George's loopholes

Sydney H. Schanberg

April 24, 1992|By Sydney H. Schanberg

THE PRESIDENT released his tax returns the other day, and once again the sly dog has avoided paying state income taxes.

You've got to hand it to him: He knows how to outsmart the revenuers. Don't we all wish we were that clever?

George does it by living on the East Coast but pretending to keep his pipe and slippers in the Southwest -- Texas, to be specific. Texas, you see, is one of only seven states that has no income tax or capital gains tax. So on his tax return George lists

as his legal address a nondescript suite at a four-story hotel in Houston.

He uses and pays for the hotel digs only on those rare occasions when he visits Houston -- precisely three days, for instance, in 1991.

The rest of the time, the Houstonian hotel rents out the suite to anyone willing to pay the $600 daily rate. George doesn't even pay that rate; he negotiated a special price, $264 a day.

He's one smart dude. While the rest of us are paying 8, 9, 10, even 12 percent in state and local taxes, George has slipped right through a hole in the fence on his way to the bank.

If he were to admit he lived in Washington, D.C., where most of us think the president lives, he would have had to pay more than $200,000 in D.C. taxes over the decade since he moved into the District as Ronald Reagan's vice president in 1981. His other straightforward alternative would have been to list his personal estate in Kennebunkport as his true home. If he had done that, he would have been hit with a tax bill from Maine of about the same size -- more than $200,000. Naturally, he rejected both these options and chose as the appropriate domicile for a president of the United States a no-tax hotel suite of three rooms measuring 948 square feet.

There's nothing inconsistent in any of this. George is a believer in states' rights and states' responsibilities, as was Ronnie before him. The moment they got into office, they started talking sternly to the state governments, trying to teach them self-reliance by taking away federal grants for such non-essentials as housing, mass transit, health care and toxic-waste cleanup. You'll feel better if you learn to do things on your own, George and Ronnie lectured the states. Confronted with this new fiscal theory, the states began cutting their budgets and raising taxes.

But George, at least according to lip-readers, doesn't believe in raising taxes. So to put his tax abhorrence where his mouth is, he signed an affidavit saying that no-tax Texas was his IRS home.

It's all quite legal, because the easygoing Texans have graciously accepted George's sworn hooey. What he swore to was as follows: "It is our intent to return to Houston permanently following completion of my public service in Washington."

That's all you've got to do. Just swear that you "intend" to go back to Texas, or some other no-tax state, and you don't have to pay the local taxes in whatever place you've just been "visiting" for, say, the last 37 years.

Better yet, George doesn't actually have to go back to Texas when life in the Rose Garden is over. He can live wherever he wants. There's no penalty, no back taxes due, for changing your mind.

To be precisely fair, George does pay a tiny amount in state taxes -- $3,596 in 1990 -- but since this appears only as a number on his federal return and he does not make his state documents public, one can only speculate on where this money goes. A small portion might go to Maine as a payment by a non-resident for working days spent there.

But the bulk of it likely goes, as the law requires, to the state or states where the Bushes' blind trust earns money. In the end, this payment notwithstanding, the Bushes avoid $25,000 or more each year in state taxes. In 1991, because of higher income, it was closer to $50,000.

Also in fairness, one has to record that the Bushes did live in Texas for many years, until George became vice president. At that juncture, they sold their five-bedroom home in Houston for $843,273 and bought the Kennebunkport estate, known as Walker's Point, for $800,000 from George's aunt, Mary Walker.

The Bushes at this point tried to avoid yet another tax. Ironically, the device they selected was to try listing Maine, not Texas, as their home state. They don't seem to be choosy about where they call home as long as the tax is right. The issue in 1981 was the $600,000 profit they had made on the sale of the Houston home -- and the taxes owed on this. George tried to defer paying the capital gains tax by saying he had used the $600,000 to buy his "principal house" in Maine -- the place he now insists is but a vacation retreat. The IRS rejected the Bushes' contention that Kennebunkport was their principal residence at the time and made them pay the gains tax -- $177,600. Faced with this dead end, the Bushes did a U-turn and began claiming the Houston hotel suite as their home.

So now you can see the true reason why George avoids state taxes. The devil made him do it.

Sydney Schanberg is a columnist for Newsday.

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