How the 'income defense industry' is creating a parallel tax system for the wealthiest Americans | Arkansas Blog

Tuesday, December 29, 2015

How the 'income defense industry' is creating a parallel tax system for the wealthiest Americans

Posted By on Tue, Dec 29, 2015 at 11:41 AM

HANDS OFF: We'd rather not pay, thank you. - FORBES
  • FORBES
  • HANDS OFF: We'd rather not pay, thank you.

Absolutely required reading this morning: The New York Times details the evolution of what is essentially a parallel tax system for the wealthiest Americans, who now pay a far smaller percentage of their income into public coffers than they did twenty years ago.

In 1992, the 400 highest earners in the U.S. paid about 27 percent of their income in taxes; in 2012, the figure was around 17 percent. (That's about a 37 percent reduction in the effective rate.)

It's no surprise that plenty of loopholes exist for the wealthy, but the scope (and success) of billionaires' investment in clever tax reduction strategies is staggering:

With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy,  the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the “income defense industry,” consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means.

...The ultra-wealthy “literally pay millions of dollars for these services,” said Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, “and save in the tens or hundreds of millions in taxes.”

Not a bad ROI. The Times also digs into the various means by which these shenanigans are executed, from the formation of large private partnerships to the use of offshore tax shelters and charitable trusts. Most of the time, there are no laws being broken — just manipulated. And the outsize influence of the superrich over the American political process both helps to prevent those laws from changing and keeps the IRS at bay when tax evasion strategies do fall into a legal gray area.

The article notes that the ranks of politically powerful billionaires includes some Democratic donors, such as George Soros. But there's no doubt which party is more sympathetic to the cause:

While Democrats like Bernie Sanders and Hillary Clinton have pledged to raise taxes on these voters, virtually every Republican has advanced policies that would vastly reduce their tax bills, sometimes to as little as 10 percent of their income.

At the same time, most Republican candidates favor eliminating the inheritance tax, a move that would allow the new rich, and the old, to bequeath their fortunes intact, solidifying the wealth gap far into the future. And several have proposed a substantial reduction — or even elimination — in the already deeply discounted tax rates on investment gains, a foundation of the most lucrative tax strategies.

Arkansas's preeminent billionaires aren't mentioned in this article, but make no mistake: The Walton family has demonstrated a masterful ability to avoid higher tax bills, as described in this 2013 Bloomberg piece on the Waltons' use of trusts to shield untold billions from a higher tax rate.

Tags: , , , , ,

From the ArkTimes store

Favorite

Comments (4)

Showing 1-4 of 4

Add a comment

 
Subscribe to this thread:
Showing 1-4 of 4

Add a comment

More by Benjamin Hardy

Readers also liked…

  • IHOP coming down, but .....

    I always scan the Little Rock City Board for items of interest this week and this one caught my eye: A zoning measure required by a proposal to tear down the IHOP at Markham and University.
    • Apr 30, 2016
  • Mitch Landrieu on the removal of Confederate tributes in New Orleans

    You want to hear the words of a strong mayor? Read the speech delivered by New Orleans Mayor Mitch Landrieu on the removal of the last of four Lost Cause tributes in the city. THIS is a strong mayor. Brilliant.
    • May 22, 2017
  • LR speakers blast state board for double standard

    A series of speakers, beginning with Sen. Joyce Elliott, denounced what they saw as a hidden agenda favoring charter schools at the state Department of Education and asked the state Board of Education for return of local control.
    • May 12, 2016

Most Shared

Most Recent Comments

Blogroll

 

© 2017 Arkansas Times | 201 East Markham, Suite 200, Little Rock, AR 72201
Powered by Foundation