illegalities — mail fraud and conspiracy — that potentially could be prosecuted by the United States Attorney. Blanchard’s office knows its stuff on these things. Its staff includes very competent, former FBI types.

I’m very annoyed that the use of sending info via U.S. mail makes something a federal case. I know “wire fraud”, etc., but come on. If he did something illegally, it should be in state court.

But I see the “no Dems to be indicted” aspect in Illinois — so, Illinois, make this a state court matter by actually doing something about this other than bafflegab. Bring some kind of charge, even if minor. Being indicted for something has never been a bar to Democrats being successful politicians in Illinois.

One might be a bit wary over whether Pritzker gets to be the next of many Illinois governors to spend some time in the federal pen, but hey. It’s a tradition by now.

SERIOUS TAX ISSUES WITH PRITZKER

All the toilet drama aside, that’s not the serious trouble with Pritzker.

This is: If Pritzker won’t share his tax plan, we Democrats shouldn’t support him

I am very concerned that J.B. Pritzker is demonstrating Donald Trump-like proclivities, an arrogant disdain for the democratic process and the principles of transparency. I hope that the Democratic Party of Evanston will take a strong stand to let the candidate know that we will not accept such disrespect for the voters from the leaders of our party.

The most blatant example of this attitude is how Pritzker and Illinois Speaker of the House Michael Madigan are acting just like President Trump and U.S. Speaker of the House Paul Ryan in a blatant effort to conceal their tax plans from the voters.

…..
Pritzker is acting in the same way, refusing to tell voters the details of his tax plans. Vapid and anodyne assurances that his plan will be “fair” have no more specificity or clarity than promises to make America “great.”

No issue affects Illinois residents more directly than taxes.

I recognize that there really are two issues here: (a) the long-term tax objective of a progressive income tax, and (b) the short-term strategy for the years before any such tax can be implemented in the event a constitutional referendum authorizes a graduated income tax.
…..
The website of J.B. Pritzker does not include taxes among the issues it addresses — not even a vague mention of the progressive tax he favors, let alone the critical details. If you send an email or try to use the website to ask questions, they will not be answered. I know. I have tried repeatedly. It is impossible to even find out where the campaign headquarters are located, let alone communicate with the leaders of the campaign.

The details of the concealed tax plan are what matters — the rates, brackets, deductions, exemptions. There will be winners and losers. Senior citizens like me want to know whether Pritzker intends to preserve the exemption for retirement income. Homeowners want to know what deductions will be allowed for real estate taxes. Parents want to know what exemptions will be available. Everybody wants to know if there will be loopholes for favored interests. Everybody wants to know whether they will be in a tax bracket with a higher or lower rate.

I don’t believe for a minute that Pritzker and Madigan have not thought these things out.

If Pritzker hasn’t, he is not fit to be governor. If he has, but pretends that he hasn’t, he is not telling the truth. If he has ideas but refuses to disclose them, he shows that he has no trust in democracy and scorns the citizens whose votes he seeks.

The piece was by James K. Genden, a lawyer who lives in Evanston, and the full piece was delivered to the Political Committee of the Democratic Party last Thursday.

Here is the reaction by Jane the Actuary:

Separately, an op-ed: “If Pritzker won’t share his tax plan, we Democrats shouldn’t support him,” authored by James K. Genden of the Evanston Democratic Party. Citing the fact that Pritzker refuses to provide any details whatsoever about his tax plan, other than vague claims that it’s solely intended to soak the rich, and referencing Pritzker’s tremendous inherited wealth, and the fact that he has never held public office nor even run a company which required compromise, always only being the absolute owner able to dictate the decisions, he calls for fellow Democrats to demand of Pritzker that he reveal the details of his tax plan.
….
But the reality is that this is wishful thinking. Pritzker is so far ahead of Rauner (the latest polling, from the Illinois Broadcasters Association, shows Pritzker far ahead, at 44% to 27%, with 14% undecided, 10% choosing a minor party candidate, and 4% saying “none of the above,” and Wikipedia’s list of polls shows that this is consistent with past polling as well) that he faces no real risk of losing this election; or, at any rate, I myself have a hard time imagining him losing so many votes on account of the toilet-seat tax-cheat scandal or his refusal to provide details on his tax plan, that Rauner can make up this massive gap.

