Commentary: It hasn’t gone well when privileged avoid taxes

By Christine Adams / Special to The Washington Post

The news of President Trump’s secretly obtained tax returns that broke Sunday — detailing that he paid $750 in taxes in 2015 and 2016, and no taxes at all in 10 of the past 15 years — reveals that tax systems are often astonishingly irrational, shielding the wealthy from their civic fiscal responsibilities.

The scale of Trump’s tax avoidance reflects a contradiction in a democratic government that is supposed to be based on equality. And anger over the unfairness of the tax system can result in dramatic political upheavals as a study of French history reveals.

The basis of French society under the Old Regime — that is, before the Revolution of 1789 — was privilege. The most privileged social group was the nobility: Those of noble title enjoyed legal, fiscal and social advantages that others could only dream about.

The tax system made this clear. Early modern French aristocrats were exempted from most forms of taxation. A relic of the late Middle Ages and the idea that they served the crown as warriors, this exemption from the taille (a direct royal tax on people and land) had been fixed in law as a definition of nobility since the 15th century.

When times of war or economic crisis hit, however, French kings and their ministers recognized the foolishness of a system in which the richest people in the realm did not pay. The monarchy would often try to levy “extraordinary” taxes to tap the resources of the privileged. However, efforts to tax the revenue of the nobility and other privileged groups (such as the clergy) were generally met with stiff resistance, and any progressive features were usually curtailed or eliminated. In addition, many members of the elite evaded paying their share of even these extraordinary taxes by making use of their connections to influential government officials.

The result was a system in which aristocrats paid significantly less for public services and the costs of running the French state than did individuals unprotected by privilege. Who provided the state’s tax revenue? The peasantry, who were mired in poverty and unprotected by any form of privilege, contributed the majority of royal taxes as well as myriad other indirect taxes and feudal dues. In fact, a steep increase in royal taxation of the peasantry in the 17th century to pay for constant wars had triggered a series of popular revolts, making the government reluctant to raise rural taxes when the Seven Years’ War (1756-1763) and assistance to the American Revolution (1775-1783) created new and alarming fiscal pressures in the 18th century.

Such an arrangement was unsustainable, something that reformed-minded nobles recognized as the country faced bankruptcy in 1788. But the nobility’s resistance to the crown’s suggested fiscal reforms demonstrated their unwillingness to pay more without accompanying political reforms to France’s absolutist system that would give them a say in running the country. Noble recalcitrance to altering the tax system was a key factor in the calling of the Estates General in 1789 to solve France’s political and fiscal problems; the event that triggered the revolution.

Preferential tax treatment was not the only financial advantage French aristocrats enjoyed under the old regime. They had access to sinecures — cushy jobs doled out by the king — and other revenue sources unavailable to those without friends in high places.

But the financial accounts of many of France’s most illustrious families reveal that they spent far more on the trappings of status than their revenue could cover. Heirs to fabulous wealth, they burned through their money, spending it on signifiers of noble status, including magnificent chateaus and townhouses, luxurious furnishings, gourmet food, expensive clothing and other personal adornment, legions of servants, impressive marriages for their children and high stakes card games with other courtiers at Versailles.

For example, Henri Louis de Rohan, prince of Guéméné, member of one of France’s most prominent families, went bankrupt in 1782 with a debt of 33 million livres; and this was only the most notorious case of financial disaster among the 18th-century rich and famous. A spectacular bankruptcy like this might mean temporary humiliation and the forced sale of some choice properties, but their court connections meant that noble families could often survive a crash with financial assistance from their friends, sometimes in the form of a royal pension.

However, many of the “little people” to whom the family owed money were ruined in the process. While noblemen would make it a priority to pay debts to aristocratic friends with whom they gambled, as a matter of “honor,” they didn’t hold others outside their social class in the same regard. The small shopkeeper or dressmaker faced impoverishment with little legal recourse against a noble debtor who refused to pay.

The New York Times report on Trump’s taxes reveals that he operates in the same way: bragging about his fabulous wealth and freely spending $70,000 on items like his hair while declaring bankruptcy, manipulating IRS laws and stiffing contractors in the process.

So often the wealthiest pay significantly less in taxes than those with far fewer resources, and they, unlike most people, are allowed to escape the consequences of their lavish living and bad business decisions, protected by laws that favor them. This can, however, be a dangerous game.

The unfairness of the tax system, especially as the French government faced bankruptcy in the late 1780s, was one of the factors that triggered revolution in 1789. One of the goals of the French revolutionaries was to reform the system so that the well-heeled no longer escaped the burdens of taxation at the expense of less-favored French citizens and so that all were equal before the law. Among the early revolutionary reforms was an end to privilege in the tax system, and the right to vote was linked to a minimum payment of taxes; which also had the unfortunate effect of restricting the right to vote to male property owners.

The residual anger of the common French people at the nobility’s rapacious greed and careless entitlement fueled the vicious attacks on aristocrats that punctuated the Revolutionary period and sent many of them to the guillotine during the Reign of Terror. Perhaps Trump chose to hide his tax returns because of the potential legal issues at stake; but he may also have feared the public’s anger when they saw in black and white how little he pays and how he bends U.S. tax and contract law to his own advantage. But now, the curtain has been pulled back and Americans can see clearly, once again, that very different rules apply depending on access to privilege.

Christine Adams is professor of history at St. Mary’s College of Maryland and author of book on “The Creation of the Official French Royal Mistress,” with Tracy Adams.