No, You Idiots. That’s Not How Taxes Work. – An Accountant’s Guide To Why You Are a Gullible Moron

I posted that last night on Facebook, and sure enough, this morning my feed is filled with people who don’t know shit about taxes retweeting the stupid opinions of other morons who also don’t know shit about taxes. This is just as annoying as last week when these same idiots all suddenly became Constitutional Scholars. Or the month before that when they were all experts on use of force laws and police tactics. Or the month before that when they suddenly got their epidemiology degrees from the University of Internet and turned into infectious disease experts.  

Holy shit, you Dunning-Krugerands are annoying. Of course the comments are all about the “morality” of paying your “fair share”. Which isn’t how any of this works in real life. Just stop it with your vapid hot takes already. You clearly have a child-like grasp of a complex topic, and your words are making America dumber.

As a former accountant, please allow me to explain why all of today’s newly formed tax experts are fucking morons, and we should metaphorically put a brick in a sock and beat them over the head with it until they shut up.

I’m going to keep this blog post simple. I’m not going to get into any of the specifics of the leaked Trump taxes. Why? Because:

  1. We don’t know how full of shit the NYT is, and you don’t do taxes based on rumors and innuendo. You do taxes based upon financial statements and the company’s books.
  2. This shit is super complicated and my happy ass is retired and likes getting paid more money to write books instead of reading through thousands of pages of IRS regs.

So big picture time…

First off, “morality” doesn’t have jack shit to do with taxation. You pay what you legally owe. Nobody willingly pays the government more than they legally owe.

This has always been this way since America has had income taxes. There is endless court precedent. You pay what you legally owe. That’s it. If you pay less than you legally owe, then the government will fine or imprison you. If you pay more than you legal owe, the government will laugh and laugh, because you are an idiot, and you deserve to be poor.

Every single person who barks about how somebody else should be paying more? They themselves are paying the minimum they can get away with. As they should. As should you.

I remember when I was taking my first tax class back in college. This class was all accounting majors by this point. At the beginning of the semester the professor (who’d had a long career as a tax guy) gave us an imaginary family as our clients and had us do their taxes. One kid didn’t take advantage of all the obvious deductions for his clients. When the professor asked why, the kid said some mushy thing about how he didn’t think it was FAIR to keep that money from the government… Holy shit. The professor ripped this kid a new asshole. HOW DARE YOU!?! IT IS NOT THE GOVERNMENT’S MONEY! IT IS YOUR CLIENT’S MONEY. YOU OWE THEM YOUR BEST! IT IS YOUR SACRED DUTY TO SAVE THEIR MONEY! YOU DISGUST ME AND YOU SHOULD NEVER BE A CPA!

That class was one of my favorites.

Basically, you pay what you owe, no more, and anyone who claims otherwise is full of shit.

Second, “loopholes” is a term most often used by people who don’t understand accounting or tax law, to complain about how somebody else used the existing laws created by congress to pay less than what that person thinks is “fair.” Regular people have heard the bullshit term loopholes tossed around so much that they start to believe that it is some magical easy button that rich guys can just push that makes it so they don’t have to pay taxes.

Nope. They’re just laws. These “loopholes” exist because at some point in time congress (both democrat and republican both!) decided that they wanted to promote some type of behavior or discourage some other behavior. So they basically put a reward into the law saying if you do this thing we like, you’ll pay less taxes! Or the opposite, congress wanted to discourage some behavior, so if you do that thing we don’t want, it will cost you more.

Both sides have done this forever, state and federal. We want you to drive electric cars so if you buy an electric car you get a tax break this year. YAY! Uh oh, we want you to stimulate the economy by buying this kind of machinery faster, so you have to depreciate your assets this other way or you’ll pay more! BOO! You get a discount for paying your employees health insurance, YAY! Oh, wait… Not that kind of health insurance. BOO!.

So on and so forth, up and down, these perks come and go, all based upon whatever behavior congress is trying to promote at that time (or what favors they are doing for their friends). Why was mortgage interest deductible? Because at one point congress said “we really want people to own houses!” Even regular people have things that are considered “loopholes” to somebody.  

So when the blue check mark journalism major (who probably dropped out of PoliSci because “there’s too much math”) declares that it is immoral that some rich dude didn’t pay his fair share because he used loopholes, those are basically a bunch of meaningless buzz words strung together to prey on the feelings of the gullible.

Joe Biden has been making shit like this up for forty something years now. Congress meddles in business and your personal lives to try to steer outcomes. And as a result the tax law just keeps getting bigger and bigger, and more complicated and confusing, until it is the bloated leviathan we have today.

How big is the US tax code? NOBODY KNOWS! (and I’m only partially kidding with that answer, because there’s thousands of pages of actual laws, and I don’t think anybody can actually pin down how many thousands of pages there are of supporting documentation and IRS regs and findings that translate those broad laws into the nitty-gritty real world application accountants have to deal with).

It is this complexity that makes it hard to figure out what anyone actually owes. The more complicated your affairs, the more of these laws you run into, the more “loopholes” you may be able to take advantage of.

We’ve already determined, nobody willingly pays more than they owe. The real problem is determining what you actually legally owe. And this is where it gets sticky. Because the laws are very complex, the more complicated your finances, the more likely you are to have confusion over your taxes.

Let me give you an example. I can’t remember the exact details because this was over 20 years ago, but when I was getting my accounting degree we learned about this challenge someone did, where they got something like a hundred different tax preparers, ranging from Big 5 (back then)firms, medium size firms, small firms, individual CPAs, TurboTax, H&R Block, the works… to do the taxes of the same hypothetical family of five. This family had a small business, some investments, some rental property, so on and so forth, but nothing super complicated. Then they had the hundred different preparers do their taxes… And they got a hundred different answers of what they owed that year. And each of those answers could be argued as being correct… And yet each of those answers could also be determined as wrong by an IRS auditor.

Sometimes there is confusion about what can or cannot be deducted. Some things are clear. Others are questionable. Some things the IRS has clearly stated are good to go, others you make your best guess, and then hope the auditor doesn’t disagree. There is an old tax preparer saying, pigs get fat, hogs get slaughtered.

Which brings us to today, with people freaking out about how Trump allegedly didn’t pay taxes for 10 out of 15 years and how that’s UNFAIR. Assuming that the anonymous tip isn’t total bullshit—and this is the New York Times we’re talking about and they love to just make shit up—and that the information is accurate (which means that whoever leaked it committed a felony, but that’s a whole different discussion)… my answer is so?

Is it plausible that a billionaire paid no taxes for a period of several years? Yep. Totally. See all that stuff I wrote above about the complicated tax code and how it is an accountant’s sacred duty to take advantage of all the stupid laws congress has passed to save their client’s money? Pretty much that. It has happened many times before, and it will happen many times again.

One thing that’s really unfair about our tax system is that it is rigged in favor of people who have more resources. Government meddling makes it more costly to conduct business. The more complicated the regulatory burden, the more smaller companies can’t compete. Make the laws complicated enough and the only companies that stay in business are the ones who can afford to pay for twenty guys like me. (my last regular accounting job paid extremely well, and nearly everything I did was jump through government mandated hoops, filling out government mandated paperwork which nobody in the government would probably ever read)

Trump has those resources. I bet he’s got a room full of accountants, and their leader is probably a grizzled old CPA with an eye patch and a raven who sits on his shoulder. The raven also has an eye patch and an accounting degree. This man has wrestled bears, and he’s going to take advantage of every tax break in the US Code for his client, and do so gleefully, knowing that many of those laws were signed by Barack Obama and Bill Clinton.

On the other side, you know damned good and well that the IRS has sent their most fearsome auditor against him. This man sold his soul to the devil, and then fined the devil for failing to list that soul as a depreciable asset. When he shows up to audit your company, he appears a flash of fire and brimstone, as a Finnish death metal band plays his theme song. He is an auditor bereft of mercy, compassion, or pity, and beneath his leathery wings serve a legion of IRS goblins, who will crawl into every nook and cranny of the Trump Corporation’s P&L looking for errors, and if a mouse so much as shits a turd large enough to unbalance that ledger, there will be hell to pay.

Is it unfair that rich guys can employ Gandalf level CPAs and take advantage of more complicated tax laws, while regular people use TurboTax? Yep. But in the meantime, as long as those tax laws are there, the rich guys would be utter fools not to take advantage of them.

I recall a similar freak out several years ago when it came out that some giant mega-corp (I think it was GE, but I don’t remember) didn’t pay any taxes due to some Obama green energy tax breaks. Only that time the freak out was coming from the right (who hate Obama) and the Bernie Bros (who hate all business). It’s the same kind of thing though. If the laws are on the books, of course companies (and individuals) are going to take advantage of those laws. THAT IS WHY CONGRESS PUT THEM THERE.

Now, it is perfectly okay to get mad at congress for writing stupid laws and needlessly complicating everything with their endless meddling. But it’s stupid to get mad at the people for obeying the laws that are in place.

If it comes out that Trump broke the law, then it goes back to that soulless abomination from the IRS (which again, I say with all due respect, Mr. Auditor Sir, please don’t hurt me) to hook his ebony talons into the Trump Corp’s meaty flank, to pull it down and feast upon the carcass.

Why yes… During the course of my accounting career I did go through several audits with various government agencies. Why do you ask? 😀  (that said, the IRS auditing the various corporations I worked for was always way nicer than being audited by the DCAA. What a fucking nightmare clusterfuck that organization is. I’ve been through ATF audits and they were way better than the DCAA. Though for pure incompetent malfeasance, the SBA still takes the cake.)

That’s how it works. On one side CPAs, and the other, hellspawn audit demons, and they’ll argue, and battle, and go to court over what is and is not owed to the government, and then the client will pay what is legally owed plus any applicable fines and penalties (and not a dime more). Both sides of this titanic eternal struggle are far smarter than anyone at the New York Times and they have access to the actual financial data, unlike all the blue check mark idiots on Twitter who are whinging on today about their feelings. Barf.

Your feelings don’t mean shit. Same as the rest of us, Trump owes what he owes. And the IRS will determine if that number is accurate or not.

Here is an Interview I did with Publisher's Weekly
I'll be on the Publisher's Weekly Podcast tomorrow, 9/23 at 4PM EST

306 thoughts on “No, You Idiots. That’s Not How Taxes Work. – An Accountant’s Guide To Why You Are a Gullible Moron”

    1. My son, bless his heart, last week had some comment to me regarding how the time restrictions I’m enforcing on his game-playing was somehow “unfair”.

      I told him he does not want the universe to be fair. He should revel in how unfair it is. Because if it was fair, I’d be looking at all the homework he has to turn in after corrections, instead of doing it right the first time. I’d be looking at his chore list which has not been consistently done. I’d be looking at the state of the room, which mas more in common with “landfill” than “bedroom”. And, in all fairness, he’d be playing computer games again right about the time he buys his own computer and his own internet connection at the apartment he pays for.

      So, no, don’t appeal to fairness, because fairness is not going to work out for you.

      1. “I used to think it was awful that life was so unfair. Then I thought, ‘wouldn’t it be much worse if life *were* fair, and all the terrible things that happen to us come because we actually deserve them?’ So now I take great comfort in the general hostility and unfairness of the universe.”

        Said by the character Marcus Cole in the tv show Babylon 5, but rather applicable to real life, IMO.

        1. I do believe that if all the goodies of the world and all the clusterfuck shitstorms of the world were mixed together and then partitioned out in a “fair” manner (everyone gets the exact same share) we would all have an equal share of abject misery. The supply of clusterfuck always always outstrips the supply of goodie. Hobbes smiles.

          1. “Fair” does not mean “equal” except when the circumstances call for it. It is not fair to give all the kids the same grade if they did not perform the same on the test.

        2. The truly amazing thing is that the writer, J. Michael Strazinski, who wrote what is inarguably one of the most libertarian pieces of visual entertainment ever made (Firefly, by Joss Whedon, is, amazingly, another one), is an astoundingly lefty idiot.