I agree that the toilet tax drama is going nowhere, and the hidden tax plan is also going to be sprung when Pritzker and Madigan are ready to do so. Neither of those issues will affect the Illinois race.

You can argue they should, but it seems to me that Illinoisians are getting what they ask for. I hope they “enjoy” it.

TRUMPIAN TAX EVASION

I’m writing this well in advance, so this story may have gone somewhere else after this initial post.

Let’s start with something easy: a 11-point summary from the NYT.

I’m not going to address all 11 items. Let me pick the ones I find most interesting.

The Trumps’ tax maneuvers show a pattern of deception, tax experts say

The line between legal tax avoidance and illegal tax evasion is often murky, and there is no shortage of clever tax-avoidance tricks that have been blessed by either the courts or the Internal Revenue Service itself; the wealthiest Americans rarely pay anything close to full freight. The Trumps’ tax maneuvers met with little resistance from the I.R.S., The Times found.

That is actually the opposite of interesting. The whole point of complex tax laws is to allow the well-connected to avoid taxes. This has always been the case.

I bet Warren Buffet has to file some extremely complicated taxes, especially if you include the tax returns of the companies he has great involvement in.

Donald Trump began reaping wealth from his father’s real estate empire as a toddler

So, that’s more about Trump’s dad than Trump himself.

But let’s look at this:

But The Times’s investigation makes clear that in every era of Mr. Trump’s life, his finances were deeply entwined with, and dependent on, his father’s wealth. By age 3, he was earning $200,000 a year in today’s dollars from his father’s empire.

Okay, Toddler Trump was “earning” $200,000/year (inflation-adjusted dollars… that was 1949, so let’s inflation adjust it right back: $19,000 in 1949)

So… Toddler Trump was “earning” this money via investments. And then what? It accumulated in his own investments? Did it go to his clothes & toys? Heck if I know.

The point they were trying to make with this item, and the next few, was that Trump got a lot of money from his dad, and wasn’t the big financial success he has made himself out to be. That’s not quite a tax fraud/shenanigans tale (except to try to avoid tax hits for wealth transfer without benefit of trust funds, I suppose).

The Trumps turned an $11 million loan debt into a legally questionable tax write-off

By 1987, Donald Trump’s loan debt to his father had grown to at least $11 million. Had Fred Trump simply forgiven the debt, his son would have owed millions in income taxes. They found another solution — one that appears to constitute both an unreported multimillion-dollar gift and an illegal tax write-off.

That December, records show, Fred Trump spent $15.5 million to buy a 7.5 percent stake in Trump Palace, his son’s condo tower rising on the Upper East Side of Manhattan. Four years later, tax returns and financial statements show, Fred Trump sold that stake for just $10,000. The buyer, other documents indicate, was his son.

According to tax experts, with Trump Palace condos selling briskly, selling shares worth $15.5 million to your son for a mere sliver of that would constitute a multimillion-dollar gift under I.R.S. rules. But Fred Trump’s tax returns show no such gift to Donald Trump. What they do reveal is that he used the transaction to declare an enormous tax write-off. That appears to violate federal tax law that prohibits deducting any loss from the sale or exchange of property between family members.

In all, Fred Trump dodged roughly $8 million in gift taxes and $5 million in income taxes on the transaction.

Look, I understand what the NYT is getting at – this definitely looks like an iffy tax dodge to me.

Remember, I am not a tax lawyer.

