Do the Wealthy Have a Patriotic Duty to Pay More Taxes?

Democrats are feeling betrayed by President Obama, while Republicans are gloating over the tax deal they struck with the President to extend the Bush era tax cuts for two years.  The deal also includes setting the estate tax exemption at $5 million for two years at a rate of 35%.  Jennifer Rubin of The Washington Post claims that Obama sold out the Left.  Taking a more conciliatory tone, Senator Reid reminds us that the President does not make law, Congress does, and that there is still work to be done on the tax deal.  

Meanwhile, I have been wondering about requests by rich Americans to increase their taxes.  One noted group, Wealth for the Common Good, consists of wealthy advocating higher taxes for the rich.  Just today, this organization issued a press release in response to the Obama deal.  The headline reads: “Millionaires Urge Rejection of Bush Tax Cuts for Rich.”  This organization has been widely reported on, here and here, for example.

Maybe it is my background as an estate planner helping people to avoid taxes on their wealth, but I can’t understand this desire to be taxed.  Didn’t the wealthy get wealthy by making as much money as possible?  Granted, Wealth for the Common Good only has a few hundred wealthy members. These people certainly do not represent anything like a majority of the wealthy.  But who is right?  Is there a patriotic duty to pay more taxes?

I am reminded of a surprising statement by a retired estate planning attorney, a respected member of the bar.  He recently told me that he consistently advised his clients to avoid estate planning that resulted in paying less in taxes.  He would tell his clients that paying tax is good, that our government needs the money.  I don’t think he ever advised anyone to actually make charitable contributions to the US Treasury, but he may just as well have done so. Everyone has a right to their opinion, but does this make sense?  Again, is there a patriotic duty to pay more taxes?

The law imposes no such duty.  That’s according to no less an authority than Justice Learned Hand.  Perhaps the most respected member of any of the United States Courts of Appeal, he was, in his time, widely considered the “tenth” member of the Supreme Court.  He wrote that there is no patriotic duty to pay more taxes than the law requires.  His exact words were: 

“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.”  Gregory v. Helvering, 69 F.2d 809, 810 (2d Cir. 1934), aff’d, 293 U.S. 465, 55 S.Ct. 266, 79 L.Ed. 596 (1935).

The best way to answer this question of whether there is a patriotic duty to pay more taxes is with another question.  If Congress increases taxes on the wealthy, will those who have lobbied for more taxes take advantage of legal steps to avoid taxes or reduce their tax liability?  I expect so.  And who can blame them?  There is no duty to pay more taxes than the law requires. 

Fat Sam Creative Commons License photo credit: Randy Son Of Robert

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