          How you can write something like this (or Firefly, Whedon is another ridiculous lefty) and not pick up SOMETHING of the reasoning and justification behind the ideology is … nothing short of flabbergasting.

          1. I interacted with him years ago on his FB page (around the time of the Trayvon Martin thing) regarding some shit happening in Texas around an abortion bill wending through their legislature. Some liberal shitheels there had attempted to sneak feces and urine in baggies into the gallery, to fling down onto the legislators.

            The arresting security people purportedly neglected to keep the evidence, so the charges wound up being dropped. JMS crowed how that proved it was all made up, that they never attempted it at all — “innocent until proven guilty” was his battle cry.

            I asked him if he said the same thing about George Zimmerman when he attended those Hollywood parties.

            He banned me. Quelle suprise?

            Mind you, I was totally polite, no name calling, about the strongest thing I said was something along the lines of “Oh, come on, don’t be ridiculous!!”

          2. The field of Science Fiction Literature is filled with leftists who can write the best conservative and/or libertarian themed stories you’ve ever read – without it making a dent in their own ideology.

            If you’ve read the “WOOL” and “DUST” series by Hugh Howey you might think he’s a die hard Republican, especially since he has the whole evil plan setup by Democrats.

            Nope! He’s pretty darn close to being a communist. ‘Course his collectivist spewings on Facebook didn’t stop him from taking his capitalist book profits to buy a sailboat and go on a cruise around the world.

          3. Not only whedon, but the actor who plays Capt Reynolds as well. One of the most libertarian characters I’ve ever seen is also a hardcore leftist/statist. Obviously actors aren’t the characters they play, that’s why it’s called acting, but it’s still amazing that some one can enthusiastically play the role of the good guy and then essentially espouse the very same ideology as the evil entity his character is fighting against once the cameras are off.

            Good post. I’ve said the same things in simple form because they seem like common sense. First, it’s the NYT, so you can’t start off with a good faith assumption that they didn’t just make all that up. Second, no one pays more than they absolutely have to. Third, pretending claim you know the ins and outs of the countless pages of onerous regulations known as the US tax code is preposterous for those who haven’t spent their careers doing so. Even people who spend their lives doing so often don’t claim to do so. And finally, yes, loopholes are spoken about as though it’s some kind of illegal or immoral trick to get out of paying your taxes, when in reality all they are is a legal way to reduce your liability. I’m a middle class guy with a relatively simple return who used turbo tax, so if all of this is obvious to me, why is it so hard for these ‘very smart people’ to figure out?

          4. Bill Whittle has discussed this (that Leftists write the most amazinng Conservative and Libertarian stories) every so often in his “Stratosphere Louge” discussions. His take on this is that stories have to be about individuals, and for them to be entertaining, they have to be at least somewhat heroic. The result necessarily ends up highly Individualistic.

            It’s hard to write a good story about Collectivists.

            Which brings us to a point that Sarah Hoyt has brought up repeatedly, about the Myth of the Non-creative Individualist. It’s not that Conservatives and Libertarians can’t write good literature, or produce art, or act, etc– it’s that whenever it’s discovered that someone is a Conservative or Libertarian, they are othered and blacklisted out of the industry.

          5. Leftists have a unique and odd ability to hold two or more completely contradictory and incompatible ideas in their heads simultaneously and then come to an astonishingly ridiculous conclusion that doesn’t involve any of that data.

        3. Worth noting that Marcus dies by being drained to death by an alien healing machine to save his damsel in distress who never gave him any play at all.

          Fair.

        4. I’ve always been fond of the quote from the nameless priest in Lord of Light, who, speaking with Yama, said, “No man who has lived more than a score of years desires justice. For my part, I find mercy infinitely more desirable.”

      2. Here in Massachusetts, we have an option in our state tax form to voluntarily pay a slightly higher rate. I’ve never heard of anyone doing so.

        1. Used to live in Taxachusetts.
          I’ve heard the figure that something like 5% of the tax-filing populous actually check that box, but the legislature was sure something like 75% would be happy to pay the higher rate they used to before the rate was lowered. To their utter shock.
          I live in NH now, where the state tax rate is 0% and my property tax is STILL lower than what I payed in Taxachusetts.

        2. Back when I was single, I regularly checked the box on the Alabama return that donated my refund to the state.

          But I still took every deduction I was eligible for, if the refund had ever been large enough to matter to me, I’d have taken it. The post marriage joint returns have a much larger refund and we take it.

      3. That is beautiful!

        My kids have mostly learned that fair, deserve and bored are words that they just don’t want to say. Those bathrooms aren’t going to clean themselves!

    2. As a retired “bean counter” myseIf, I remember the saying story about a CEO caIIing one of his average accountants into the office and asking, “How much are we going to pay in taxes this year” and receiving the repIy, “Iet me go through the statements”

      and then the CEO caIIs in his BEST accountant and asks the same question, “How much are we going to pay in taxes this year” and this time the repIy is, “How much do you WANT to pay?”

      Accountants are Iike AthIetes. Sometimes you get the Oympic GoId medaIist; and sometimes you get the guy who shouId be in the speciaI OIympics.

      1. Of course, the Average CEO calls in the accountants in the 4th quarter. The BEST CEO calls in the accountants and asks the questions during the Budget Meetings the year before.

      2. I had heard it as someone interviewing for accountants asking, “What’s two plus two?”
        The interviewee checked the door, pulled down the shade, and whispered in the interviewer’s ear, “How much do you want it to be?”

      1. And “Reasonable _________”.
        Thousands of dollars are billed by lawyers each year arguing about what is reasonable in front of a politically-connected lawyer who is called “Your Honor”.
        As to Common sense, I used to call it horse sense until someone told me some dumb stunts horses pull.

        1. As an aside, the term “horse sense” originally referred to a human that literally knew about horses and their behavior. It evolved into what we now call “common sense”. So, the term “horse sense” refers to the human, not the horse.

    3. I would amend that to say:

      There is no interpretation of “fair share” that doesn’t translate to “I want more of your shit than even the government wants.”

    4. Truth! With democrats (who are socialists) it’s presented as greedy for me to want to keep what I’ve worked hard for but, somehow, NOT greedy for them to want to take it! LOL. Commies are funny. Sick, but funny.

    5. There is no interpretation of “fair share” that doesn’t translate to “I want your shit.”

      No, I interpret ‘fair share’ as being the speaker saying that OTHERS should pay more shit.

    6. And “he used a loophole” is precisely equivalent to “he followed the law as written”.

    1. Well written indeed! I noticed also that they sneak in the word tax “avoidance”…which I guarantee the idiot authors of that fishwrap, and every single employee of the NYT practices. They may well be dim witted blowhards as it pertains to tax law…but if they aren’t taking every single deduction and/or credit the law allows, they should never be permitted to use a computer keyboard again. Avoiding taxes, as someone once said, is prudent. Tax ‘evasion’ is illegal. I would LOVE to appear next to George Stuffingenvelopes and across from the bag(s) of hammers who vomited this clown show of an article.

      1. This is why Leftists should have their tax returns revealed as well. You ask for confidential information? You’ll get it, but you have to reciprocate.

  1. This is a good balance to the inevitable shrieking that is going to plague my newsfeed over the next few days. Thank you.

  2. Cliff notes for the perpetually stupid on taxes and morality (I would be one of those PSers, when it comes to taxes). Love it ILOH, thank you! ????????

    1. I live in California, where there is an “Assault Weapon Ban” (If they could just do something about Assault with weapons they could ignore the device with no moral nature, but that’s another subject).
      Our public servants are bent out of shape because someone has devised a stock for the AR-15-based rifles so it works around the law , whining about exploiting a loophole.
      If someone finds a loophole in your shiny new law, it means they have better reading comprehension that you do.
      And that is too threatening to their self image as better than the general public.

  3. Question, Larry? I am a mere drone, droning away in the bowels of a state governmental agency; and we do have access to IRS taxpayer information. It’s drilled into our thick little skull annually, that is a Federal crime to have unauthorized access to someone’s tax records, or to disclose those same tax records, leaving to a fine of up to $250,000 and/or a prison sentence of up to five years, PER COUNT. Do you think there’s any danger that a member of the NY Times staff could be in any danger of being treated like a common plebe by the Justice system?

    1. I’d bet 1000:1 that no one on the NYT staff did the actual accessing. They found someone to leak the info who would bear the penalties (publishing the info is protected speech). I suppose you could try to get them on some sort of conspiracy charge but good luck proving that (if there were one).

      1. A major flaw in the functioning of the Trump administration is that they haven’t created a black ops group to discover and punish the leakers.

        1. The Nixon administration had “a black ops group to discover… the leakers”. Remember the White House’s Plumbers? Then mission CREEP occurred.

          1. John Dean also turned state’s and he was likely the one who ordered all the illegal deeds. He knew too much about everybody else’s activities, including the existence of MacGruder’s missing notebook detailing everything that the group said and planned in meetings, and everything each one did.

      2. If someone at NYT urged/encouraged/coerced or otherwise manipulated someone with access to those tax records to access them and pass them along, that should be conspiracy and the NYT someone would, I expect, be in violation of the law.

        Precedent says if someone got those records on their own, then passed them to an NYT contact, there would be no LEGAL wrong doing on the NYT side.

        Answer is to find whoever did it and apply the legal penalties… every time. Or even half the time. That would adjust the risk/reward ration to discourage it more.

        But I am somewhat appreciative/respectful of the types who find wrongdoing in government, “illegally” obtain and pass along evidence, and accept the consequences. Those are patriots.

        The weasels who who do it anonymously can go…

        1. Someone at NYT encouraging this? Like Susanne Craig; one of the authors of NYT’s latest Trump Tax article?

          In closing her 3 Oct 2016 article on Trump’s 1995 taxes:
          “when people are worried that anything sent by email will leave forensic fingerprints, “snail mail” is a great way to communicate with us anonymously.
          And a note to tipsters out there: If you want to send me anything, on any subject, my mailbox is open. The address is 620 Eighth Avenue, Third Floor, New York, NY 10018.
          You can bet I will be checking it.”

          That certainly sounds like encouragement for people to send her materials, even those acquired illegally.

          https://www.nytimes.com/2016/10/03/insider/the-time-i-found-donald-trumps-tax-records-in-my-mailbox.html

          https://www.nytimes.com/interactive/2020/09/27/us/donald-trump-taxes.html

      3. The Biden campaign had swag printed up and ready to go before the story came out. Conspiracy is not so far fetched.

      4. I do suspect a proctological examination of the system logs of certain IRS computers might be able to determine who accessed what when and from where. I suspect that examination is probably already well underway, and someone is going to be facing those charges sooner rather than later.

        1. You are absolutely right. Some taxpayer names are flagged, and when they are accessed without authorization, somebody gets an alert, followed by the FBI getting a call. Response is very speedy. For example, when I worked for the IRS, I was warned never to access such accounts recreationally. Someone who accessed O.J. Simpson’s account had the FBI at his door very quickly. The trespasser might have still been in the account!

        2. Maybe I’m cynical, but I suspect whether said someone will face charges will depend largely on who ends up at 1600 Pennsylvania Ave come January…

          If there’s a D after the name, this will quietly go away with the culprit perhaps being released from employment but not much else.

          If there’s an R after the name, I’d expect the culprit will probably end up in a gray-bar hotel for a couple years, but no one will hear about it from the majority of the media…

      5. I call this “The Weekly World News technique.”
        Whatever they say about some famous person is couched as the newsworthy report from someone else, so the tabloid rag was insulated from liability.

    2. The NYT propagandists are safe, but whoever handed them Trump’s private info is a felon. It might be annoying, but if the NYT were liable for criminal prosecution, then the press would cease to be a way to shine a light on nefarious activities like the NSA’s routine illegal surveillance of all of our phone calls.

      -jcr

      1. It is my opinion that the person that leaked it (if they in fact exist) will try and hide behind whistle blower protection.