The tax dodging here is being done by Fred Trump. I’m not saying Donald Trump is non-complicit – especially not at that age. It’s just that, given that Fred Trump died in 1999, it can be a little late in trying to prosecute Fred Trump’s estate. If you want criminal tax fraud charges – against Fred Trump – you’re gonna have to dig it up.

https://www.youtube.com/watch?v=MRhyu-4b-L8

(That’s one of Stu’s favorite songs. It always makes me laugh.)

Maybe there is something that can be clawed out of Donald Trump?

I mean, the other items I’m reading are about Trump’s parents dodging various taxes, and setting up the estate just like other rich people do via trusts and other stuff. Yes, undervaluing or overvaluing assets to lower the tax hit is, again, iffy, but you really want to be combing through all trusts? Various lawyers would like to talk with you. If you think this would stop with Trump… yeajh, I don’t think so.

Last item:

Donald Trump got a windfall when the empire was sold. But he may have left money on the table.
In 2003, once again in financial trouble, Donald Trump began engineering the sale of the empire Fred Trump had hoped would never leave the family. The sale, completed in 2004, brought him his biggest payday ever from his father: His cut was $177.3 million, or $236.2 million in today’s dollars. But as it turned out, banks at the time valued the empire at hundreds of millions more than the sale price. Donald Trump, master dealmaker, had sold low.

And…

Seriously, I have no clue about this one. Who did he sell to? If the banks valued it higher than that, they could have made a bid.

Maybe he sold to Ivanka? I don’t know.

Anyway, I’m sure Trump has the best tax lawyers there are. Fabulous, I tells ya.

via GIPHY

Sounds like NY state is doing its own investigation, though again, if it’s all in Fred Trump’s estate… there may be problems making hay from that. I’ll leave the yelling to the tax lawyers.

The “this time we’ve really got him!” folks need to calm down for a bit. Maybe you got him this time. If you did, there’s no hurry. Just chill. Fire up the lawsuits and court cases when you amass enough evidence – don’t jump before you’re ready.

FWIW, I don’t think the Trump family tax dodges would budge most people from the positions they’ve already taken re: Trump, any more than the pro-Clinton folks were that put off about old Bill’s sexual shenanigans. It definitely won’t push people to go vote if all the other stuff going on didn’t do it.

TAX LINKS AND TWEETS

I’ve said what I want to say above.

Let’s give other people their say.

Let’s look at that last one:

What do you remember about this week, 25 years ago? October 1993. Many of us were watching Seinfeld and the first Roseanne or listening to a Mariah Carey cassette on our Walkman.

….
That’s because the federal gas tax is still the same 18.4 cents a gallon for unleaded (23.4 cents a gallon for diesel) that it was when Groundhog Day was playing in theaters 25 years ago. The last time it was raised was Oct. 1, 1993, when the price of gas at the pump averaged just $1.11 a gallon.

Yet over those 25 years, the cost of building and maintaining roads, bridges and transit has shot up, leaving the highway trust fund, which pays the federal portion of highway and transit projects, running on empty.

“The whole reason this tax exists is to keep our roads paved and to keep our bridges from falling down,” says Davis. “And to do that effectively, it needs to collect a sustainable amount of revenue over time to cover the cost of paving roads and maintaining bridges, and it can’t do that if it’s just not updated for decades at a time.”

You can check out the fuel tax history here.

But here’s another problem: people get more miles per gallon now:

I do see the argument to increase use of tolls to pay for roads, as it would be directly tied to use, no matter the gas mileage. A high mileage vehicle wears on the highway, too.

now to tweets:



THERE MIGHT BE A REASON FOR THAT. I mean, wtf were you people screeching about for the last month?


To be fair, tax evasion, etc., like this involves numbers. It’s boring to most people. I mean, I can follow the various shenanigans, but most people don’t want to think about this stuff. I would argue the national debt & entitlements should be a huge political issue, and yet it’s super-quiet about that.

