Wednesday, September 3, 2014


A recent article that was referenced in a “tweet” from a fellow tax pro stated “Actually Burger King has been trying to dodge taxes for years!!”. 

As if this was a surprising discovery.  And as if it was something wrong – illegal, immoral, or unethical – with this practice.

I do not know a single person or company that does not try to “dodge” taxes.  I do it, both for myself and my clients, and so do you.

There is absolutely nothing illegal, immoral, or unethical with trying to “dodge” taxes.  By “dodge” I mean “avoid”. 

Over and over again, courts have said that there is nothing sinister in arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich and 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.”  Judge Billings Learned Hand

“ . . . [t]he legal right of a taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot be doubted.”  Justice George Sutherland 

In my 40+ years of preparing 1040s for taxpayers in all walks of life a client has never told me “No thanks, I would rather pay more taxes” in response to my advising them of a legitimate tax deduction or credit to which they are entitled.  

The latest fascination with “tax inversions”, and US companies moving overseas to reduce their tax bill, seems to suggest that taking advantage of this totally kosher strategy is, if not illegal, immoral and unethical. 

When it comes to public companies, they actually have a fiduciary responsibility to their shareholders to properly "manage" expenses such as income taxes.

If it is perfectly alright for me to do whatever I can to legally reduce my tax bill, why is it not also alright for Burger King?

If the law allows a taxpayer to deduct his mortgage interest don’t chastise the taxpayer for doing so.  The taxpayer would be stupid not to do so.

If a tax deduction, credit, or strategy seems to be immoral, unethical, or unfair it is the fault of the idiots in Congress for writing the Tax Code to allow such a deduction, credit, or strategy.

The only obligation an individual or corporate taxpayer owes to the government is to file an honest tax return – to report all taxable income, to deduct only legitimate deductions, and to claim only legitimate credits.

There is no doubt that much of our current Tax Code is “unfair”.  Our current Tax Code is truly a mucking fess.  And the fault lies directly on the shoulders of the idiots in Congress, who line their pockets with “gifts” from lobbyists, and seek votes from groups of taxpayers, in exchange for legislating specialized tax loopholes.

The US Tax Code needs to be rewritten from scratch to be simple and fair.  But don’t hold your breath.



Chris Johnson, EA said...

Hi Bob,

On the subject of taxpayers (individual or business) "dodging" or "avoiding" taxes, I thought I'd chime in here with something I remember from the 2012 presidential elections related to it. Though it involved Mitt Romney, this post is in no way to indicate my opinion on him, Obama or any other politician.

While he campaigned, Romney got some flack over the relatively low amount of taxes paid on his federal returns for 2010 and earlier years, partly due to the fact that he was contributing such a large portion of his income to charity. So for his 2011 return (which was filed as his presidential campaign was in full swing during 2012), he chose not to report all of his donations on his Schedule A. He reported $2.25 million in charitable donations when he had supposedly donated $ 4 million, forgoing $ 1.75 million in deductions.

Really, I think the whole thing was silly and shouldn't have been an issue in his campaign. He made the charitable donations and he had every right to deduct every penny of them on his return. This a pretty basic Schedule A deduction we're talking about, not some complicated tax shelter or the slightest bit shady. The amount of tax a presidential candidate paid is really not much of an issue to me when voting in an election, so long as the law was followed when the return was prepared.

Not that I need to feel sorry for Mitt Romney, but it's like he was shamed into giving up a perfectly legitimate and simple tax deduction, and he didn't get elected anyway.

Robert D Flach said...


Thanks for the comment. I remember the incident.

I agree with you that Mitt was “shamed into giving up a perfectly legitimate and simple tax deduction” and with your statement “The amount of tax a presidential candidate paid is really not much of an issue to me when voting in an election, so long as the law was followed when the return was prepared.”

To be honest, I actually thought less of Mitt for doing this. It was not the action of a financially responsible individual.

If wealthy individuals feel they are not paying enough income tax they can always actually make a separate “contribution” to the US Treasury.