      2. hey, jcr, wasn’t it a few years back that the NYT published and made a big deal about FedEx not paying taxes – until the FedEx CEO and founder Fred Smith called them out…
        “the New York Times paid zero federal income tax in 2017 on earnings of $111 million”

        In the same press release, he challenged A.G. Sulzberger (owner/publisher of NYT) to a tax debate! Which probably never happened.

        1. That year was when a lot of very expensive changes were being made at FX, and that made it a net-loss year.

          For the morons out there: When a company spends more money than it makes, their profit is <0. When you have zero or negative profit, THERE IS NOTHING TO TAX.

    3. If Trump wins re-election, expect the DoJ to do its best to hunt down everyone involved and prosecute them.

      If Biden wins, expect nothing to happen

    4. Someone would have to decide to prosecute them as complicit. Probably as an accomplice to the crime of divulging private tax information. Then that person would have to get approval from his supervisor. Then he would have to find proof of who at NYT got that info, and then proof of who gave it to him. All while being harrassed by the NYT and people decrying the sacred privelige of press to abet criminals. But not just anyone. Freedom of the Press are for fancy people who are official press. Not merely people who track down factual information, cite their sources and publish them in some manner. No. True and Sacred Press are those who cite secret sources from famous mastheads, and who couch almost all their qualified statements in the name of unidentified people. Lemme try, “Some people are concerned that the NYT doesn’t pay taxes because it hasn’t turned a profit in decades.” “Sources say that The NYT Editor may no longer be beating his boyfriend with proper levels of consent. The editor has not responded to the inquiry we’ve posted on his myspace profile mere seconds before publishing this article. “

    5. Dave, if I had to guess I would say it wasn’t the IRS who leaked it.

      Given that the New York Times has stated that they aren’t going to show the copies they have to protect their source, I’m going to say that every page has something that Identifies the source on it.

      As far as I know, most Corps don’t watermark every pages.

      But Law enforcement entities entering it as evidence do….

      Short list of who could have done it right there.

      1. “Given that the New York Times has stated that they aren’t going to show the copies they have to protect their source, I’m going to say that every page has something that Identifies the source on it.”

        And that would make them an accessory after the fact, in a way NOT covered by the First Amendment. Not that they’ll ever be prosecuted for it, but I’m going to point that out to anyone who mentions the NYT leak to me.

      2. The Special Counsel’s Office is the most likely culprit. They basically controlled the DOJ during their witch hunt. They had Rosenberg to rubber stamp every request for data they made, and they made the requirement for data collection intentionally wide enough to include tax records.

        The NYT has had these tax records for years. They were given to them for just this reason. They are just doing an early October surprise because internal polling tells them OMB is ahead and the Trump train must be stopped somehow and they could arrange for the accusations to be aired via the debate. Which they were.

    6. The NYT staff are in the clear, legally, unless they personally stole the docs. Google Pentagon Papers.

      The people who obtained the tax documents and illegally sent them on to a third party are felons. And the NYT is claiming that even posting the docs themselves would reveal the sources (thus exposing them to very unfun federal prison time and fines) which reveals one of two things is true. Either:

      A. The NYT is lying about having Trump’s tax records

      Or

      B. The tax records have identifying information that leads right back to the felonious leaders.

      Either possibility is approximately equally likely, given the situation and the players. The NYT lies about Trump (and conservatives in gneral, not that Trumo actually is conservative) and is willing to knowingly publish wholly false stories that hurt him. And, Orange Man Bad leaders are stupid enough to do things like send over files that have download transaction IDs printed on them, leading straight back to the leaker.

      1. It is my understanding that the tax returns for prominent people (politicians, etc.) and the very wealthy are handled in secure rooms and special computers with even more stringent auditing. If they came from the IRS, they may be able to figure out who got them. My guess is that they came from a source in an accounting firm. It’s believed that the copy of the previous 1040 that got leaked (just the first two pages) came via the attorney’s office of an ex-wife or the wife herself.

      2. The New York Times is not necessarily in the clear. If they offered a reward or other inducement to the leaker, they may be considered accessories.

      1. Prosecute them anyways. At this point, only a fool accepts “established precedent” or “laws” as a reason not to prosecute their enemies. Remember, the process is the punishment.

        This is war. It’s time to fight back. Any weapon my enemy uses against me is meet for me to use against him.

        1. That works for me. There are penalties for receiving stolen property. It will be fun watching them try claiming that they had no way of knowing it was stolen.

    7. Yet, surprisingly, tax information on conservatives and conservative organizations does leak, either through the IRS to journalists or through the IRS to Congress who can’t keep their mouths shut abut anything.

      But nothing ever comes from any investigations into these leaks. Sadly. But not surprisingly.

      Much like leaks from any government agency.

      It’s like, oh, say, law enforcement. I worked for a PD for a while. And had access to all sorts of ‘seeeeecreeeeetssss’ but I kept my lips sealed. Because if a leak was traced to me, I’d be fragged. Now, some other people leaked like a friggin sieve so badly that the investigations units had to have secret files and secret case numbers that the leaking people couldn’t see because the leaks were always to relatives of the leakers or to newsies who’d slip some dough their way.

      Gah. Double standards. Hates them.

  4. Loved the post…one thing that comes to mind is the quote from S. Maraboli …..Your opinion is not my reality!!!

    Keep them coming Larry!

  5. “On the other side, you know damned good and well that the IRS has sent their most fearsome auditor against him. This man sold his soul to the devil, and then fined the devil for failing to list that soul as a depreciable asset. When he shows up to audit your company, he appears a flash of fire and brimstone, as a Finnish death metal band plays his theme song. He is an auditor bereft of mercy, compassion, or pity, and beneath his leathery wings serve a legion of IRS goblins, who will crawl into every nook and cranny of the Trump Corporation’s P&L looking for errors, and if a mouse so much as shits a turd large enough to unbalance that ledger, there will be hell to pay.”

    Holy shit Larry, you owe me a coke. I’ll get my own new keyboard, damn it, but you owe me a fucking coke.

  6. “(my last regular accounting job paid extremely well, and nearly everything I did was jump through government mandated hoops, filling out government mandated paperwork which nobody in the government would probably ever read)”

    This sounds like my last 20 years in healthcare IT working for a hospital producing reports proving that the doctors had indeed been treating their patients in a government-approved manner.

    That kind of work is So Much Fun.

    Thank you for stating so clearly and entertainingly that Tax Avoidance (aka tax minimization) is an all-American sport. Which is played by anyone with enough brain cells to generate a thought.

    1. I am a retired career Infantry NCO. It is Appalling the VAST amounts of Paperwork (both Dead Trees and Digital) that is Required to Kill our nation’s enemies!

      I most enjoyed my years in USSOCM, where it was my Duty to accomplish needed tasks with the absolute minimum of bureaucracy. Frequently, I was the buffer who had to submit the necessary administrative falderal… I had the discretion to accomplish necessary tasks without any paperwork (I was a “Dog Robber” Extraordinaire!)

      My boss, a Master Chief from DEVGRU (I was a mere Army SSG), occasionally availed himself of the fact we wore no Rank nor other identification, other than (occasionally) our Name Tape, to send me to mind numbing meetings in his place. (Basically, my job was to minimize the amount of time he would otherwise waste in military/naval bureaucracy; or other inconveniences.)

      I had done similar things in the conventional units I was assigned to. I had also been on the periphery of “Special” units much of my career. I earned my CIB, but was Never going to be selected for RIP/Ranger School, etc. I am, however, one of the Greatest “Dog Robbers” and that provided my opportunity to be invited into SOCOM.

  7. Another tax pro here.

    The loopholes comments are not entirely unjustified; every large company has lobbyists in DC writing Easter eggs into the tax code every single year. Which is why we have to go back to school every year to keep up with it.

    About the only way to get a simple tax code would be to write it into the constitution. And even then the attorneys would go to work on it from all sides.

    1. That’s why I mentioned them doing favors for their “friends”. I didn’t want to get too far out into the weeds ranting about how congress is a bunch of corrupt scumbags. 🙂

      1. As Mark Twain once said, “America has no natural criminal class – except Congress.” He also said, referring presciently to many Democrat administrations, “America has the best government that money can buy.” Of course, he said those things way back before he was cancelled.

    2. Best proposal along those lines I’ve seen is the “Fair Tax”, which is a uniform nationwide sales tax that applies only to new goods and services. No tax on any second-hand goods, no way for congress to sell tax code tweaks for “campaign contributions”, no more wasting our time and attention on figuring out the tax effects of every single business decision.

      Check it out at fairtax.org

      -jcr

      1. The Fair Tax will crush the big ticket item industries: cars, boats, planes, etc. Go back to the Clinton Administration and look at what happened to those industries (particular the boating industry) when the Fed added a 10% “luxury” tax to them.
        Keep in mind that if you buy a $20K car, the bank wants 20% of the PRICE down for the best interest rate. The 19% Fair Tax and 6% State sales tax mean you need a downpayment of $9,000 in order to finance $16K of a $20K purchase. With the Fair tax not applying to used cars, new car sales will drop like a rock.

        1. 19% federal sales tax sounds like a lot, but then you don’t charge other taxes on the business which create them or the dealerships that stock them or the weasels that sell them. By the way, the current federal tax rate for a small business is an average of 19%.

          And the State sales tax happens anyways.

          1. So a business buys steel for a widget, paying 19% tax, then adds that tax to the price of the widget. Another manufacturer buys the widget to integrate into his gizmo, paying a 19% tax. Then the – – – – well you can see that the price of some items, say pencils is going to be in the thousands of dollars.

        2. actually it does no such thing, fair tax replaces all other taxes, period, listened to an executive from GM, on a talk show years ago, ” the fair tax eliminates corp taxes for one plus we would no longer have to with hold income taxes, do you know how much those two things would save in Money and bean counters at GM? Millions!!. further she claimed the price of a new car would drop by approximately 25 to 30 percent,overnight”. When pressed on the matter she explained that “believe me we would have no choice, do you think our competitors wouldn’t drop theirs, that is how a market works!” Same over all industries, the bean counters cost a fortune!!

      2. No tax on second-hand goods, no way for congress to sell tax code tweaks…..yeah, right.

        When Social Security was being debated, the govt promised that your SSN# would NEVER be used for ID purposes.
        The Fed Income tax started as a small, fixed percentage on only the richest people – then got expanded until today just about everyone owes.
        The govt is soooo good at keeping promises.

        1. Eternal vigilance is the price of liberty.

          Snoozers are liberty losers. Ben Franklin isn’t reported to have said “A republic, if you can keep it” to politicians or even to voters. He said it to a woman who, presumably, wasn’t a voter. IOW, every warm body standing on American soil has a constant duty to be vigilant against the State.

      3. tax only sales of new items and you have given giant companies that can vertically integrate a HUGE advantage over smaller companies that have to buy from external suppliers (and pay taxes on that transaction)

        a fixed sales tax also tends to hurt low income people the most.

        flat tax with a large deductible seems to be the best simplifcation I’ve seen. But don’t make it too large or too many people pay zero

      4. I’ve watched the “fair tax” (the VAT) in Britain and the EU creep up and up and up, and the taxes it was supposed to replace never went away. Sorry, I cannot support that idea as presented, because of what happened in Britain and mainland Europe.

        1. Before we could let the Feds do that, we’d have to not only repeal the 16th Amendment but explicitly add to the Constitution that the Federal Government is not authorized to collect income tax. Then we could talk about a VAT.

          1. I would prefer an amendment that prohibits the federal government from taking money directly from the people. Concentrating all that money in one place is what gets us the staggering levels of corruption we’re seeing, and the pork-barrel politics as state politicians try to get some of ‘their’ money ‘back’. The federal government should be funded by the states, in direct proportion to the federal services each state wants.

    3. It’s that little part of the 16th Amendment “…from whatever source derived,” they can call literally anything “income” and expect you to pay taxes on it in US legal money. Traded firewood for apples? The IRS wants a cut of the value of the apple ‘income’ in money, not cider.

      The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.