So no, people aren’t going to be chatting about something like this, because it’s far less sexier than screeching about how WE’RE ALL GONNA DIE! with whatever current thing Trump is doing.


Let me see if Frum’s characterization is correct: Dogs Bite Men and Trumps Duck Taxes

If you are the last and perhaps only person in America to believe Donald Trump built his business empire without help from his father, the New York Times has a 14,000-word investigation to disabuse you.

If you thought his genius was for anything other than image management, the piece will doubly help you get up to speed.

Unfortunately, the most interesting revelation is one the Times buries — the astonishing degree to which father Fred Trump patiently financed and strategically connived in the creation of what the paper calls the “Donald Trump myth.” Think Joseph P. Kennedy. There’s even a parallel in the displacement of firstborn son Fred Jr. from his original slot as heir apparent.

In one way excruciatingly detailed by the Times, however, Mr. Trump and his sire are nothing new under the sun. Nobody in their right mind from the compulsive accumulator class pays the punitive federal estate tax. From an early age, such people make sure their lifetime achievements are not sucked up and splattered away in 15 seconds of federal spending. Bill Gates, Jeff Bezos and Mark Zuckerberg, all apparently in the pink of health, have been working for years to shield their assets from the taxman. Sam Walton, the saintly founder of Walmart, in his autobiography advised: “The best way to reduce paying estate taxes is to give your assets away before they appreciate.”

Because politicians find it useful to appease both the envious and the wealthy, the IRS code features both an estate tax and ways to avoid it. A loophole the Times accuses the Trumps of using is a so-called grantor-retained annuity trust, described as “one of the tax code’s great gifts to the ultrawealthy.” Unsurprisingly, it also happens to be a favorite of the Sulzberger family, which owns the New York Times.
….
Also, let’s note an important underpinning of many such newspaper investigations. Journalists are as unlikely as the next person to adhere rigidly to the law in their driving habits, their use of pharmaceuticals, their failure to procure a valid fishing license.

But as a class they do insist on rigid adherence to the law on the part of their subjects for the purpose of writing gotcha exposes. And Mr. Trump is a potential gold mine in this regard twice over, being the most intriguing person on the planet right now and trailing a 40-year history of high-wire personal and business laxity.

So yes, Frum is somewhat correct, but he is missing the point. Here is the point:

Yet the Times also is confused if it believes its tax investigation will finally discredit Mr. Trump once and for all in the eyes of his supporters. The people whose class envy and resentment extends to a desire to despoil the rich at death are not Trump voters but the New York Times’s own upper-middle-class readership. The federal estate tax exemption has been lifted to today’s $11.2 million from $5 million precisely to accommodate these people’s desire to pass along their own justly earned, entirely deserved nest eggs. Meanwhile, anybody who has more to leave is obviously a greedy so-and-so.

And the GRAT, as mentioned, has long been an estate-planning tool, also known as a “loophole” in the press. There have always been ways to dodge estate taxes, and industries with the means of doing that weren’t exactly pleased when the exemption level was increased so much. Dang it, estate planners need to live, too!


Okay, let’s check this one, too.

I had to actually go find the report mentioned (dammit people, link to the report you’re reporting on in your frickin articles) – Special Climate Report: 1.5ºC Is Possible But Requires Unprecedented and Urgent Action — which leads to the report here.

The specific policy action items seem to be in here. I searched on “tax”, and got generic statements, not the actual numbers. I am sure the specific carbon tax goals may be in there somewhere, but I’m not going to work too hard to find this. Especially as this is not going to happen.

This one is funny:


From the linked article:

Republicans have been blasting Andrew Gillum’s tax plan as “far out,” but they’ve got it half-wrong.

Sure, raising corporate taxes would harm Florida businesses. But you know what less expansion and hiring means?

Fewer people!

Florida has about 22 million of them, which is about 21 million too many for me.

Finally:


(btw, such tweets are posted every day. I’ve generally not been posting them, but I do smirk every time I see it.)


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