 |
| Richard Nixon at the Associated Press Managing Editors annual meeting, November 17, 1973. |
"People have got to know whether or not their President is a crook. Well, I am not a crook." President Richard M. Nixon said that at Disney World at the conference of the Associated Press Managing Editors Association on
November 17, 1973. (Video is here.) He said it not in
regards to the Watergate scandal but a personal issue—whether he cheated on his
federal income taxes.
Last week I was reading a huge report the Joint Committee on Internal Revenue Taxation published in April 1974, five months
before Nixon resigned the presidency. Examination
of President Nixon’s Tax Returns for 1969 Through 1972, S. Rep. 93-768, is
a thousand-page doorstop. Or it would be
if I was looking at the printed edition—I used a PDF which was a massive 194
MB.
The biggest issue with Nixon’s taxes was the tax
deduction he took for donating to the National Archives his papers from his
time before he was president. These
papers covered his time as vice president under Dwight D. Eisenhower, his 1960
campaign for president, his 1962 campaign for governor of California, and his
political activities before his 1968 presidential run.
After President Lyndon B. Johnson took
significant deductions for donating his papers to the United States, Congress
passed the Tax Reform Act of 1969 to, among other changes, amend the Internal
Revenue Code to end deductions for donations of papers made after July 25,
1969. The Tax Reform Act of 1969 was
signed on December 30, 1969, but had retroactive effect. It also created the Alternative Minimum Tax.
In March 1969, Nixon had placed boxes and file
cabinets of papers in storage at the National Archives. The archives stored them as a courtesy in
expectation of a future gift to the government. This courtesy storage had
been done for prior presidents. Nixon,
however, did not deed them to the United States at the time the documents went to the Archives. The papers did not belong to the nation by
the July 1969 deadline. Nixon’s agents
were still working on appraising them and pulling select items from the files
when the deadline passed.
Edward L. Morgan, deputy White House counsel,
subsequently backdated a deed of gift so Nixon could claim the tax
deduction. The deed was dated April
1969, but it was prepared no earlier than March 1970 and not actually signed
until April 1970. Morgan told The Washington Post in June 1973 that
there was a “mad scramble” at the White House to preserve Nixon’s deduction
when Congress was considering amending the Internal Revenue Code. Morgan, who became an Assistant Secretary of
the Treasury in 1973, was indicted for creating the falsely dated document. He pleaded guilty, and was sentenced to four
months in prison. Nixon’s tax lawyer,
Frank DeMarco, Jr., and the documents appraiser, Ralph G. Newman, were also indicted
for conspiracy to defraud the United States for their part in the backdating of
documents.
(DeMarco was a law partner of Herbert W. Kalmbach, Nixon’s personal attorney; Kalmbach went to prison for violating the Federal Corrupt Practices Act for campaign finance issues. DeMarco and Newman successfully moved for their criminal cases to be transferred from the U.S. District Court for the District of Columbia, where they were indicted, to the U.S. District Courts for the Central District of California and the Northern District of Illinois, where they resided. United States v. DeMarco, 394 F.Supp. 611 (D.D.C. 1975). The Central District of California dismissed the case against DeMarco because of prosecutorial misconduct in presenting the case to the grand jury. United States v. DeMarco, 401 F.Supp. 505 (C.D. Cal. 1975). The government reindicted DeMarco in California but the case was again dismissed because of prosecutorial misconduct. United States v. DeMarco, 407 F.Supp. 107 (C.D. Cal. 1975). The government appealed the second dismissal but lost. United States v. DeMarco, 550 F.2d 1224 (9th Cir. 1977). Newman, however, was convicted in Chicago of making false statements and fined $10,000.)
Because Nixon's donation was not actually made before
July 25, 1969, Nixon was not entitled to claim a tax deduction for it. Nixon claimed a substantial tax deduction. Over four years, he
deducted $482,018. In 1969, Nixon
deducted $95,298 for the papers and applied the rest toward future years. In 1970, he deducted $123,959 for the
papers. In 1971, he deducted
$128,668. In 1972, he deducted $134,098.
That left a balance to be applied to future years—the Joint Committee’s report
is dated April 1, 1974, two weeks before returns for 1973 were due to be filed.
The report does not breakdown what the Joint
Committee’s staff believed was the tax due specifically from the improper
deduction of papers. The staff concluded
that Nixon had not included all income in 1969 and had taken other improper
deductions besides the deduction for the papers. For tax year 1969, Nixon reported an adjusted
gross income of $328,162. They concluded
Nixon had underpaid his taxes in the amount of $171,055 for tax year 1969
alone. The deduction for the papers for
1969 represented a substantial part of that deficiency.
I will discuss Nixon's other tax problems in a later
post.
Sources
Joint Committee on Internal Revenue
Taxation. Examination of President
Nixon’s Tax Returns for 1969 Through 1972. S. Rep. 93-768. Washington:
U.S. Government Printing Office, 1974.
Nick Kotz.
“Tax Break Sought for Nixon Papers.”
The Washington Post. June
12, 1973, at A2.
Richard Philbrick. "Newman Guilty in Nixon Tax Fraud." Chicago Tribune. November 13, 1975, at 1.
Richard Philbrick. "Newman Gets $10,000 Fine in Nixon Case, Escapes Jail." Chicago Tribune. January 7, 1976, at 3.
Walter Pincus.
“Mr. Nixon’s Papers: The Tax
Question.” The Washington Post. January 7, 1974, at A18.
Timothy S. Robinson. “Ex-Nixon Aide Gets 4 Months in Jail in
Backdating of ‘70 Documents Gift.” The
Washington Post. December 20,
1974. A13. (Morgan sentenced).
Timothy S. Robinson. “Two Indicted in Backdating of Gift in Nixon
Tax Case.” The Washington Post. February 20, 1975, at A1.
(DeMarco and Newman indicted).
Robert McG. Thomas, Jr., “Ralph G. Newman, Authority on Civil War, Dies at 86.” The New York Times, August 3, 1998, at 8.