    4. There was a book from 1969, “The Rape of the Taxpayer”
      In it, the author wrote about a provision that contained so many odd restrictions the accountants just wrote it off as a strange product from the IRS. As it turned out, it was what you referred to as an Easter Egg, and the author referred to as a gift.
      I worked in a library in college, so the blathering of my professors was not the only information I received on economics, ethics, politics and life.

  8. The only thing worse than a DCAA audit is a DoL audit. Those guys can and will reach right through the corporate wall and fine the hiring manager.

    1. Former CPA. I worked for a large insurer for several years and was part of the response team to many state and federal audits. The absolute worst 3 letter agency was the SEC. they literally read you the Miranda warning every time they spoke to you. They literally told you how many years you would be in prison every time you spoke to them

  9. And this is why I’ve had a CPA doing my taxes for the last 25 years. I used to be a contractor and it took me over a month to do my taxes each year and I got audited several times (won each time, but damn was that a time suck and STRESSFUL!).

    Best day on my financial life was when I wised up and hired a pro. Sure they cost money, but they are WORTH EVERY PENNY when you take the time and stress into account.

    (Plus you’ll get more money back)

    This is why I tell everyone NOT to do their own taxes. Hire somebody. Because if you’re not reading all the new tax laws every year (like fool me used to) then you’re losing money. Lots of money!

    CPA’s rock.

    1. Agreed, and Same with me. My wife always says, “I can’t believe we pay our tax lady $400 to do our taxes,” and my same reply (every year) is, “would you invest $400 to “make” $18,000?” Easy answer really

  10. Billionaire Ozzy James Packard famously said he will happily pay millions to accountants to pay nothing In taxes.

    And he would be an idiot not to.

  11. I haven’t laughed out loud reading a posting in quite some time. This is the first time I’ve read you. Not the last. Great writing and also has the benefit of being 100% accurate.

  12. Larry, one thing that you didn’t touch on is that these are the books of a multinational business that requires whole accounting firms and law offices to reconcile the insane tax codes of a dozen different countries.

    This adds whole buckets of wrong to the equation.

    Only one of which is the US, which the Democrats had the opportunity to fix in 2009 and 2010, and instead handed out billions in tax breaks to their cronies…. which at that time included Donald Trump.

    The CISGs stupidity / ignorance / pathological dishonesty are what the NYT counted on. Their faith has been richly rewarded.

    Note: I have over 30 years IT experience designing, building, and testing software for both private and government entities here and in Canada.

  13. Check over at Ace of Spades blog. The Times reported before that Trump paid $1 million in taxes in 2016 and $4.2 million in 2017.

    Yes, the same Times that’s spinning this mess.

    It gets better. The Times admitted that it “analyzed data from thousands of individual and business tax returns from 2000 and 2017, along with additional tax information from other years.”

    Thousands. Of. Private. Tax. Returns.

  14. In the words of the great Thomas Sowell: “Since this is an era when many people are concerned about ‘fairness’ and ‘social justice,’ what is your ‘fair share’ of what someone else has worked for?”

    -jcr

  15. I can’t remember –

    Does a Dunning-Krugerand = 1 Troy Ounce of Cape Buffalo shit, or 1 Metric Shit Ton of same?

    Can’t find that conversion on my calc app…

    ????

  16. “Make the laws complicated enough and the only companies that stay in business are the ones who can afford to pay for twenty guys like me.”

    I do corporate meetings for a living (at least, I used to, before the current unemployment fad). I get to meet some incredibly rich people and spend some time talking to them.

    I started asking them how they felt about a flat tax – “would you be willing to take a flat 20% out of your income if it was a pure cut, no deductions or other things?”

    The universal answer was “hell yes.” One guy explained that he’d make out like a bandit, due to not having to hire legions of accountants, not to mention the upgrade in the efficiency of how all of his companies would operate – and he’d be paying more in taxes than he currently does.

    1. It’s not the incredibly rich people who want a complicated tax code. It’s the lamebrained businesses that are circling the drain and will get a few extra laps before going down if the gummint makes it harder for new competitors to enter the market.

  17. I used to work on Wall Street, writing code for derivatives trading. Every time some leftard douchenozle like Krugman goes railing against “unregulated” banking, I want to smack him.

    -jcr

    1. Krugman is in that select group of folks who’ve both won the Nobel prize for Economics and can’t balance their own checkbook. I’d say he’d be more useful as a garbage man but a) my garbage man is a both a lot nicer and a lot wiser than Dr. Krugman and b) I wouldn’t trust Dr. Krugman to drive the truck without hitting something.

      1. Krugman recently compared Trump to Trofim Lysenko. The man who denied the existence of genetics on Marxist dialectical grounds.

        Krugman is a totally dishonest political hack who never saw a tax increase he didn’t like unless it was proposed by a Republican. He predicted nineteen of the last three recessions. He predicted the stock market would tank upon Trump’s election and never recover. He’s been wrong more times about everything than Joe Biden. The fact that this lying sack of s**t still has a job anywhere more ennobling than cleaning spittoons with his tongue is a comment on the intellectual and ethical stature of his employers.

  18. I don’t think the NYT mentioned anything about charitable donations either. You can bet he must have given a lot or else they would have made that the lede.

  19. Spent 25 yrs doing the math involved in equipment finance. Not a tax expert by any stretch, but had to know this one little (as a fraction of the whole, It was still massive) piece of tax regs.

    The whole game played out before my eyes: way back, Congress thought it good to promote purchase of new equipment by letting owners depreciate it more quickly – and if that’s doesn’t make sense to you, then, sorry, you need to get off the tax bus now. No hard feelings, but it’s like having to explain to someone what a ‘base’ in ‘baseball’ is.

    Anyway, GE said: hey, if we buy a bunch of equipment we get to depreciate it fast, reducing our tax burden. But since we don’t need all that new equipment – in fact, we are in the business of *selling* equipment – we can just lease it out to people who do want it. Then – tricky part – since our taxes are lower, we can cut really good deals for people leasing our equipment! Win-win!

    Congress got EXACTLY what it wanted: lots of new equipment got sold and put into productive use all over America! Woohoo! But then GE didn’t pay any taxes – they just bought and depreciated enough equipment to offset their entire tax liability. (Larry knows it’s a LOT more complicated than that, but that’s the gist.)

    Congress then freaks – GE made BILLIONS and paid no taxes!?! UNFAIR! That they paid no taxes because they executed exactly what Congress said they wanted didn’t enter into it.

    So I got to have a nice 25 year career setting up and running financial models that produced reports showing that, in fact, the applicable rules were followed, and helping giant finance companies figure out how to play it so that they paid as little taxes as possible. Good times.

    The unfairness here, if any, is that phalanxes of smart people with training and multiple degrees are required to spend their working lives just to comply with tax law. Seems a suboptimal allocation of resources.

    1. Your example of GE is so laughably wrong. You are mixing their core business (which did not pay taxes due to losses, accelerated depreciation (on equipment they bought and used for themselves- do you think gas turbines or airplane engines build themselves?) GE Capital did the leasing and it was not “buy equipment that GE can’t use so sell it to others”. It is financing, that has its own set of tax rules and GE Capital paid billions of taxes every year.

  20. people who don’t know shit about taxes retweeting the stupid opinions of other morons who also don’t know shit about taxes
    Are this many people who don’t file? Or do they mindlessly take a pile of paperwork to the H&R Block guys and just say “do my taxes, ’cause I’m stupid!”?

    I will admit that I know more about it primarily because I had a rental property that was losing money. (A passive activity, that I converted to an active participation the last year, when I sold it. Recouping those losses was a pain over the next few years.) But, even when I filled out an EZ I knew the longer forms had stuff on them like business losses and catastrophic personal losses. And I knew the business was complicated.

    1. When a new President changes tax laws, I see people I’d expect to know better complaining / crowing that their tax refund was lower or higher than last year. I’ll bet a sleazy pol could get a lot of support for their tax changes by quietly bumping withholding rates.

      The overwhelming majority of people plug their taxes into a website online. But even if you file on paper, you can follow the instructions pretty mechanically and not understand what the numbers mean.

      I say this as someone who wrote various tax modules for a simulation for an investment firm and thus really had to think it through while poring over IRS publications. I had quite a few “that’s how that works” moments doing it.

  21. And this is why I not only hired a CPA, I hired one that specializes in royalty income. Usually from bands, as could be expected of a CPA in Nashville, but he’s quite happy to tackle indie author income as well. Because there’re CPAs who specialize in rental income, and CPAs who specialize in stock trading, and… for almost every niche, as the tax code is far too overwhelming for any single human brain to wrap around the whole thing and come out with the best way to pay the government only what we’re minimally legally required to, especially the instant you start earning non-W2 income.

    As well, using the right kind of CPA is like a ward against auditorial demons. If you use H&R block software and your royalty income varies wildly from year to year, you’re leaving a blood trail for them. But if you’re a band or an author, and you use a CPA who deals almost exclusively with royalty income, and has survived many audits unscathed, then the auditorial demons growl at that signature and prowl on for easier prey.

    I’ve met a CPA who deals exclusively with real estate investment income, and he actually prints his forms slightly scaled down, and scribbles relevant portions of the tax code and related rulings in the margins. He, too, is a Name that is a ward against auditorial demons. (He also views audits the same way bloodthirsty trial lawyers view going to court. “Audits? I love audits! I get to school the IRS on what they should have known when they decided to mess with me!” A strange, bloodthirsty, highly expensive, and good man who’s worth every penny.)

    “Not fair” is the cry of those who refuse to accept that their wishes are not the same as actual reality.

    1. I have a friend that has a small firm that specializes in taxes for pro gamblers, mostly pro poker players. Does well.

      1. I read your article while eating my dinner. Neither one upset my gut, though my young idjet offspring complain. Now I shall spend the rest of the evening watching Hockey and shredding tax forms.
        Fun evening all round, thank you Sir.

    2. Some years back, my Mom was audited 10 years in a row. Each time, the IRS wrote her a refund check because the audit showed she’d paid too much.

      After the 10th audit, her accountant and her lawyer advised that she join them in a “little trip” to the Federal Courthouse. They exited that process with a 7 year cease-and-desist order against the IRS requiring them to lay off the audits.

      Of course, the moment the C&D expired…. she was audited again. With the same outcome as before.

      Fun fact for the non-accountants among us (including me!): The IRS need not tell you *why* they are auditing you, merely which documents they want to see and which parts of your tax filing they want explained/substantiated/whatever-they-call-it. (I told you I’m not an accountant!)

      1. She maybe should have just called them up in February the next year and asked if they could audit her books right away, to save her paying her bookkeeper/accountant…..

        That said, information that would help honest people avoid unnecessary scrutiny gets abused by dishonest people to avoid necessary scrutiny. So not explaining or not having a mandatory gap between audits makes sense from the enforcement side. But if I was a competent manager who found out someone had been targeted for 10 unsuccessful tax audits in a row, I’d be looking into why they were triggered to see why resources were getting wasted.

  22. “How big is the US tax code? NOBODY KNOWS!”

    I’m reminded of the scene in Tom Clancy’s Executive Orders when the newly-appointed President Jack Ryan, faced with the task of rebuilding most of the U.S. government (as a replacement placeholder for Vice-President following a political scandal, Ryan gets booted into office when a lone-wolf enemy pilot hits the Capitol with his jetliner at the one time the government forgot its rules against mass gathering), decides he wants to look seriously at the tax code, and tries to gather, for the first time, all the lawbooks relating to it in one place. The books are so numerous and so heavy that they wind up collapsing, on live TV, the table they’ve all been piled on. 🙂

    It’s disquieting to realize that novel was published in 1996.

  23. “government paperwork”…
    Yup. The final push I needed to retire from the tech industry was the realization that the % of work time I devoted to compliance issues had ballooned from a tolerable 10% to well over 50%. So I said Screw That Noise and pulled the ripcord.

  24. well written. I work for a large complex corporation, and in the end the company’s taxes are largely what is agreed to between the company and the IRS, because no finite tax code can possibly address every facet of the company’s operation.

