The recent New York Times article on Ronald S. Lauder and what is described at its kindest as the “shrewd use of the United States tax code” presents him as a clever man who has preserved his family fortune, estimated at more than $3 billion, for decades, through the use of strategies that combine philanthropy with tax law acumen. Should he be faulted for this?
Judge Learned Hand, one of most respected Federal judges in our history, addressed this issue in a 1935 case stating:
Anyone 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.
Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.
While the sheer size of the Lauder wealth is staggering, I don’t believe that his use of existing law should be vilified. Individually and collectively, the Lauders are known for their philanthropic leadership. Are their donations purely self-centered? I doubt it. If he intended to solely to preserve assets, he could have accomplished his goals with strategies that did not include philanthropy. Furthermore, despite everything, he still pays plenty in taxes.
For those who would criticize his strategies, here is my two cents worth: if you don’t like the results of the legislation that governs tax planning, change the laws. Personally, I find it annoying to listen to people who complain about wealthy individuals using federal and state law to minimize their tax liability and maximize the assets they pass to the next generation. Those who work to build their fortunes are entitled to use legal methods to protect their assets. If you have a problem with the law, call your representatives.