8 of the Biggest Presidential Tax Scandals Throughout History
Many things may be unprecedented when it comes to politics these days, but tax scandals have plagued numerous presidents over the years.
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A tradition of tax returns
Though they’re not legally required to do so, every U.S. president since Richard Nixon has made at least some form of their tax returns publicly available. That is, until the current president. Back in January 2016, then-candidate Donald Trump said that he planned to release his tax returns, telling Chuck Todd of Meet the Press: “We’re working on that now. I have big returns, as you know, and I have everything all approved and very beautiful and we’ll be working that over in the next period of time.”
More than four years later, that still hasn’t happened. So, on July 9, 2020, the Supreme Court ruled in favor of a New York prosecutor’s demands for Trump’s tax records. It’s unlikely these tax returns will be made public before the November 2020 election, so it’s unclear whether they will have immediate political implications. Though this exact situation may be unprecedented, this isn’t the first time there has been controversy surrounding a president and taxes. Here are eight of the biggest presidential tax scandals throughout history. And while you’re here, check out these 52 astounding facts you never knew about American presidents.
Ulysses S. Grant
When Ulysses S. Grant was elected president after the Civil War, he wanted to do things his way in Washington—including picking people he trusted and respected to fill his Cabinet, rather than simply handing out the jobs to Republican leaders who supported him in the election. Though a great idea in theory, Grant wasn’t always the best judge of character, writes Joan Waugh, PhD, a professor of history at UCLA.
This quickly became evident in 1875, when Grant’s Treasury Secretary Benjamin Bristow began to look into Midwestern distillers who were not paying excise tax, thanks to the help of some federal agents. Bristow brought evidence for what was later referred to as the Whiskey Ring to Grant, who told him to prosecute the fraud. The investigation uncovered that Grant’s personal secretary, Orville Babcock, knew about the Whiskey Ring for some time. Babcock was put on trial—with Grant providing a deposition in his defense—but was not found guilty. Although Grant wasn’t involved in the swindling, it didn’t look great to have someone in his inner circle associated with the crimes.
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Warren G. Harding
You may have a vague recollection of hearing about the Teapot Dome scandal in history class, but did you know that the situation then wasn’t all that different from our current presidential-taxes situation? It was the Roaring ’20s, and Warren G. Harding was president. In an op-ed for the Brennan Center for Justice, Ciara Torres-Spelliscy explains what happened: “The Teapot Dome scandal involved Secretary of the Interior Albert B. Fall’s no-bid contract to lease federal oil fields in Teapot Dome, Wyoming, to a private company on April 7, 1922. Congress’ investigation of the scandal centered on the question, ‘How did Interior Secretary Albert Fall get so rich so quickly?’ Fall was eventually convicted of taking a $100,000 bribe.” Then, Harding’s attorney general Harry M. Daugherty took heat during the scandal for not investigating Fall more thoroughly.
Ultimately, the Teapot Dome scandal resulted in some major federal reforms, including the Federal Corrupt Practices Act of 1925, as well as the Revenue Act of 1924, which “provided the chairs of the House Ways and Means and Senate Finance Committees with the ability to demand tax returns from the IRS,” Torres-Spelliscy writes. Though Harding died in 1923 before these took effect, he is still associated with the scandal that involved a member of his Cabinet.
Franklin Delano Roosevelt
When Franklin Delano Roosevelt moved into the White House, it wasn’t customary for presidents to release their personal tax returns. For FDR, that was a good thing, because he wasn’t the best at paying taxes. Thanks to the National Archive, we now know that Roosevelt was in the habit of minimizing his own tax payments at various points, both before and after he was elected president.
“During his first term in office, FDR repeatedly claimed that he was exempt from the high tax rates on personal income that Congress had enacted—and Roosevelt had approved—in the revenue acts of 1934 and 1935,” Joseph Thorndike, a tax historian, writes for Tax Analysts. “In a series of letters to internal revenue officials, Roosevelt insisted that he could not be taxed at the heavy rates imposed on rich taxpayers during the mid-1930s. Article II, section 1 of the Constitution forbids any reduction in the president’s compensation during his term in office, Roosevelt pointed out. Since the new rates enacted in 1934 and 1935 effectively reduced that compensation, they could not be applied to the president’s salary.” Eventually, in 1936, FDR started paying his taxes at the correct rate.
