Tax Law

It May Be Legal, But It Ain't Always Right

Tax avoidance is legal and tax evasion is not. Simple distinction, but not always relevant, at least not in politics. Consider the recent burst of outrage over corporate tax avoidance generally and General Electric's tax bill in particular. In some years, GE's tax schemes might have escaped public notice. But in other years -- especially hard ones -- they get plenty of attention. And it was ever thus.

Consider the lessons of 1933. Wall Street investigator Ferdinand Pecora hauled J.P. Morgan, Jr. before the Senate banking committee. Pecora had been charged with uncovering malfeasance on Wall Street, but he focused much of his attention on tax issues. In particular, he forced Morgan to acknowledge from the witness chair that he had paid no income taxes in 1931 and 1932.

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The Pecora investigation... kicked off a decade of high-profile campaigns to boost effective tax rates on the rich, including a remarkably ambitious effort to revamp corporate income taxation from the ground up.

Which just goes to show: it may be legal, but it ain't always right -- at least not in politics.

View TaxAnalysts' Joe Thorndike's opinion in its entirety on TAX.com.

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