Dori Raises Red Flag, Inslee Raises White Flag, I Throw Yellow Flag

[Up-front disclosure. When I ran for Congress in 2004, Jay Inslee spent a Sunday afternoon in my dining room helping me raise money. I know some of you will want to evaluate this post in that light.]

On this tax return matter:

Jay Inslee released five years of tax returns, and the big red flag turned out to be his selling a golf club membership for less than he paid for it, and claiming a tax deduction:

“The tax returns show the couple acquired the membership in 1988 and sold it in 2009, reporting a $5,500 loss.” (Seattle Times)

On this matter the law is quite clear (for once):

26 USC 274 – DISALLOWANCE OF CERTAIN ENTERTAINMENT EXPENSES

(3) Denial of deduction for club dues
…no deduction shall be allowed under this chapter for amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or other social purpose.

So Inlsee screwed up, Dori called him out on it, and Inslee will pay around $2,000 in back taxes (plus interest and penalties) to the rapacious US Treasury.

But if that gets you called a “tax cheat”– wow! What term would we come up with if there turns out to be a candidate who parked money offshore, or came up with a way to re-define salary as investment income to get a lower tax rate? Not to worry, it won’t happen. Because every candidate — except Inslee, apparently — understands the media math:

Candidate Discloses Returns And Pays For Improper Deduction = Tax Cheat

Candidate Discloses Nothing = We Don’t Know, Since He Didn’t Tell Us

I know Dori will do his best to get Rob McKenna to disclose his returns, but it won’t work. McKenna’s not the type to sucker-punch himself.

As for this other charge: That Inslee can’t “run his family financially” because he withdrew $45,000 from his IRA for roof repairs…

“That seemed very unusual to me to take a $10,000 tax hit on IRA retirement,” said Monson. “Do they have any savings they could have tapped?”

What is an IRA? It’s a savings account! I’d put my entire savings into one if I could because it grows tax-free. It might be unusual to make a withdrawal before age 59 1/2, because there’s a penalty. But the Inslees made their withdrawals at age 60. So the “tax hit” is simply ordinary income tax, which, if you have a traditional IRA, you will pay too because a traditional IRA is pre-tax money.

In other words, unless you’re so rich that you never use your IRA, everybody who has one is going to take a “tax hit.” That might be why they withdrew so much — to pay the taxes.

And why might they want to take that “tax hit” now? Maybe because they’re betting that taxes will be going up soon — which is a pretty safe bet, no matter who’s elected.

In any case, if it’s unfair to slam a candidate for being wealthy, how does it make sense to slam a candidate for NOT being wealthy?

But Dori’s doing his job. The ultimate blame goes to Jay for violating the first rule of politics — disclose nothing unless forced.