  25. I’m looking forward to the upcoming freak-out by these same people when the find out that al sharpton owes some $4 million in taxes.

  26. Slight fix:
    Nobody knowingly andwillingly pays the government more than they legally owe.
    Plenty of ignorant people pay more than they can because they don’t know what they’re doing. I’ve met people who didn’t know they could deduct their house mortgage interest.

  27. My MIL only knows two words about taxes “not enough” despite the millions (billions!) paid by the top 50%
    She also didn’t notice when Biden voted to tax Social Security (twice) and still didn’t notice when her medical insurance and taxes both got lower since the Revolution of 2016.
    TDS is rampant and the media is fanning the flames

  28. “Anyone may arrange his affairs, so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the Treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again, the Courts have said that there is nothing sinister, in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.” – Judge Learned Hand, dissenting opinion to Commissioner v. Newman, 159 F.2d 848, 851 (2d Cir. 1947)

    1. Learned Hand was channelling Lord Tomlin, who, writing for the House of Lords in a tax case, Inland Revenue Commissioners v. Duke of Westminster (1939 AC 1 at 19),

      Every man is entitled, if he can, to order his affairs so that the tax attaching under the appropriate Acts is less than it otherwise would be. If he succeeds in ordering them so as to secure this result, then, however unappreciative the Commissioners of Inland Revenue or his fellow tax-payers may be of his ingenuity, he cannot be compelled to pay an increased tax.

      Note that Hand was dissenting, but in the vindicated as being correct.

  29. My accountant calls trying to structure your year end finances to pay as little tax as possible as “tax efficiency.”

    Based on the NYT article, Trump has accountants who understand that tax efficiency is good!

  30. I would love to just have the entire tax code deleted and rewritten in plain English we can understand, but I know that’ll never happen because these same breaks that Trump takes advantage of are the same breaks people like Bill Gates, George Soros and Tom Steyer use to keep their money. It’s just not frowned upon because they write checks to the “correct” people.

  31. The first Tax Partner I worked for gave a short talk to us new guys on the concept of “fair” in relation to the profession of Public Accounting and what he would do to anyone who felt like the clients should pay more for the same reason…. I only recall the impression it left on me, a truly masterful rant.

  32. “[I]t is perfectly okay to get mad at congress for writing stupid laws and needlessly complicating everything with their endless meddling. But it’s stupid to get mad at the people for obeying the laws that are in place.”

    This. Absofuckingtively this. Plus, let’s hear from Judge Learned Hand:

    “Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.” — Gregory v. Helvering, 69 F.2d 809, 810 (2d Cir. 1934)

    “Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.” — Commissioner v. Newman, 159 F.2d 848, 851 (2d Cir. 1947) – dissenting opinion

    1. Biden has imposed upon himself a “public duty to pay more than the law demands” lest he be outed as a hypocrite (again!).

      The fool Biden has by his own cant worked a hex upon himself.

      Pay up, Joe Biden. Lay down your head and pay…

  33. IRS is Internal Revenue Service, check; and SBA, I assume, is Small Business Administration; but may one dare to ask what does “DCAA” stand for?

      1. Not to be confused with the DCMA (Defense Contract Management Agency). I’ve had to deal with audits from both. Very, very not fun.

  34. Let us also not fail to note that businesses don’t pay taxes, they are merely the middleman between the government and the consumer. They are the collector.

    1. Let us not fail to note M Puckett’s self reveal of never having taken an Introduction to Microeconomics class and passed it.

      There is always a portion of taxes that businesses can’t pass on to consumers, assuming that the businesses are trying to maximize their profits.

      Here, M Puckett, try the following thought experiment: If the State imposed a negative tax on your businesse would you expect the consumers that patronize those businesses to capture 100% of that negative tax the State paid to those businesses? If you don’t expect that to occur, then why do you suppose businesses can pass 100% of conventional taxes onto those same customers?

      1. Every cent of all taxes I pay, be they income tax, sales tax, excise tax on fuels etc comes from one source – the people to whom I sell reproduction car parts. My customers.

      2. Micha:
        Hate to bust your bubble, but income and outgo are different. Taxes are just as much an expense as steel or plastic to make a product. A gift from the state would be just that – the business would just drop it into it’s profit line.

      3. If your economics professor proposed that absurd “thought experiment”, he or she wasn’t qualified to teach; and if you can’t grasp the flawed premise, you weren’t qualified to learn.

  35. Excellent article Mr. Correia –

    everybody who dislikes an outcome becomes an expert on why it should be illegal, wrong or whatever. i see it in my field, when someone gets upset that the sentence imposed is less than they believed deserved, or someone ‘gets off’ on a ‘technicality’ like an illegal government search and seizure.

  36. 10 years of being audited, you’d ‘think’ the IRS would have found something… And honest reporting is NOT high on the NYT’s list of things to do… I pay my accountant to minimize how much I pay the IRS too! Well done, Larry! Honesty, what a concept…

  37. THIS. I know nothing about accounting and I’m certainly no expert, but I’ve done enough freelancing (though not anymore, thanks to that AB-5 POS, but I digress) to know what a terror the tax code can be to ordinary folks like me.

    To paraphrase the late, great Robert Heinlein, “There ain’t no such thing as a ‘fair share'”. Especially when it comes to taxes. I wish that Wilson hadn’t managed to ram through the 16th and 17th Amendments, but he did and now we have to live with them. And there is no sin in minimizing how much the government takes.

    In closing, I’m heartily sick of all the illegal leaks from the Democrats, their deep state minions, and their slimy media enablers. I really want to see one or more scalps from whoever illegally leaked Trump’s taxes, if these turn out to be the real thing (as Larry says, this IS the NYT, so we should assume it’s fake until proven otherwise).

  38. According to one of my tax professors: The definition of ‘loophole’ is a tax benefit you don’t qualify for.

    I’ve had a lot of real estate developers as clients. They seldom pay much in taxes. Why? Because, due to depreciation, most real estate developments, for the first 10 – 15 years, are cash flow positive but throw off tax losses.

    For example, say DJ Greed builds a new office complex for $50 million. Greed would need to receive $50 million in rents (over and above his operating costs) before he makes a dime in income. That can take several years. The tax law recognizes this economic reality by allowing Greed to deduct the cost of the office complex over a number of years.

    Eventually, Greed will run out of costs to deduct against his rents. What does he do then? He develops another piece of real estate. As long as Greed keeps spending enough on new buildings (and renovating his older ones), he’ll have very little taxable income. Which is okay. His development activities are creating a lot of good-paying jobs and his developments help other actors in the economy to be more efficient — benefiting all of us.

  39. I would add what I will call the Obama point: at a certain point you’ve made enough money. I don’t mean it the way Obama did, but as the reality that when you have enough money in secure investments to live on the rest of your life, you’re left with the question of what to do now: Do you just stop working and producing, and go on a permanent vacation? Or do you continue to build things, produce things, and employ people?

    Once you’ve taken out all the money you’ll ever need, everything else from that point on can be sent back into your businesses as investment. Your income can essentially be nil–you just pull out of your savings what you need to live on at the moment (and that would mean paying capital gains taxes, not income taxes)–but your *wealth*, the value of those businesses you continue to invest in, grows.

  40. I am not an accountant (married to one, but she is non-practicing stay at home mom); and I did NOT sleep at a Holiday Inn last night. However, i would like your take on this. My “go to” comment on this tax stuff, especially in this case, is that the US does NOT tax wealth. We tax income. That is why people who are wealthy and who get most of their income from capital gains only pay 15% on their income. It’s usually the upper middle class guy who worked his ass off to get to the top of the lower tier of upper management and who is going to retire in a couple of years who winds up in the upper income tax bracket. That is why I argue against the so-called progressive tax code…in fact, I despise income taxes. There are other ways to raise the money…but at any rate, I would love to see your comment on what I say above and love your books and columns.

  41. Point of Clarification. Since this is NY douchbaggery, I presumed that the claim was he evaded NY State taxes, not Federal. NY is it’s own sepparate level of hell after all.

  42. The Tax code is necessarily complicated and as such is just a “Lawyers and Accountants Relief Act.” Imagine how many people would be out of work with out it.

    1. For all those curious about the origins of the stated position that no one should pay more tax than owed, here is a quote from Judge Learned Hand, “ Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.”

    1. I worked for a long time for a small division of the largest defense contractor, doing work for a big civilian space agency. The agency farmed out the procurement regs to DoD and used DCAA as auditors.

      One of their audits was to show up and ask random employees to produce their time sheet and the supporting documents allowing them to work on those charge numbers. One year I got chosen. I had an up to date time sheet in the computer. I was asked about work documents, pulled out a file from my desk with the work documents and remarked that if I was assigned new work that the department clerk had a binder of the work documents so I could get a copy. The auditor was satisfied, and the manager assigned to watch the auditor gave me a thumbs up on the way out of my office.

      HOWEVER, we ended up with a problem. All the employees they had talked to had up to date time cards and work documents. The DCAA then decided that this meant we were up to no good, did another random sample walkaround, and crawled all over the computer audit trails until they found someone that had filled out a timecard late. Cost us a bunch of time and money.

      1. Case when I was working at the Space Center in Houston back in the ’70s… One of these auditors reported that many software engineers were sitting at their desks working crossword puzzles.

        It turned out the “Crossword puzzles” were, in fact, coding forms, which the “auditor” had no clue what they were, and didn’t ask.

  43. This man sold his soul to the devil, and then fined the devil for failing to list that soul as a depreciable asset.

    Isn’t a soul an intangible asset and thus subject to amortization and not depreciation?

    (CPA / tax dork here, sorry if the humor falls flat)

    1. Surely determining whether that soul was a tangible or intangible asset that would depend upon Satan’s use (or abuse) of the asset. Most intangible assets are atomic in nature: all or nothing. You cannot carve a patent or copyright into pieces. So the real question becomes whether Satan can actually rend a soul or cut it into pieces.
      Since I have no desire to litigate with Satan, about his powers of ‘soul-handling’, I think the determination is: tangible and depreciable.
      Of course, which *class* is another argument again, as a soul does not wear out…
      Maybe a soul is a tanglble asset, but not depreciable, like realty?

      1. That depends. Is it like “Screwtape Letters”, where souls of the damned are consumed by devils (along with underperforming devils)? One epilogue has Screwtape proposing a toast with a vintage of “Pharisee” that’s been ground up and mingled.

    2. If someone at NYT urged/encouraged/coerced or otherwise manipulated someone with access to those tax records to access them and pass them along, that should be conspiracy and the NYT someone would, I expect, be in violation of the law.

      Precedent says if someone got those records on their own, then passed them to an NYT contact, there would be no LEGAL wrong doing on the NYT side.

      Answer is to find whoever did it and apply the legal penalties… every time. Or even half the time. That would adjust the risk/reward ration to discourage it more.

      But I am somewhat appreciative/respectful of the types who find wrongdoing in government, “illegally” obtain and pass along evidence, and accept the consequences. Those are patriots.

      The weasels who who do it anonymously can go…

  44. Makes me want the fairtax[dot]org even more.

    All these Leftist idiots complaining about the loopholes and complexity are the same nitwits that would support an income tax system prone to such abuses in the first place.

  45. I remember in one of my first accounting classes at BYU the instructor said “it is your moral obligation to pay every penny of tax that you owe. It is also your moral obligation not to pay a penny more than you actually owe.” I don’t know any person or company who doesn’t think that way about their own taxes. I’m sure there are some, I just don’t know them, and they are idiots.

  46. Thank you for the entertainment! I never thought that someone writing about tax codes could be both informative and make me laugh.

  47. The “like” and “share” button aren’t working, at least for me and a few others on Instapundit. Didn’t know if you knew. Also, at least three times in a row, I got a 504 error message when I tried to come here to read your excellent article.

