Comedian Steve Martin did a routine in the late 1970s on “how to be a millionaire”. A million dollars seemed to be a lot more money back then and a worthy goal for many. The January 21, 1978 skit on Saturday Night Live was performed for all of America:
“You can be a millionaire and never pay taxes! You can be a millionaire.. and never pay taxes! You say.. “Steve.. how can I be a millionaire.. and never pay taxes?” First.. get a million dollars. Now.. you say, “Steve.. what do I say to the tax man when he comes to my door and says, ‘You.. have never paid taxes’?” Two simple words. Two simple words in the English language: “I forgot!””
I was a high school senior then and the show made a lasting impression. Over the years I’ve used the first part of the joke often. How to be a millionaire: first, get a million dollars. The second part “never pay any taxes” might take even more work to be credible. Yet it occurs to me now that this is a good summary of the financial success of Donald Trump. Trump claims that his start in business came when “my father gave me a small loan of a million dollars.” Most Americans may not consider this to be a small loan, but it underscores the point that it often takes money to make money.
Then Trump employed a series of tax planning strategies where one “forgets” the financial statements or positions taken earlier for the purpose of creating a current position that will reduce taxes. There is nothing unusual or unique about this; it is a commonplace and legal tax planning strategy (although some might argue not ethical depending on personal values). Yet there is no doubt that the strategy is legal and still available today.
So there it is: first get a lot of money and then forget to pay taxes.
But comedy and satire aside, it is possible for ordinary Americans to build wealth and avoid taxes by duplicating strategies employed by Trump. Everyone’s financial situation is different and that’s why my exploratory tax planning consultations have been so popular. I’d love to hear your plan for building wealth. Perhaps I can suggest a few more ideas and hope that I could add some strategies for minimizing taxes long the way.