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If you were asked to recall one quote from Richard Nixon, it would probably be “I am not a crook.” As it turns out, he was directly referring to a situation with his taxes. It was 1973, and the Watergate scandal had captured the country’s attention. As part of the investigation, there were calls for the IRS to release Nixon’s tax records, but the agency refused. However, that didn’t stop one IRS employee from leaking Nixon’s tax information, showing that he’d paid only $792.81 in federal income taxes in 1970 and $878.03 in 1971, despite income of more than $200,000. Ultimately, Nixon was charged with more than $400,000 in back taxes, and he resigned less than a year later. In addition to taxes, here are other things presidents have to pay for on their own.
When Ronald Reagan released his 1981 tax returns, it indicated that he was paying taxes at an effective rate of 40 percent. This was the highest effective tax rate of any recent president, from Nixon to Obama. But don’t worry about the financial situation of the actor turned politician: He ended up taking full advantage of his own tax cuts. For example, in 1987, his tax rate was slashed to 25 percent. That year, his earnings included his presidential salary ($200,000 per year, plus a $50,000 expense account), $1,312 in residuals from his work as an actor, and $281 in royalties from sales of his autobiography.
George W. Bush
During his two terms as president, George W. Bush interacted with a lot of people. But one—a lobbyist named Jack Abramoff—was especially problematic. Abramoff raised more than $100,000 in campaign funds for Bush and, in the president’s first ten months in office, came away with nearly 200 contacts in the administration. This included members of Abramoff’s team meeting with Attorney General John Ashcroft, as well as policy advisers for Vice President Dick Cheney. It’s thought that these connections helped Abramoff secure meetings with high-level officials in the Department of the Interior to further his lobbying efforts on behalf of Native American tribes and the casinos they operate. In fact, between 2000 and 2003, six tribes paid Abramoff more than $80 million in lobbying fees—and that’s just one example of his corruption.
Meanwhile, Bush tried to distance himself from Abramoff as much as possible—including saying that he didn’t recall meeting the lobbyist—but there were photos of the two together. In 2006, Abramoff pled guilty to charges including mail fraud, conspiracy to bribe public officials, and tax evasion, and was sent to federal prison, where he served 43 months before being released. Bush’s presidency and subsequent legacy, however, hasn’t been defined by Abramoff. We may never know the full extent of their relationship, just like we may never know the answers to these 15 presidential mysteries that were never solved.
Although Bill Clinton’s presidency is more closely associated with a different scandal, there were multiple incidents involving underpaying on taxes for earnings associated with the Clintons’ Whitewater real estate investment. When he was campaigning in 1992, Clinton promised to reimburse the government for improper personal tax deductions on interest payments made by the Whitewater Development Corporation. The Clintons owed $4,900, but it took them 21 months to send a check to cover this. By 1994, Whitewater was constantly in the news, with some claiming that the real estate venture involved other illegal activities. The Clintons released several years of tax returns, and despite multiple investigations, they were never found to be guilty of breaking the law. In the end, Whitewater didn’t have much of an impact on Bill Clinton’s presidency or legacy—or Hillary Clinton’s bid for president in 2016.
When Barack Obama released his tax returns, it was clear that he and Michelle started making higher donations to charitable organizations once he started to run for president and as he made more money from sales of two books. In fact, he earned $1.2 million in 2005 from the rerelease of Dreams From My Father, then $551,000 in 2006 from his second book, The Audacity of Hope.
Though donations are usually viewed as a positive for a presidential candidate, that wasn’t the case for Obama. His tax returns indicated that in 2005 and 2006, the Obamas donated $27,500 to the Trinity United Church of Christ in Chicago. Obama attended the church for almost 20 years, and the church’s pastor, the Rev. Jeremiah A. Wright Jr., acted as his spiritual mentor. Unfortunately for Obama, Wright became famous for something other than his connection to the future president: several inflammatory sermons that were captured on video and made the rounds in the media. Obama first distanced himself from Wright, then eventually left the church in 2008.
Next, check out these dramatic before-and-after photos of how presidents have aged in office.