Tax-Tainted Leaders

About one out of every six dollars owed in federal taxes is not paid in the US. The amount of unpaid taxes every year is plausibly about three-quarters the size of the entire annual federal budget deficit. The rate of income misreporting is significantly higher for income from sole proprietorships and farms, and it is likely higher for high-income households than lower-income households, as per a report published by Brookings in 2019.

According to two decades of tax data obtained by The New York Times, Donald Trump paid next to nothing in taxes the year he was elected to the Presidency - and nothing at all for 10 of the last 15 years. Trump paid just $750 in annual federal income taxes in 2016 and 2017.

The first president to file the tax return at all was Abraham Lincoln after the US Congress temporarily instituted federal income taxes to help pay for the Civil War. At just under $1,300, Lincoln paid more tax in 1864 than what President Trump paid 152 years later, without inflation adjustment. President Abraham Lincoln filed tax return voluntarily, as it wasn’t clear whether taxation of presidential salaries was constitutional or not. Five years after Lincoln’s death, the courts ruled that it wasn’t. The U.S. Treasury department returned Lincoln’s taxes to his estate. The federal income tax became permanent in 1913, but the salary exemption for presidents continued for decades.

In 1973, as the Watergate investigation escalated, it came to light that President Nixon had paid only $1,670 in federal taxes over two years in 1970 and 1971 while claiming over $130,000 in tax refunds. Congressional investigators pounced on questionable tax write-offs that included claiming the transfer of his official papers to the National Archives as a large charitable donation. Even Nixon’s accountant admitted that some of the deductions were “unwise,” and Congress ordered the President to pay more than $400,000 in back taxes.

President Obama's Treasury Secretary Tim Geithner, whose position includes being the head of the tax-collecting Internal Revenue Service (IRS), was found to have evaded substantial taxes years ago. This financial expert blamed it on software miscalculations and oversights. Only after he was nominated Treasury Secretary, he paid the back taxes with interest, but no penalty. Timothy Franz Geithner was a former American central banker who served as the 75th United States Secretary of the Treasury under President Barack Obama, from 2009 to 2013. He was the President of the Federal Reserve Bank of New York from 2003 to 2009, following service in the Clinton administration.

Jesse Louis Jackson Jr. is a former American politician who served as a Democratic Congressman representing Illinois's 2nd congressional district in the United States House of Representatives from 1995 until his resignation in 2012. He is the son of activist and former presidential candidate Jesse Jackson. Jesse Jackson Jr. pleaded guilty on Feb 20, 2013, for fraudulently obtaining $750,000 of funds from his election campaign, and his wife Sandra Jackson also pleaded guilty to one count of tax fraud for covering up the receipt of those funds from 2006 to 2011. Jackson Jr. was sentenced to 30 months in prison, while his wife was sentenced to one year.

Jerome Cahuzac was the French budget minister who spearheaded President Hollande’s efforts to cut the public deficit and stamp out tax evasion. But Mr Jerome Cahuzac had to resign over allegations that he hid money from the French tax authorities, first in Switzerland and then in Singapore. An alleged recording of a conversation between Mr. Cahuzac and his wealth manager in 2000 about his embarrassment over the Swiss account was published by the French investigative website Mediapart. The website claimed to have evidence that Mr. Cahuzac had an undeclared account at the Swiss bank UBS for 20 years until 2010. The website alleged he traveled to Switzerland to close the Geneva-based account and transfer the money in it to Singapore shortly before he was made head of the parliamentary finance commission in February 2010.

The leaked documents of Panamanian law firm Mossack Fonseca showed that 12 current or former heads of state and at least 60 people linked to current or former world leaders are on the list of suspected money laundering.

The ‘Fuehrer’ who used the political slogan ‘public benefit before self’, worked boldly from the time he took power to free himself from all taxes. Adolf Hitler was a tax evader who became the richest man in the Nazi hierarchy, a West German magazine claimed in 1987. Munich-based Quick magazine said the Nazi dictator got officials to write off his tax debts of 405,494 marks and exempt him from paying any future taxes while amassing a fortune through payments from industrialists and sales of his book, “Mein Kampf.” The book was practically mandatory reading for everyone in the Third Reich. By 1934, Hitler was earning up to 2 million marks in royalties annually, Quick said.

(V Venkateswara Rao is an alumnus of IIM, Ahmedabad, and a retired corporate professional.)