Caveat lector

Life in this celebrity press corps: Too taxing for the New York Times

Synopsis: The New York Times--they cracked Whitewater, you’ll recall--were stumped by the world’s simplest tax matter.

Clinton Tax Returns Show Costly Handling of Charitable Donations
David Cay Johnston, The New York Times, 4/14/98

It Takes a President To Overpay the I.R.S.
David Cay Johnston, The New York Times, 4/19/98

Commentary by Ron Nessen
Hardball, CNBC, 4/23/98

Life in this celebrity press corps means never having to say that anyone’s conduct is reasonable. And so, following the release of the Clintons’ tax returns last week, David Cay Johnston penned a pair “analyses” of the Clintons’ 1997 charitable deductions--and failed to discern an obvious explanation for behavior he preferred to lambaste.

Johnston’s articles revive a familiar press trope--those stupid Clintons have done it again! On April 14, Johnston showed how the Clintons’ large charitable gifts could be bigger still, if they’d only give their dough away right!

For the record, the Clintons recorded income of $569,511 last year. Of that income, $281,898 came from royalties from Mrs. Clinton’s book, “It Takes A Village.” When the book was published in 1996, the Clintons had promised to donate the book’s proceeds to charity.

Here’s what Johnston said in his April 14 piece about how the Clintons have followed up on that pledge:

JOHNSTON: In 1996 and 1997, Mrs. Clinton earned $1,024,750 in royalties, of which the Clintons have given away $840,000, or 82 cents on the dollar, after paying taxes on the income.

Which would likely strike the average Joe as a generous bit of conduct. But nothing’s ever quite good enough when you’re writing from inside this celebrity press corps. So here’s what Johnston had to say about the Clintons’ giving:

JOHNSTON: But that is not the only way to give away royalties, tax experts around the country said today. They said that had the Clintons gotten better advice they could have given every penny of the royalties to charity by giving it to a community foundation, or by setting up a foundation through which they would have to channel the money.

“The charities received $184,750 less than they could have,” Johnston said, and he reported extensive discussions with various tax experts about the ways the Clintons could have given away their money. According to Johnston, he has consulted with “a dozen tax lawyers...over the past year,” and the tone of their critique was summed up in this paragraph from his piece:

JOHNSTON: “What kind of tax advice did the Clintons pay for?” said Tom Ochsenschlager, of the Grant Thornton accounting firm, adding that he was mystified by what the Clintons did because it was an inefficient way to give the money to charity.

Johnston penned another lengthy piece in the April 19 Sunday Times detailing the Clintons’ dumbness in donating their money. And nowhere could Johnston conjure a reason why a president would give away money the way Clinton did--paying federal taxes on money earned before giving the balance to charity.

It’s not all that surprising that Johnston’s tax “experts” couldn’t fathom the Clintons’ approach. Tax lawyers normally represent private citizens; and they assume their clients want to reduce their tax burden to the lowest possible level. But that, of course, would notbe the objective of a politician bright enough to get to the White House. Politicians who reduce their tax burden too far will routinely be criticized for having done so; and it is truly remarkable that, in the course of two lengthy articles--and in the course of an (inexplicable) year-long investigation--neither the know-it-all Johnston nor his New York Times editors seem to have had this thought enter their heads.

Johnston reports that, on their 1997 income ($569,511), the Clintons paid $91,964 in federal income taxes. In his April 19 piece, he writes that “if those book royalties had not flowed through their accounts they would have owed $41,865 in federal income taxes, a saving of $50,099.”

A private citizen would likely regard that as a desirable lowering of his federal tax burden. But for a president to pay $40,000 federal income tax on a $570,000 income is to offer an open invitation to critics. And this thought has surely occurred to President Clinton, if not to his brainy friends at the Times.

Indeed, even at the level of taxes which the Clintons did pay, complaining drifted in from the provinces. There were calls to C-SPAN on April 14 noting how little the Clintons had paid in federal taxes, and even on CNBC’s talk show Hardball--a program obsessed with fairness to Clinton--the following exchange occurred April 23 between guest Ron Nessen and tabloid talker Chris Matthews, the former journalist who is now the show’s host:

NESSEN: ...The interesting story about the Al Gore tax return and also the Clintons’ tax returns that sort of got drowned out in this sideshow about [Gore’s] charitable contributions was what a small percentage of their income they paid in taxes. I think they paid less than 20% of their income in taxes and they were both in the $200,000 or higher income range.

MATTHEWS: What do you think they did to avoid paying their “fair share,” as we say? (Group chuckle) I probably don’t know the answer. That is pretty low.

If this kind of commentary can result when the Clintons pay $91,000 in federal taxes, what kind of comments might have occurred if they had reduced their share by $50,000 more?

For the record, the tone of Johnston’s articles is relentlessly disparaging. At one point he suggests that the way the Clintons donated their money means that Mrs. Clinton broke her charitable pledge. (“Mrs. Clinton has pledged to give away all of the proceeds from her book, but instead gave away $250,000 last year, nearly $32,000 less than she was paid, with the difference going to the I.R.S.”) He cites endless tax “experts” sniffing and rolling their eyes about the stupid advice the Clintons received. He borrows from the title of Mrs. Clinton’s book to make funny about the Clintons’ bad judgment. (“It may take a village to raise a child, but it would have taken only a lawyer or two for the Clintons to eliminate their tax bill...”)

He even takes the opportunity to recite an embarrassing old story about how the Clintons once claimed a tax deduction for old underwear they gave to the Salvation Army. This story is revived, says Johnston, deadpan, because it shows that “the Clintons do not [always] object to taking advantage of tax breaks.”

But nowhere does this likely explanation for the Clintons’ procedure ever occur to the nattering scribe. So much for the powers of judgment at the great, great paper that thinks it hit Whitewater out of the park.

No, Virginia, politicians aren’t just like you and me; and if politicians have even an ounce of smarts, they won’t want to wipe out their tax burden. Is this why the Clintons handled their donations as they did? At THE HOWLER, we have no way of knowing. But the fact that the possibility never entered Johnston’s mind, and apparently never entered the minds of his editors...well, it’s all just a remarkable part of what we dolove to call: “Life in this celebrity press corps.”