  48. Bitting themselves in the head with that brick-sick is the wrong body part nothing in their empty heads to damage

  49. Something I learned years ago is that a good accountant can make the balance sheet and tax returns say just about anything they want it to. Without the underlying information Trump’s tax returns are meaningless. I also suspect that any vigorous audit would likely result in the IRS paying Trump rather than vice versa; something the IRS hates doing.
    .
    The end result of releasing 10 years of tax records is a big nothing burger; another failed attempt at creating a scandal with one exception. What few are addressing is that while someone may release their tax records, it is a felony to release or publish someone’s tax records without their express permission.
    .
    The only way to make this stop is by vigorously enforcing this law. No attempt at breaching journalistic privilege. We don’t care where you got the information from. The journalist & everyone they report to go to jail. I suggest the federal Super-Max.

  50. You mentioned the 100 tax estimates from the 100 tax prep agencies. Money Magazine put together this exercise in the mid-1980s (the exact year escapes me). The estimates taken together essentially formed a bell curve, with the highest tax being several times the lowest.

  51. Funniest tax column ever! God I wish my accountant had a raven with an eyepatch, with a CPA degree. But I’ll keep Dale because A. I trust him. B. He was partners with a buddy of mine until said buddy passed (God rest you Paul, may your numbers always add up) and C. Back when Paul did my taxes, Dale would then double check them- 2 accountants for the price of one! One year Dale caught a $500 error . He told me but I think he kept it from Paul. Anyways, I slipped Dale a $20 and a handshake. That’s accounting!

  52. yeah haha I passed the CPA exam in 99 after I had already decided to learn to code

    therefore have zero actual professional accounting experience

    but can share the existence of schemes of tax minimization so convoluted that lawyers argue their minutiae in court for years

    suspect political contributions are a factor when sums reach a certain size

  53. I look forward to the next Monster Hunter Nation story, which involves, as the antagonist, the soul-less Orc from the IRS.

    1. It’s clearly established that the Orcs are good guys. Maybe Skippy has a brother who’s talent is total understanding of the IRS code, supporting documents, and court decisions. He has an Eye Shade of Accounting +5 and a Pencil of Bountiful Deductions +5.

      1. Oh man, this totally needs to happen.

        MHI is AUDITTED! Fortunately, there’s an Orc who magically understands the tax code.

  54. That tax exercise (family of 5, etc) was run by Kiplinger’s Magazine for a number of years. It was dropped sometime in the 90s, I think, because the Big 8 (as it was then) flat refused to play, as did most midsize firms. They got tired of looking like fools in print. They weren’t, but the majority of readers had zero idea how complex even that simple return was. And no amount of explaining “this, vs that” helped. Everybody gave it up as a bad job. All it really demonstrated was that the tax code was too complicated for even a simple situation.

    In a vaguely related way, I was an ex-pat paying taxes to a notoriously grabby state (Wi), the US, and a notoriously opaque other country. Where I was in fact resident. A well known big 8 firm did all my taxes. Just for fun, I ran their results against a version of Turbotax. Got different answers of course. I threw that at our HR/finance guys, and said “who indemnifies me?” as it was the company’s choice to retain, take over my taxes, charge me a so-called hypothetical tax, and then pay all the bills. The resulting flap was galactic level hysteria. And hilarious. Went on for years.

    1. I know exactly how complicated a tax return can be for a family of five. I took a 400 level federal income tax accounting class for my minor, and we had to do such a return as a class project. Example was thus: Husband works with an employer, the wife is self employed with a “company” car, and they own a rental property together. They pay for the rest home costs of the wife’s mother, and own stocks, and cashed in some of those stocks to donate to the husband’s alma manor.

      The return would up being 15 pages or so, Schedules A thru E and SE, Schedules 1 3,4,5, and five forms on top of it.

    2. There are countries where you don’t have to do your own taxes. In Belgium they just send you a bill (with explanation in case you disagree with it). In Japan your employer does the tax return for you.

  55. I’m confused. You seem to be conflating Odin and Gandalf. Are you saying they are the same?

    Odin was a death god who liked to sew conflict among men so that his valkyrie could choose nine champions to reside at Odin’s feast hall. Gandalf was one of the istari – an angelic being in a corporeal shell sent to help elves and men against Sauron.

    Personally I’d rather have Odin doing my taxes. His ravens brought him all the news of the world.

    On a more serious note, someone at the IRS has to be quaking in his shoes right now. I spent decades working with municipal taxes. We had access to IRS data and, as a condition, we had to have annual training on confidentiality and regular audits with the IRS to prove that we had an audit trail that would alert us if someone accessed an account without authorization.

    Whoever leaked Trump’s returns is facing five years in prison.

  56. They always think they know better than anyone else, don’t they? They know more about the military than actual military people, they know more about taxes than actual accountants . . .

  57. Ir was on the April 15th of that fateful year, that Johnny Carson brought out a man of serious demeanour, dressed all in black. He spoke in an oleaginous and lugubrious manner cloying and condescending at the same time, like an undertaker.:
    “This is an important date in the secular calendar. So the first reading is from the 26th part of the Code, subtitle A”
    And he recited a section, subsection, paragraph and subparagraph so quickly that I was unable to catch them. He read on:
    “The amount by which the amount by which the amount determined above exceeds the amount by which the amount determined by subsection a) paragraph 1….
    I heard no more, as the roar of the audience overcame all….
    And Johnny cried and cried, tears of mirth.

  58. These “loopholes” exist
    Yes, and they used to be called “loopholes” because they were some way that the legislature left (often unintentionally) for someone to take advantage. Sure, they wanted to encourage “X”, but they didn’t define it well enough, or they forgot there were already laws defining it two different ways, and someone exploits that to pay less. They are often arcane and require the sorts of people to find them that humans often consider less than virtuous.

    That being said, the problem is NOT people wanting to pay less in taxes, but that the (wannabe) masters of our fate like to think they have a right to impose such burdens, taking our money to do so. (And the ones who actually build carve-outs for someone or some class because of lobbying. Blecch.)

    (or what favors they are doing for their friends)
    There, you said it better than I did.

  59. It is this complexity that makes it hard to figure out what anyone actually owes.
    And that makes it seem “unfair” to those of us who can’t afford a brigade of lawyers and accountants to find and exploit the hidden charms.

    Having said that, none of us could take advantage of them, anyway, since we don’t make enough money, or we don’t spend enough (you know how hard it is to spend 2% on “business expenses” unless you run your own business? Of course you do, Larry), to actually take advantage of them.

    But that disconnect makes it seem unjust to regular people.

    1. “A brigade of lawyers”.
      What an interesting phrase. It prompted me to look up actual manpower. In the USA, we have:
      1.33 million lawyers.
      1.12 million uniformed personnel on active duty.

  60. “Second, “loopholes” is a term most often used by people who don’t understand accounting or tax law…”
    Or gun law.

  61. A couple of comments.

    First, these NYT idiots heads would explode if they knew that tech billionaires like Zuck will never have to pay taxes. Why? They take little or no salary from their company. They own companies that don’t pay dividends. How do they live? They borrow against their stock. (To be fair, he paid a whopping tax bill when FB went public, because he exercised a bunch of options that allowed him to buy shares for 6 cents when it IPOed for over $40. He paid capital gains taxes at the lower rate,) So, they go to a bank, pledge shares as collateral, and get cash and a very good interest rate. Rinse and repeat. When they die, their heirs get a step up in taxable value of the shares in the estate and liquidate them for little or no taxes to pay the loans back.

    Sweet, isn’t it. Warren Buffett pioneered this, Gates and Jobs refined it.

    Second, one of my lefty poker buddies was outraged that Trump paid $150,000 in Philippines income tax in a year he paid less than $1000 in the US. So what, I said. He had income there, paid taxes there, and would have been liable for US tax on the money also, because unlike almost all of the rest of the world the US taxes income made in other countries. Why did he have income there? Well, maybe from book sales. Or licensing his name. Or maybe because there was a Philippines version of The Apprentice and Trump owns a chunk of the show.

  62. “Now, it is perfectly okay to get mad at congress for writing stupid laws and needlessly complicating everything with their endless meddling. But it’s stupid to get mad at the people for obeying the laws that are in place. ”

    This right here sums up a huge amount of our political and national problems. Politicians make crazy decisions, people who understand those decisions find ways to leverage it for money, then politicians blame the people and everyone goes along with them.

    As an example I remember reading a book talking about how Chris Dodd and Barney Frank were bold reformers to hold the banks accountable and changing systems to protect us against another 2008 (
    Dodd-Frank Wall Street Reform and Consumer Protection Act). Turns out they had both been leaders of defending Fannie Mae from audits and accountability for how they were getting “creatives” in packaging .

  63. I recall long ago and in a galaxy faraway, an escaped hobgoblin by the name of Gordon Brown somehow managed to parley his doleful visage and autistic personality into the British Treasury Secretary job.

    He decided, much against type, that he was going to encourage new businesses to bloom by introducing a ZERO rate of corporate income tax on the first $30,000 or so of profits. At the time he was warned that this, though generous, was not necessarily wise. But he was not much for listening, being the cleverest man on the planet, in his own estimation.

    Not 18 months later, he announced an immediate clampdown on people who had been scandalously exploiting a LOOPHOLE that had “cost the British Treasury billions”, as tens of thousands of existing small businesses had incorporated to take advantage of the $30,000 zero tax band. Who would have thought it ?

    From incentive to damnable loophole in 18 months.

    What Larry Said.

  64. ????????????. You are so on point!! And DCAA audits are a royal pain in the ass. I’ve had to tax prep my company for several years now. If people only knew the “loopholes” allowed more people would be for a flat tax.

  65. For those of you just hearing about Larry for the first time, he wrote this on his phone during lunch- he also writes books (which take a bit longer) 😀

  66. You are totally wrong, Larry.

    I am a gullible moron for an entirely different reason.

    (That being said, “Dunning-Krugerrand” is now and forever a part of my vocabulary. Thank you.)

  67. Biden saying how much more taxes he paid than Trump should not be looked at as an attack but an admittance of incompetence on his part. To not use your resources to find all of the legal methods to reduce your tax burden is idiotic. Trump having a lower tax than Biden just proves he has a better understanding of the tax system or at least has the intelligence to hire those who do. Unless you are putting in a large sum on the final line of the tax form that asks if you want to make any donations to the government, to claim you are paying more taxes than someone else does not make you a better person, it proves you are a dumber one.

    1. ‘Trump having a lower tax than Biden just proves he has a better understanding of the tax system or at least has the intelligence to hire those who do.’

      More likely Biden pays more tax because his personal revenue stream is of entirely different composition than Trump’s and thus is taxed at differing rates and gets differing deducts.

  68. After I was diagnosed with multiple myeloma, a friend called my attention to the class action suit against Monsanto and Round-up. I think it’s based in shitty science and a jury swayed by emotion. But if they’re handing out money, I’ll take some.
    As it turns out, they’re not handling MM cases. But if they start, I’ll get a call back.
    Why leave money on the table?

  69. I suddenly find that I want just one thing – a drawing of Trump’s head CPA. And his raven. Featuring eye patches and their framed diplomas.

    Nothing fancy, a pencil sketch will do.

    Having them facing off against the IRS Demon with the Finnish death-metal band would be … too much joy for my aged heart to handle.

  70. Spot on piece! Beautiful exposition. Yes, an actual remark from a speaker in answer to a question at a New York City tax symposium, “Actually you can do anything you want as long as you’re not audited.” . It took minutes for the laughter and applause to die down.
    Andrew W Mellon, Secretary of the Treasury, titular head of the IRS (they answered to him), Republican Saint, and supposedly third richest man in the world all at the same time. Under him the IRS went after the old Boston & Maine Railroad over “retirement accounting” over the railroad’s car trusts. These were equipment trusts for railroad cars with the trust owning the cars and NOT the railroad. Once a trust was paid off, usually about 15 years, then title finally went to the railroad. Depreciation–it’s a fundamental “fact” you “must” own something to depreciate it. The B&M fought Mellon’s IRS all the way to the SCOTUS TWICE to win their point and today “retirement accounting” is a firm part of tax lax and now even mentioned in the statutes. But it was A. W. Mellon who made the tax lawyers work for a living. However Mellon never was successful in getting tax-exempt municipal bonds abolished. His idea was that the “rich” should not be encouraged to become idle couple-clippers but instead should be encouraged/forced to hazard their fortunes. He recommended ending tax-exempt municipals in each annual message he sent to congress. As of now–that still hasn’t happened.

