WILL WILKINSON. Can Democrats Drain Trump’s Gilded Swamp? (New York Times, 27 November 2018)Nov 29, 2018
Democrats are now preparing to assume control of the House. This offers many possibilities for oversight and investigation. For one, the House Ways and Means Committee has the right to inspect the president’s tax returns, and Democrats are sure to swiftly call on the Treasury to hand over President Trump’s tax records.
“They can do whatever they want,” Mr. Trump replied when asked whether he was worried about House Democrats going after his tax returns, “and I can do whatever I want.” What he wants, of course, is to keep beating the rap — and he might take down the whole system to do it.
Newly empowered Democrats need to be ready to hit back, and not just at the president. Mr. Trump is the living embodiment of a spiraling crisis of American corruption, but the problem is far bigger than this one rotten guy and his family.
An exploitable tax code, blithe indifference to rampant white-collar crime and failure to require financial transparency of those who would lead our country and fix our fates have combined to spawn a class of rich and powerful miscreants who profit by gnawing away at the rule of law and the system of public finance, critical pillars of functional liberal-democratic government.
The Trump presidency is the apotheosis of the crooked class, a monster made from our mistakes, and he’s making them worse. Under Mr. Trump, the I.R.S. has been starved of resources, audits of big corporations and the wealthy are down, and big banks and corporations have been given more leeway to rip people off with impunity. If we survive this reign of error, we need to learn our lesson and make it right.
We should have seen this coming. The president’s father, Fred Trump, built a real estate empire with the help of government housing subsidies and industrial-scale tax evasion. Donald used this pilfered inheritance to build a myth of capitalist self-creation and rode it all the way to the White House. This trajectory would have been impossible if not for a labyrinthine tax system especially vulnerable to book-cooking scam artists like the Trumps.
When it’s easy for a class of people to cheat and get away with it, over time, lots of them will. When their ranks and resources hit a critical mass, their desire for political cover can get traction. Their pooled wealth, much of which has been illicitly withheld from the system, can be deployed to incrementally change the system — to rig the tax code and its enforcement — to keep themselves in the money (and out of jail).
This starves the government of funds for the public goods and social insurance programs that ensure our institutions work to the benefit of everyone, not just a cabal of the well-connected. If the legal and fiscal foundations of the country continue to erode, the rule of law can unravel in a doom loop of corruption, distrust and institutional degeneration. Collapsing public faith in government offers alert demagogues an opening to grab political power by promising to stick it to corrupt elites. As often as not, these will be corrupt elites eager to exploit a populist mandate to plunder with ever greater impunity.
This happens the world over, again and again, and it happened to us. Mr. Trump is using the presidency to cover up his crimes, feather his nest and protect the interests of dictators who funnel money to his family. And it started with the tax-evasion tricks he learned at his father’s knee.
The continued survival of the American system may turn on shutting down would-be Trumps. In the near term that means limiting the opportunity to use public office for private gain. House Democrats can address that when they take over the chamber. In the longer term, it means cracking down on tax cheats who grow powerful by leeching our polity of its fiscal lifeblood.
Once the next Congress is seated, House Democrats should advance legislation akin to Senator Elizabeth Warren’s Anti-Corruption and Public Integrity Act, which she introduced this summer. Ms. Warren’s bill would align the incentives of legislators, executive branch officials and federal judges with the public interest by (among other things) banning stock ownership while in office; limiting lobbying once out of office; mandating that presidents and vice presidents sell off through blind trusts all assets, including real estate, that might create conflicts of interest; as well as requiring presidential and vice-presidential candidates to release eight years of tax returns.
If selling off assets and rigorous financial transparency requirements dissuade the unscrupulous rich from pursuing political careers, clearing a path for citizens who never owned a shell company, that’s not a problem. That’s a victory for democratic equality and clean government.
Passing strong anti-corruption legislation through the House would make an important statement and lay the groundwork for a more ambitious anti-corruption agenda — even if Senate Republicans kill it.
In the longer term, Congress must choke off the growth of the crooked class by throwing more resources at tax enforcement and making enforcement easier by making the tax code simpler. Close loopholes, seal off asset-concealment escape routes and reverse the proliferation of micro-exemptions, credits and carve-outs.
Real estate merits special attention. Much of Mr. Trump’s ill-gotten empire is based on the manipulation of the assessed values of his properties through an easily gamed system of valuation by local authorities. If commercial real estate search companies like Zillow can create algorithms that reliably estimate the market value of properties, the government can do the same. The taxable value of real property should be fixed through a general, rule-bound, politically independent method, with political discretion reserved for transparent legislative rate-setting. Determining the value of taxable assets through an opaque process of bureaucratic whimsy invites corruption.
The president’s son-in-law, Jared Kushner, offers another example of abuse: He’s reportedly worth more than $300 million, but paid little or no income taxes from 2009 to 2016 by legally declaring financial losses on the “depreciation” of properties that are in fact rapidly rising in value. This dodge has repercussions beyond Mr. Kushner’s net worth: It incentivizes the rich to shift assets to real estate, driving up already soaring rents and housing prices in tight urban markets.
Tolerance of fiscal corruption means more than lost revenue, underfunded schools, straitened social insurance programs and mountains of government debt held by America’s geopolitical rivals. It is the corruption of the body politic and an incentive to get rich, or richer, by cheating the system — which is, in effect, an incentive to slowly destroy it.
Free and prosperous democracies run on social trust: the mutual expectation of non-exploitation. Rampant corruption is the bane of trust, the Kryptonite of republican self-rule. Failure to guard against it has delivered us into the hands of a grievously compromised tax cheat who saw a chance to cover his decadent backside by winning power as a tribune of the people.
But it was our lack of vigilance, not his peerless mendacity, that allowed Donald Trump the bogus reputation and stolen resources he needed to seize it.
Will Wilkinson is a contributing opinion writer and the vice president for research at the Niskanen Center.