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The former U.S. tax commissioner who went to jail for evading taxes

Former U.S. tax commissioner Joseph Nunan Jr. at a federal courthouse in Brooklyn in June 1954. (AP)

Former president Donald Trump seemed to acknowledge Saturday that his business and its chief financial officer — just indicted on a charge of tax fraud — engaged in some creative accounting to evade $1.7 million in federal taxes.

“They go after good, hard-working people for not paying taxes on a company car,” Trump declared at a rally in Sarasota, Fla., slamming the prosecution as political. “You didn’t pay tax on the car or a company apartment. You used an apartment because you need an apartment because you have to travel too far where your house is. You didn’t pay tax. Or education for your grandchildren. I don’t even know. Do you have to? Does anybody know the answer to that stuff?”

Trump appears to acknowledge tax schemes while questioning whether alleged violations are crimes

While the Trump Organization and CFO Allen Weisselberg have pleaded not guilty to the charges and Trump was not charged in the case, he isn’t the first powerful former federal official to be linked to tax evasion. In 1956, a former U.S. tax commissioner went to jail for it.

In 1954, Joseph Nunan Jr. was convicted of evading $91,086 in taxes (equal to $911,000 today) between 1946 and 1950, including one year when he still was the nation’s top tax official. This involved taxes owed on $1,800 (about $18,000 now) that Nunan won on a bet that President Harry S. Truman would win the 1948 election.

The tax evasion was the tip of a massive scandal in the Treasury Department’s Bureau of Internal Revenue in the early 1950s. At least 20 tax officials were convicted of or indicted in tax evasion, taking bribes, illegally accepting outside income or charging “fees” to fix tax cases. Another 166 employees were fired.

At that time, most federal tax collections were overseen by 64 politically appointed district collectors. Congressional investigating committees found many tax collectors lived well beyond their modest government pay.

A tax agent in Brooklyn admitted splurging on a new car, a new house, new furniture and carpets, and a new TV set. The agent credited his sudden riches to a run of gambling luck. The agent, the Associated Press reported, boasted he had made quite a reputation “as a doper of fights, and he got racing tips from a bookie named Packy.” The agent was soon ousted for taking improper payments.

The head of the bureau’s alcohol tax unit in New York City bought his wife expensive mink coats. He admitted to being on the payroll of liquor companies that he oversaw for doing “nothing in particular.”

The St. Louis district tax collector, an old friend of Truman, was convicted of accepting payments to help companies win preference in federal programs.

The bribes to tax agents weren’t always in cash. “We discovered a case where an agent put in the fix for a contractor after the latter weatherproofed the agent’s house,” said James Dowling, the chief investigator for one congressional committee. “Another builder over the barrel built a brand-new garage for a tax agent.”

Sometimes “the tax agents picked out TV sets or washing machines in stores owned by their intended victims,” Dowling added. “One fellow had a dozen finely tailored suits. We learned he had processed tax returns for a clothing maker.” When asked to explain the free suits, the agent said, “I’m testing the fabric.”

The corruption reached all the way to Nunan, whom President Franklin D. Roosevelt had appointed tax commissioner in 1944. Nunan, an amiable Democratic politician from Brooklyn, was known as “the jolly tax collector.” When he resigned in 1947 to become a highly paid tax consultant, Truman praised him for fighting “tax chiselers.”

In 1951, congressional investigators charged that as a consultant, Nunan had improperly gotten a brewery company’s triple-digit tax bill reduced to a hefty refund. The investigators said Nunan failed to report tens of thousands of dollars of income over several years. A federal grand jury indicted Nunan in cheating on his taxes. The former tax commissioner’s defense was: “I have never held myself out to be a tax expert.”

At Nunan’s trial in federal court in Brooklyn in 1954, investigators testified that the former tax chief held large sums of money in three safe-deposit boxes. Nunan’s bookie testified that Nunan bet $900 (about $10,000 now) that Truman would win in 1948. Nunan said he didn’t report his $1,800 winnings because they were offset by losses on horse racing bets.

Prosecutors said Nunan’s wife, Kathryn, spent $29,524 (equal to $295,000 now) for “plain and fancy attire” at a Brooklyn clothing store over three years. Kathryn testified she was a “quite extravagant wife” and her husband didn’t know about the expenditures.

The Nunans claimed much of their wealth was money Kathryn had inherited from her uncle in the 1920s. The jury didn’t buy it. In 1956, a judge sentenced Nunan to five years in prison.

The former tax commissioner’s tax evasion “cannot be condoned,” the judge said. “The law-abiding citizens of this country who are carrying their share of taxes gain no comfort from the dishonesty of the defendant.” Nunan went to prison in 1956 after losing an appeal.

In early 1952, under political pressure, Truman made sweeping changes in the tax bureau. He eliminated the 64 positions of politically appointed tax collectors and moved to have the agency run by civil service employees. The reforms were needed, he said, “to protect the government from the insidious influence peddlers and favor seekers and to expose and punish any wrongdoers.”

The next year new President Dwight D. Eisenhower adopted most of the changes, and the tax bureau’s name was changed to the Internal Revenue Service.

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