  71. My sole and unenlightened comment is this: Trump donates his Presidential salary of some $400k a year to various agencies to help support their work. Why, yes, there is a list:

    2017
    Q1 National Parks Service
    Q2 Department of Education
    Q3 Health and Human Services
    Q4 Department of Transportation

    2018
    Q1 Department of Veterans Affairs
    Q2 Small Business Administration
    Q3 National Institute on Alcohol Abuse and Alcoholism
    Q4 Department of Homeland Security

    2019
    Q1 Department of Agriculture
    Q2 U.S. Surgeon General’s Office
    Q3 Office of the Assistant Secretary of Health
    Q4 Department of Health and Human Services

    So, while there is undoubtedly income from other sources, $400k of donations certainly has an impact on his returns. If all of his other assets are held by trusts as is generally required for public figures and he’s donating his salary, yes, it is very possible that paying $750 a year is a proper tax on his personal income which may be a very low net number. Please note that personal income is not at all the same as that earned by, reported, and paid by corporations (except for S-corporations but, of course, as the Marquis of Moose Mountain already pointed out, that requires all relevant documentation not spitballing in the dark).

    1. There’s no blasphemous material in Larry’s post, unless you’re a worshipper of Odin and think he’d be insulted by the CPA thing, or if you’re a Satanist with objections to the soul lawsuit. Thus, no profanity whatsoever.

      The word you want is “vulgarity.” And frankly, I don’t think Larry’s choice of words is vulgar at all. His taste is excellent. Perhaps one might speak of it being “highly salted.”

  72. I just graduated with a CompSci degree this summer,and got an accounting minor to go with it. The ignorance running through the internet is so dense not even light can escape.

    Weapons grade idiot.

    I have given up trying to explain how Trump can only owe $750 on top of the already remitted quarterly estimated tax payments he made over the relevant tax year. People just want to believe what they want to believe.

    I decided to do accounting for my minor because of all the bookkeeping I did running my unit operating funds over my 20 year Navy career. How little did I know that accounting != bookkeeping. 🙂

  73. “…we should metaphorically put a brick in a sock and beat them over the head with it until they shut up.”

    Larry, you are showing your softer side again. Why “metaphorically”? I choose “literally”.

    1. I had to stick the metaphorically in there so I could post this to Facebook and not end up in jail again for Inciting Violence. 😀

      1. Well, metaphorically speaking, if you are going to whack on somebody, a solid object in a sock is a poor weapon. A readily available common-place object, which would be much more effective would be a baseball bat. And you would not tear a perfectly good sock.
        There are some considerations, however: you should NEVER use a wooden baseball bat. You wonder why?
        Three reasons: 1) you can *break* a wooden baseball bat;
        2) an aluminium baseball bat actually hits *harder* (it deforms and springs back, thus delivering more energy: there is a good reason that alu bats are not used in the majors), and
        3) you cannot get blood residue out of the pores of wood of a wooden bat, nor can you effectively destroy that blood residue so that DNA cannot be recovered. On the other hand, a quick wash and wipe down with bleach will ‘sanitize’ an aluminium bat.
        (Insight gleaned from an employee of the Ontario Centre for Forensic Science, who was involved on a daily basis in extracting DNA from ‘items of interest’, one of which was a broken wooden baseball bat. The wielder of said bat was convicted.)

  74. Please please make that grizzled eyepatch cpa and eyepatch raven and soulless auditor demon characters in the monster hunter verse!!!

  75. Oh thank God. We needed a Larry take to counter all the STUPID being posted everywhere. Appreciate you taking time away from GETTING PAID time to dip back into the old waters.
    Also, I just missed a good ole Larry ass-chewing.

  76. Many years ago I was in Panama not long after Noriega was removed. The hotel room that I was staying in overlooked the BCCI building and from my window, I could see the investigation Auditors working, boxes upon boxes of paperwork being closely looked at.

    It was almost like Warren Zevons “lawyers, drugs and money”

    1. Umm, Warren Zevon sang of “Lawyers, Guns And Money” in 1978.

      In Panama, what you saw might have BEEN lawyers, drugs and money, but that’s not quite the same as WZ.

  77. The fact that you always know what you are talking about is something I greatly appreciate.

    Now fair tax systems have been proposed over and over again, Its called a flat tax and there many variants (X over minimum, flat for all , progressive but flat)

    The thing is neither side wants to give up using the tax code to reward friends or desired conduct. So we get what we have here and if our President can manage to use the current stupid system legally to avoid taxes , good on him.

  78. My pop was an IRS agent at one time (1950’s). He ended up leaving because of the heavy handedness of the IRS. He said they could walk into a bank or business and shut them down, for whatever reason they could come up with. He didn’t like that they could screw someone’s life if the agent decided to.

  79. You may be overly generous in your estimation of the President’s accountants/tax lawyers. The President may not, in fact, get the top professionals to work for him. The President has shown that he has a preference for professionals who tell him what he wants to hear. He has also shown a propensity to hire folks who work cheap/free. He also has a history of not paying his bills. Thus the truly excellent professionals will not accept him as a client.

  80. Am watching this with interest. Do taxes in Canada and we have similar issues except that no one has disclosed our Prime Minister’s tax filings. Which would be interesting, given he’s the beneficiary of several trusts. When he maligned ordinary business owners as “cheats” because they were amassing assets in their businesses to finance their retirements, and penalized them, he somehow neglected t do the same for testamentary trusts of long standing, from which he benefits.

    However, I am reminded of saying which is of British origin: “No one is compelled to organize his affairs so His Majesty’s tax collectors can then insert their largest shovel.”.

    1. That reminds me of another famous English tax policy dating back to Henry the Seventh, called Morton’s Fork, whereby the thrifty were ‘asked’ to contribute more to the King’s Exchequer as their frugality enabled them to and the profligate were ‘asked’ to contribute more to the King’s Exchequer since their wastrel ways made it obvious that they could afford to.

  81. Judge Learned Hand:

    #4 Any one may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one’s taxes.

    Gregory v. Helvering, 69 F.2d 809, 810 (2d Cir. 1934)

    #5 Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.

    Commissioner v. Newman, 159 F.2d 848, 851 (2d Cir. 1947) – dissenting opinion

    1. Not quite any amount.

      If you read the instructions for Form 709 (gift tax return), someone actually found it necessary to point out that IRS cannot accept a payment of $10 million or more by check.

      Awww.

  82. A farmer friend of the family always did his own taxes and wasn’t one to take advantage of itemization or most other “loopholes” he was entitled to under the tax code.

    The IRS audited him, in the middle of harvest.

    Turned out the government owed him a pretty decent pile of money.

    From then on he hired accountants and made certain he only paid exactly what was owed and not a penny over.

  83. “@BarackObama who wants to raise all our taxes, only pays 20.5% on $790k salary. Do as I say not as I do,”
    — Donald Trump, 2012

  84. “Nobody willingly pays the government more than they legally owe.”

    There’s Department G over at the Bureau of Fiscal Services for people who do want to pay more taxes. I assume they net a few bucks or they wouldn’t have bothered setting it up. I carry their address around with me to give to people who tell me that we should be paying more taxes. “Fine,” I tell them. “Here’s how to do that.” It’s surprising how often I’ve dragged that address out; it’s less surprising how often it freezes their brain.

    Also, I don’t think souls depreciate. Satan should be able to fight that suit.

  85. Off the topic of the post, but I see President Trump has received a third nomination for the Noble Peace Prize. Is someone trying to do a ‘sad puppies’ to prove how biased and worthless the peace prize is? Because it seems to me to be a wasted effort, that point has been made long ago.

    1. Yep, Trump’s been nominated again. So has Biden.

      In fact, any national-level politician (senator or representative) or university professor can nominate someone–all nominations are accepted. The name of the nominating party is kept secret for 50 years.

      Just info

  86. Before she suffered a severe brain injury that left her an invalid, my mother taught a class on investments and money management for a long time. She always said that anybody who doesn’t take all possible deductions and take full advantage of the way the laws are written, and pays more taxes in consequence, was a fool.

  87. “Every single person who barks about how somebody else should be paying more? They themselves are paying the minimum they can get away with. As they should. As should you.”

    This deserves to be made into a brand that should be burned into the flesh of all the morons who became instant tax experts as of yesterday.

  88. The scandal is not how little he paid, but how much he lost and how much he owes – and to whom (and whether his losses match what he showed lenders to get loans). A president owing $1.1bn, much of it to unknown foreign lenders, is a national security problem.

    1. It’s accounting 101. You can’t draw any meaningful conclusions based upon one (unverified) line of a balance sheet. You need the rest of the data for context.
      Quit being a Dunning-Krugerand.

    2. Wise William is Hella Herold correct!

      The Proudest Boy lost money on business after business until he had to put himself into debt to Russian intelligence!

  89. Your tax class story reminds me of an incident in my administrative politics class in my MPA program.
    We were divided into groups, given background on our fictional department’s mission, workload, and budget, then handed a memo saying that we needed to identify how to cut 10% from our budget – 30 minutes later, we had to do a presentation in response. All the other groups identified cuts -mine broke down the workload, identified how demands were increasing, and asked for a 10% budget INCREASE.
    Students in the other groups immediately started criticizing us for not following the instructional memo. After a couple of minutes of this, the professor (Roby Robertson) jumped in and read them a riot act: “THIS IS NOT A BUDGETING CLASS! IT IS ADMINISTRATIVE POLITICS! The rest of you just told the Governor that you are WASTING 10% OF YOUR BUDGET! You guys are going to see cuts, they will not – and may get some of the money cut from YOUR budget!”
    It helped that three out of the five of us in my group worked in agencies (one was the head of one and a former candidate for LT. Governor) and had experienced this in “real life.”

  90. I knew there was a reason Democrats didn’t just send all their excess money above basic living expenses to the government like they preach for everyone else! I’m not even a little bit of an accountant and I can still see the utter moronocy (yes made up word) coming from these idiotic children on the left crying over pretty much anything Donald Trump does, no matter how completely appropriate or normal, all because after ~40 years of being a public figure with no sign of it whatsoever, CNN told them he was racist.

  91. People don’t seem to understand what an actual LOOPHOLE is.

    It’s when a law is abused by exploiting technicalities to achieve a result which goes against the original intent of the law. It is NOT a matter of doing what the law actually was intended for, which in all but a handful of cases is how tax law (and law in general) actually works.

    I don’t know what the specs are in Trump’s taxes, because the NYT won’t release them – weirdly enough for what’s supposedly a bombshell scandal report – but what they DO say in their own article is that Trump OVERPAID his taxes by millions. They report that he actually owed NOTHING thanks to massive tax credits which include things like renovating historic buildings, but because he wanted to delay filing his 1040s he had to pay the assessed amounts up-front… and he DID.

    Because of all this, Trump actually has a LINE OF CREDIT WITH THE IRS RIGHT NOW. He told them to keep the money he overpaid against future tax liabilities… and that’s according to the same exact New York Times article which starts off claiming he “paid $750” in 2016 and 2017. Yes, he did pay $750 – plus a million in 2016, and plus $4.2 million in 2017.

    I’m reminded of a scene from “Doctor Strangelove” in which the Russian ambassador informs the American President that the Soviets have created a doomsday bomb expressly because they thought the Americans were doing the same – and that, because the New York Times erroneously reported this was the case on basis of a study (conducted by Strangelove himself) which concluded the whole idea of a doomsday bomb was inherently stupid.

  92. I don’t think you understand what a “loophole” is. If the law is written in such a way that the people who have more resources can exploit it so that they pay less without technically breaking a law, that’s a loophole. Whether it’s a loophole or a poorly written law is a distinction without a difference.

