Last night we briefly touched on a NY Times article by Noam Scheiber and Patricia Cohen, For the Wealthiest, a Private Tax System That Saves Them Billions, in regard to relatively esoteric tax evasion schemes wealthy and politically-connected scofflaws use to avoid paying taxes. Scheiber's and Cohen's quick look at the well-funded mania of the very wealthy to abolish the estate tax isn't something we got to. So let's.
The inheritance tax has been a primary target. In the early 1990s, a California family office executive named Patricia Soldano began lobbying on behalf of wealthy families to repeal the tax, which would not only save them money, but also make it easier to preserve their business empires from one generation to the next. The idea struck many hardened operatives as unrealistic at the time, given that the tax affected only the wealthiest Americans. But Ms. Soldano’s efforts-- funded in part by the Mars and Koch families-- laid the groundwork for a one-year elimination in 2010.The tax has been restored, but currently applies only to couples leaving roughly $11 million or more to their heirs, up from those leaving more than $1.2 million when Ms. Soldano started her campaign. It affected fewer than 5,200 families last year.“If anyone would have told me we’d be where we are today, I would never have guessed it,” Ms. Soldano said in an interview.Some of the most profound victories are barely known outside the insular world of the wealthy and their financial managers.In 2009, Congress set out to require that investment partnerships like hedge funds register with the Securities and Exchange Commission, partly so that regulators would have a better grasp on the risks they posed to the financial system.The early legislative language would have required single-family offices to register as well, exposing the highly secretive institutions to scrutiny that their clients were eager to avoid. Some of the I.R.S.’s cases against the wealthy originate with tips from the S.E.C., which is often better positioned to spot tax evasion.By the summer of 2009, several family office executives had formed a lobbying group called the Private Investor Coalition to push back against the proposal. The coalition won an exemption in the 2010 Dodd-Frank financial reform bill, then spent much of the next year persuading the S.E.C. to largely adopt its preferred definition of “family office.”So expansive was the resulting loophole that Mr. Soros’s $24.5 billion hedge fund took advantage of it, converting to a family office after returning capital to its remaining outside investors. The hedge fund manager Stanley Druckenmiller, a former business partner of Mr. Soros, took the same step.The Soros family, which generally supports Democrats, has committed at least $1 million to the 2016 presidential campaign; Mr. Druckenmiller, who favors Republicans, has put slightly more than $300,000 behind three different G.O.P. presidential candidates.A slide presentation from the Private Investor Coalition’s 2013 annual meeting credited the success to multiple meetings with members of the Senate Banking Committee, the House Financial Services Committee, congressional staff and S.E.C. staff. “All with a low profile,” the document noted. “We got most of what we wanted AND a few extras we didn’t request.”After all the loopholes and all the lobbying, what remains of the government’s ability to collect taxes from the wealthy runs up against one final hurdle: the crisis facing the I.R.S.President Obama has made fighting tax evasion by the rich a priority. In 2010, he signed legislation making it easier to identify Americans who squirreled away assets in Swiss bank accounts and Cayman Islands shelters.His I.R.S. convened a Global High Wealth Industry Group, known colloquially as “the wealth squad,” to scrutinize the returns of Americans with incomes of at least $10 million a year.But while these measures have helped the government retrieve billions, the agency’s efforts have flagged in the face of scandal, political pressure and budget cuts. Between 2010, the year before Republicans took control of the House of Representatives, and 2014, the I.R.S. budget dropped by nearly $2 billion in real terms, or nearly 15 percent. That has forced it to shed about 5,000 high-level enforcement positions out of about 23,000, according to the agency.Audit rates for the $10 million-plus club spiked in the first few years of the Global High Wealth program, but have plummeted since then.The political challenge for the agency became especially acute in 2013, after the agency acknowledged singling out conservative nonprofits in a review of political activity by tax-exempt groups. (Senior officials left the agency as a result of the controversy.)Several former I.R.S. officials, including Marcus Owens, who once headed the agency’s Exempt Organizations division, said the controversy badly damaged the agency’s willingness to investigate other taxpayers, even outside the exempt division.“I.R.S. enforcement is either absent or diminished” in certain areas, he said. Mr. Owens added that his former department-- which provides some oversight of money used by charities and nonprofits to further political campaigns-- has been decimated.Groups like FreedomWorks and Americans for Tax Reform, which are financed by the foundations of wealthy families and large businesses, have called for impeaching the I.R.S. commissioner. They are bolstered by deep-pocketed advocacy groups like the Club for Growth, which has aided primary challenges against Republicans who have voted in favor of higher taxes.In 2014, the Club for Growth Action fund raised more than $9 million and spent much of it helping candidates critical of the I.R.S. Roughly 60 percent of the money raised by the fund came from just 12 donors, including Mr. Mercer, who has given the group $2 million in the last five years. Mr. Mercer and his immediate family have also donated more than $11 million to several super PACs supporting Senator Ted Cruz of Texas, an outspoken I.R.S. critic. and a presidential candidate. [Mercer's contribution to Cruz's campaign is now at $30,000,000.]Another prominent donor is Mr. Yass, who helps run a trading firm called the Susquehanna International Group. He donated $100,000 to the Club for Growth Action fund in September. Mr. Yass serves on the board of the libertarian Cato Institute and, like Mr. Mercer, appears to subscribe to limited-government views that partly motivate his political spending.But he may also have more than a passing interest in creating a political environment that undermines the I.R.S. Susquehanna is currently challenging a proposed I.R.S. determination that an affiliate of the firm effectively repatriated more than $375 million in income from subsidiaries located in Ireland and the Cayman Islands in 2007, activating a large tax liability. (The affiliate brought the money back to the United States in later years and paid dividend taxes on it; the I.R.S. asserts that it should have paid the ordinary income tax rate, at a cost of tens of millions of dollars more.)In June, Mr. Yass donated more than $2 million to three super PACs aligned with Senator Rand Paul of Kentucky, who has called for taxing all income at a flat rate of 14.5 percent. That change in itself would save wealthy supporters like Mr. Yass millions of dollars.Mr. Paul has suggested going even further, calling the I.R.S. a “rogue agency” and circulating a petition in 2013 calling for the tax equivalent of regime change. “Be it now therefore resolved,” the petition reads, “that we, the undersigned, demand the immediate abolishment of the Internal Revenue Service.”But even if that campaign is a long shot, the richest taxpayers will continue to enjoy advantages over everyone else.For the ultra-wealthy, “our tax code is like a leaky barrel,” said J. Todd Metcalf, the Democrats’ chief tax counsel on the Senate Finance Committee. ”Unless you plug every hole or get a new barrel, it’s going to leak out.”
