Quote:
Originally Posted by RichieRich
There's a huge difference between tax avoidance versus tax minimization.
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There really isn't.
Tax avoidance is just that - the act of avoiding paying tax. It's not the act of avoiding tax that you're legally obligated to pay. That is called "tax
evasion", not "tax avoidance", and that can result in fines or prison time.
Literally everyone who has ever paid income tax has engaged in tax avoidance. If you've ever deducted a medical expense or a student loan payment, you've engaged in tax avoidance. It sounds like a bad thing to people who are ignorant about how tax policy works, but it's really just the exploitation of rules in the system.
Now, you can make a distinction between tax avoidance that was intended by the drafters of the tax code, and avoidance that was unintended and is opportunistic ("loophole" exploitation), but simply put, everyone has to obey the law as it is written. It's not reasonable to expect the public to not only obey the law, but try to guess at what the people who drafted it were trying to do, and then avoid situations they weren't aiming for. You're not obligated to try to read the minds of the people who drafted the tax code, nor should you be: you're only obligated to obey the law that's on the page.
To combat this issue, tax authorities create anti-avoidance provisions. Those, too, are rules on the page that must be complied with. In Canada, there is a GAAR - a general anti-avoidance rule - that creates real tax policy problems. There isn't an equivalent in the USA, though there are half-measures. Up here, we call the non-observation of these anti-avoidance rules "abusive tax avoidance", as opposed to just regular tax avoidance, which is regarded as perfectly reasonable taxpayer behaviour. Locke may know if there is a different term for it down south of the border.
To sum up:
- If Trump simply engaged in tax avoidance to lower his tax bill or wipe it out completely, there's nothing wrong with that - that's simply following the rules in the most advantageous way you can.
- If Trump has failed to abide by the anti-avoidance provisions that are relevant to his tax circumstances, that's a violation of the law that may result in fines or penalties against him, or it may just result in liabilities for back taxes.
- If Trump has failed to accurately report his income (i.e. he earned more than he put on his returns), or has made a false statement in a return, that may be tax evasion, which would be illegal and possibly subject to criminal sanction.
In reality, though, Trump isn't the one actually filing these returns. Unless he's legitimately done something criminally sanctionable, it seems likely that he would be subject to monetary penalties that he would then get back from his tax advisors as damages, which they would then claim against their insurance. That's just a guess, really, but it seems like the most likely way that any action against Trump for tax shenanigans would play out.