    1. That’s not remotely what a loophole is, Patrick.

      A loophole doesn’t have to have anything to do with what someone pays for anything. It’s also something that can be exploited regardless of your “resources”; if a loophole exists in law, then it exists for everyone. There is no “except if you have X amount of resources” clause attached to any of these laws.

      I will give you an example of a real loophole that I have exploited, myself, to get on the ballot for the Governorship of Arizona back in 1998. With all of NINE petition signatures. On a $1,000 campaign.

      As of 1998, Arizona election law defined “major party” as any party whose Presidential candidate had obtained at least 5% of the popular vote in the most recent general election. Candidates of major parties for statewide office required a mere one-half of one percent of their party’s members to sign a petition in order to get ballot access. This effectively shut out most third parties, whose Presidential candidates habitually got 2% or less in such elections and who therefore had to meet much more onerous qualifications for ballot access.

      Well, in 1996, Ross Perot obtained 8% of the popular vote as the Reform Party Presidential candidate. So in 1998, we qualified for “major party” status. With all of 800 members in the entire state. Do the math, and you’ll see why in 1999 the Arizona Legislature changed the standards for “major party” status.

      THAT was a loophole – two parties rigging the system to shut out competition, and being hoist by their own petard even if only momentarily… and that by a member of the working-class poor with a four-digit campaign fund.

      No, Patrick, loopholes aren’t about how rich you are, nor are they about acting within the scope and intent of the laws as written, like Trump did. They’re about doing things that the law’s creators never intended, like *I* did.

      1. I still don’t see the difference. Everybody else here seems to think it’s funny that you can ask a hundred different accountants how much the same family owes and get a hundred different answers. I don’t find that funny at all. You can lay some blame on the people who wrote the laws, but yeah, I think some of the blame falls at the feet of billionaires who spend all their time looking for obscure laws to use so that they can claim a bunch of write-offs and deductibles that most people don’t know about. It’s as if you think that the guy who makes $1,000,000,000 dollars a year but finds a way to pay $4.38 in taxes without breaking any laws has “won” somehow. Maybe it’s not about winning. If Warren Buffet pays only $4 in taxes, then he is an asshole in my book, even if it’s perfectly legal.

        “A loophole doesn’t have to have anything to do with what someone pays for anything. It’s also something that can be exploited regardless of your “resources”; if a loophole exists in law, then it exists for everyone. There is no “except if you have X amount of resources” clause attached to any of these laws.”

        Effectively, that is the same thing as a loophole. If you can afford good accountants who can find the fine print in a tax code that is so long that literally no one has the time to read it all, then that works the same as the “loophole” you describe. I’m not interested in the intent of whoever wrote the laws, I’m interested in the outcome. This entire blog post is just one big excuse for conscienceless capitalism, and what’s sad is that I might agree with some of it. But the rest is sheer ignorance.

        1. This whole argument brings to mind something I read by Robert Kiyosaki, author of Rich Dad Poor Dad. He had a saying that “A students work for C students, while B students work for the government.”

          He explained that your typical entrepreneur was a C student who was making a business in high school, so only worked in school enough to pass. Meanwhile, your A students became highly skilled professionals, Lawyers, Accountants, etc. who then were best of their profession and paid good money to do the taxes of the much higher earning entrepreneurs. Meanwhile, B students tended to be decent students who took decent, safe jobs for the government (disclosure, I’m a government employee myself).

          End results was the best worked for the rich, the good to average worked for the government. This in turn means that the “tax the rich” ended up inevitably failing because average people were writing laws that the best then could find gaps in to use to protect their client. So, taxing the rich would miss the rich and hit the middle class, until best practices trickled down or politicians and bureacrats re-wrote the tax code again, and ended up in the same place. In the end, the politicians told the little guy they were for them and against the rich, but ended up soaking the little guy over and over again.

        2. “I’m not interested in the intent of whoever wrote the laws, I’m interested in the outcome. This entire blog post is just one big excuse for conscienceless capitalism, and what’s sad is that I might agree with some of it. But the rest is sheer ignorance.”

          This little section of your screed sums up your flawed thinking.

          This entire blog post is pointing out to you in clear, concise, colorful English that the laws you don’t seem to give a flying fig about are there to protect taxpayers, which presumably includes you.

          Tax policy is not “capitalism”, so you might want to project elsewhere about “ignorance”. I suggest re-reading the title.

  93. From what i understand (this may have already been mentioned in one of the hundreds of other comments), Trump paid estimated taxes the year before. He paid 1.4 million, and 4 million, respectively. it was then found that he owed $750 more, each time. Thus, technically, he only paid $750 that year, by simply ignoring and not mentioning the fact that he had already paid those millions.

    It’s not what you say, it’s what you don’t say, right NYT?

  94. The contest you are thinking of was put on by Money Magazine starting in 1987. My boss won the fourth annual competition and designed the test for the 5th. Go bean counters!

  95. We all take advantage of every tax break our choices and situations afford. I will not condemn anyone who takes full advantage of the benefits their choices afford them particularly when I have taken advantage of some of those benefits myself. As long time Expats we have pursued many of the foreign earnings advantages that the President benefits from. Taxes paid on foreign earnings in the countries where that income is earned are deductible from the US tax obligations of that earner. As for any debate on taxes, I am not a CPA. But I sleep with an MBA/CPA/Tax Manager every night. I am fortunate to have real time access to that expertise.

  96. With all this fuss about the years in which Trump paid no tax, or little tax, I haven’t heard anyone come up with a figure for his AVERAGE tax paid over that time period. This simple fact would make a huge difference to the discussion… so I think it’s safe to assume that it would be to Trump’s benefit. And so I’m happy ignoring the whole issue. Half of the story is no story at all.

  97. Just out of curiosity, where’s the best place to send your raven to get an accounting degree? Say that the raven in question doesn’t yet have an eyepatch but wouldn’t object to getting one as part of the educational experience.

  98. I pay a shitlocker of money to my accountants. Because as much as I pay them, they save me more than that every year.

    All the little dodges and deferrals and loopholes don’t amount to much. It is the overall strategy of where to put the money, how to sandbag it so the taxes don’t wash it away, how to make it earn in this environment where the interest rate is so low.

    I don’t know that stuff, and I do -not- understand how it works. My brain is not hooked up like that. Being able to hire a good accountant is a life saver. I do the work, they figure out how I can KEEP the money I earned. That’s a pretty big deal.

    As to Mr. Trump, if that guy figured out a way that he could make mega-millions and only have to pay $750 a year in US tax, then he is a god among men. If I were an American I’d vote for the guy based on that alone. He beat the IRS like that? Imagine what he could do to the ChiComs! He should be running the country!

    But he didn’t of course. He actually paid millions of dollars in tax every year. The NY Times -stole- his tax information illegally and then lied about what it said. Anyone with the personal integrity of an intestinal worm despises them for it.

    And by the way. For all the IDIOTS and English Majors out there proudly proclaiming that you pay more tax than you have to because you’re proud to support your country, you go right ahead and do that. If you think overpaying makes you the better man, you’re free to think that. Just don’t come crying to me when you need a ride to work because you can’t afford gas this week.

    For myself, I think I’m better equipped to decide what to do with MY money than some dork in a government cubicle.

    1. Interestingly, if the IRS thinks you overpaid your taxes, they’ll send what they think is extra back to you.

  99. Apropos of nothing, I’ll again exhibit my habit of veering off into irrelevancies by noting that the proper phrase, courtesy of Wikipedia, appears to be the “Dunning-Kruger” effect. As most gold bugs know, the esteemed Krugerrand remains to this day a storied standard of gold bullion coins.

    Hmmm, would a Dunning-Krugerrand then be a gold-plated moron? A golden round nugget of sheer stupidity? Oh, the possibilities for funniness! 🙂

    1. I would expect that a Dunning-Krugerrand is not solid gold, and the inside is not chocolate, either.

      1. The Dunning-Krugerrand is based on the product of people with the occupation of “dunnikin divers”, who dive in what Australians called dunnies (= septic tank or cesspool for USAians).

  100. What a terrible article- you’re so full of bias and hateful rhetoric. Congrats on offering nothing of substance to this intellectual debate

    1. If by “intellectual debate” you mean I interrupted your regularly scheduled ORANGE MAN BAD REEEEEEEEEEE session in order to explain how tax accounting works, I’m terribly sorry about that. 😀
      But I didn’t see any “hateful rhetoric” in there. My bad. I must have forgot. So here, I’ll add some. Get the fuck off my page before you injure yourself, you dope.

  101. What a bombastic crock of shit. I won’t enumerate *every* dumb thing in this post, but I’ll try to get the broad strokes:
    – “Taxes are really complicated, and everyone tries to pay as little as possible. So really there’s no fraud, just… different interpretations!” Yeah, tell that to the auditor when I claim all my visits to the bar as business expenses.
    – “I won’t engage on the specifics because the NYT sucks and stuff.” Aww I’m sorry you feel that way… but is there ANY evidence the NYT ever has or ever would publish a major document analysis without doing the proper due diligence? We’re talking about one of the few media outlets that actually still has a fact checking department here. Either way, don’t pretend it’s anything but a dodge — clearly you could do a generalized analysis on, say, whether or not it’s fraud to pay a family member as a salaried employee and as a $400k/yr consultant for the same job. Just for example. You don’t have to say the names “Trump” and “Ivanka.” Plus every indication since the release is that not one professional in his camp is going to go on record denying a single one of the specifics in there, and if that doesn’t tell ya something…
    – “The Left is obsessed with Trump cheating on his taxes.” Nahhhh. I mean, maybe some of them. But the argument you *don’t* want to address — the real one, not the straw man — is that based on these filings, at least one of three things must be true: A) Trump is a colossal business failure; B) Trump’s tax filings crossed the line from “creative” to “fraudulent” by a standard that you don’t have to be a grizzled IRS auditor to notice, or perhaps that a grizzled IRS auditor *wouldn’t* notice (kudos to NYT, for example, for matching the exact dollar amount of the “consultant” payments to Ivanka’s own income reporting); and/or C) the tax code is rigged dramatically in favor of the wealthy. Sadly there is evidence for all three here, even if you’re going to pull the ol’ “plug your ears and sing ‘la la la'” when it comes time to actually look at the documents.

    Sorry if I hurt your feelings here… I can tell they’re pretty strong on the topic *care emoji*

    1. Hurt my feelings? 😀 Bitch please, I was an auditor. Twerps like you are incapable of hurting my feelings.

      But anyways, thanks for providing an illustration of the kind of Dunning-Krugerands I was talking about. That was perfect.

  102. Entertaining, but the author promised he would tell us something useful, teach us something. Didn’t happen.

  103. Just a reminder that the NYT is a rag that covered up a genocide and, to this day, refuses to give up the Pulitzer it “won” for it.

  104. No one with so much at stake pays more than they are legally bound to pay, unless they are financially inept and cannot afford those top-shelf CPAs. Except I note that the NYT doesn’t mention the $400k salary returned in full each year since his election… I guess since it’s not technically taxes.

  105. I have twice got small extra refund checks from the IRS and one from a state – they decided I overpaid and sent me back the difference.
    Now before you get excited, all 3 were for under $30, but the idea of the government not letting you overpay is funny in this context.

    1. A month after I got laid off the company mailed me check…

      …for 12 cents.

      The stamp cost more! I guess they had to balance their books.

      Anyway, I got a good laugh out of it. So did the bank teller.

      Hey, they went to all that trouble.

  106. Update on my picture challenge. Way behind. I’m illustrating Larry’s Amazing Accountant Story and it’s taking a lot longer than I planned. Doing my ‘way overboard’ style (for fan art) got out the crow-quill pens and everything and now I am stippling my way into a corner.

    Taking the rest of the day off and going to eat a huge bowl of popcorn which is as crazy as I can get since my heart attack. Gone are the beer and cigarettes. Oh well, better off for it.

    I’ll be back at it again tomorrow. By the time I’m done everyone who got excited about the column will be long gone. That’s show biz! DVF

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