When Paul "Muslim Beard" Ryan was reviled by his party's far right-wing for compromising with the Democrats on the Omnibus recently, he defended himself by listing several "wonderful" aspects of the bill. Number one, of course, was a giant wet kiss for Big Oil in the form of a repeal of the oil export ban. As Mike Huckabee pointed out, working families don't care about that, only wealthy political contributors do. In his explanation of GOP attempts to further cripple the IRS, Ryan tried spinning it as a boon for ordinary Americans. It isn't. "The IRS continues to act with impunity against the interests of hardworking taxpayers," lied Ryan. "This bill freezes most IRS operations and maintains budget cuts necessary to ensure this agency roots out wasteful spending and redirects resources to serving the American people."Last summer we looked at a video from the History Channel about how Andrew Carnegie, John Rockefeller and JP Morgan worked together to subvert the 1896 election and steal it from William Jennings Bryan (D) for Wall Street shill William McKinely (R). Their machinations led to the greatest wealth inequality in American history and, inevitably, the Great Depression. That kind of inequality-- nearly half the wealth in the country in the grasping paws of just 1% of the people-- is back... and not by coincidence. Republicans and conservative Democrats-- Blue Dogs and New Dems-- have worked to build the foundations for the rise and dominance of an American aristocracy based on inherited wealth. Robert Reich, working with MoveOn, talks about an antidote to this anti-democracy scourge in the video up top.
At a time of historic economic inequality, it should be a no-brainer to raise a tax on inherited wealth for the very rich. Yet there’s a move among some members of Congress to abolish it altogether...Today the estate tax reaches only the richest two-tenths of one percent, and applies only to dollars in excess of $10.86 million for married couples or $5.43 million for individuals.That means if a couple leaves to their heirs $10,860,001, they now pay the estate tax on $1. The current estate tax rate is 40%, so that would be 40 cents.Yet according to these members of Congress, that’s still too much.Abolishing the estate tax would give each of the wealthiest two-tenths of 1 percent of American households an average tax cut of $3 million, and the 318 largest estates would get an average tax cut of $20 million.It would also reduce tax revenues by $269 billion over ten years. The result would be either larger federal deficits or higher taxes on the rest of us to fill the gap.This is nuts. The richest 1 percent of Americans now have 42 percent of the nation’s entire wealth, while the bottom 90 percent has just 23 percent.That’s the greatest concentration of wealth at the top than at any time since the Gilded Age of the 1890s.Instead of eliminating the tax on inherited wealth, we should increase it-- back to the level it was in the late 1990s. The economy did wonderfully well in the late 1990s, by the way.Adjusted for inflation, the estate tax restored to its level in 1998 would begin to touch estates valued at $1,748,000 per couple.That would yield approximately $448 billion over the next ten years-- way more than enough to finance ten years of universal preschool and two free years of community college for all eligible students.Our democracy’s Founding Fathers did not want a privileged aristocracy. Yet that’s the direction we’re going in. The tax on inherited wealth is one of the major bulwarks against it. That tax should be increased and strengthened.It’s time to rein in America’s surging inequality. It’s time to raise the estate tax.
A few months ago the Associated Press released a poll showing that most American voters are very aware that the wealthy aren't paying their fair share of taxes and that the burden falls on the shoulders of the middle class. It looks like the Bernie Sanders/Elizabeth Warren message has finally started making inroads in the collective consciousness of the country (if not the Congress).
According to the poll, 68 percent of those questioned said wealthy households pay too little in federal taxes; only 11 percent said the wealthy pay too much.Also, 60 percent said middle-class households pay too much in federal taxes, while 7 percent said they paid too little.Obama laid out a series of tax proposals as part of his 2016 budget released this month. Few are likely to win approval in the Republican-controlled Congress. But if fellow Democrats were to embrace his ideas, they could play a role in the 2016 race.One proposal would increase capital gains taxes on households making more than $500,000. In the survey, 56 percent favored the proposal, while only 16 percent opposed it.Democrats, at 71 percent, were the most likely to support raising taxes on capital gains. Among Republicans and independents, 46 percent supported it.
Since then, Republicans have ratcheted up their war against the Estate Tax and are moving to abolish it entirely. If they keep control of both Houses of Congress and win the White House in 2016, there will be no Estate Tax, which is great news for around 5,400 wealthy families-- and bad news for everyone else. Killing off the estate tax would increase the deficit by $269 billion over a decade. On April 16, the House passed an Estate Tax repeal 240-179. Only 7 right-wing House Democrats voted with the GOP:
• Brad Ashford (Blue Dog-NE)• Sanford Bishop (Blue Dog-GA)• Jim Costa (Blue Dog-CA)• Henry Cuellar (Blue Dog-TX)• Collin Peterson (Blue Dog-MN)• Dutch Ruppersberger (MD)• Kyrsten Sinema (Blue Dog-AZ)
