The President vs. A “Learned Hand” | U.S. Chamber of Commerce
Aug 12, 2014 - 1:00pm

The President vs. A “Learned Hand”


Chief Tax Counsel
Vice President, Tax Policy


Lately, the President has been touting “economic patriotism,” bashing businesses that are “fleeing the country” as “corporate deserters.” His solution? Closing the “unpatriotic tax loophole” causing these companies to leave the United States, aka via much discussed “inversions.” The President “[doesn’t] care if it's legal, it's wrong.”

I believe it is time to remind the Administration of an infamous tax quote from the Helvering v. Gregory case in the Second Circuit, later affirmed by the Supreme Court, by Judge Learned Hand, that “[a]nyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes.”

Later, Judge Hand expanded on this in his dissent in Com’r v. Newman, stating:

Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.

Rather than bashing law-abiding job-creating companies trying to compete globally under our outdated tax code solely for the purpose of bolstering midterm election messaging and blaming Congress for inaction, perhaps the President should, instead, consider heeding the advice of his own disbanded Jobs Council, which stated:

These members believe that a territorial system would enhance the ability of U.S. companies to acquire foreign companies and would eliminate tax incentives of U.S. multinationals to merge with or sell their foreign operations to foreign companies. This would also reduce the vulnerability of domestic firms to takeover bids by foreign firms operating with lower tax rates. According to this view, a lower corporate tax rate and the adoption of a territorial system would increase the competitiveness of U.S. companies relative to their foreign counterparts in the United States and elsewhere, adding to the U.S. jobs that are needed to grow and support global growth.

So there you have it – 80 years of case law accepting there is no duty to pay more taxes than owed and the recognition that comprehensive tax reform lowering rates for all businesses and creating an internationally competitive tax system is what will make America a great place to do business. Now that sounds patriotic to me. 

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About the Author

About the Author

Chief Tax Counsel
Vice President, Tax Policy

Caroline L. Harris is vice president, tax policy, and chief tax policy counsel at the U.S. Chamber of Commerce.