Taxes and the Ultra-Wealthy
You probably just finished the annual ordeal of filing your income tax. I did. The Republican Tax Cuts and Jobs Act simplified nothing. Nonetheless, if you pay close attention to the directions it is possible to fill in the boxes and get it right. There are few judgment calls for most of us, just diligence and the need to follow directions.
It was in this recent context Trump continued to stonewall releasing his tax returns, tax returns he bragged about on Twitter, saying "I know our complex tax laws better than anyone who has ever run for president and am the only one who can fix them." In the last few weeks his tune is different. His tax returns are "feet high" and so complex Congresspeople "aren't smart enough to understand." He now says a "very powerful firm" prepares his taxes.
For the ultra-wealthy, income taxes are a matter of negotiation, of stretching the limits of the law, stretching done by armies of accountants and tax attorneys they hire to wring out every last penny they think they can defend (or hide) from the IRS, pennies the average citizen doesn't have in the first place and certainly doesn't have to spend on elite professional help.
Remember Mitt Romney's "hundreds of pages" of income tax disclosure in 2012? "Mitt Romney paid $1.9 million in taxes on $13.69 million in income in 2011, most of it from his investments, for an effective rate of 14.1 percent." At the time it was noted that Mr. Romney paid a lower tax rate than his secretary, and this of a man whose net worth was around 250 million dollars, a mere pittance compared to the tens of billions of the Murdoch clan or the Koch brothers. (In all three cases net worth is only an estimate, a fluid number.)
In the case of the Murdochs the NYTimes recently made the case that, using their media influence and wealth, they are able to make the rules by which they prosper. As the U.S. shifts toward oligarchy with Trump at the helm, the ultra-wealthy have a new tool: work behind the scenes to defund and defang the IRS, the people tasked with scrutinizing the tax avoidance schemes an army of tax attorneys and bankers has dreamt up.
These people, and the banks and business entities with which they are intertwined, may play by the same rules as the rest of us, but their extreme wealth gives them tools to bend and stretch those rules ever more in their favor. In this effort they are aided by the privacy rules preventing disclosure of their returns.
While the ultra-wealthy benefit from the money they have to finance their defense, and while the Republicans are gutting the ability of the IRS to enforce the tax law, the working poor are put under ever more scrutiny. (See "IRS Cuts Audits of Rich, Steps Up Audits of Poor After Budget Cuts"
From a NYTImes Editorial on December 25, 2018:
The undermining of the I.R.S.’s enforcement capability coincides nicely with the Republican playbook: Enrich wealthy individuals and corporations with tax giveaways that balloon the deficit, justifying spending cuts for health care, education and infrastructure, then amplify the process by not holding high-end taxpayers accountable for the amounts they owe.
It is a grand strategy. Focus the IRS on working poor voters, encouraging them to consider the IRS as overreaching and needing to be reined in, even as ultra-wealthy not only have their tax rates lowered but their machinations less scrutinized.
For years I have had an occasional glimpse of this process, but it was this article that crystallized it:
"The IRS Tried to Take on the Ultrawealthy. It Didn’t Go Well" by Jesse Eisinger & Paul Kiel, writing for the non-profit investigative news organization ProPublica. In 2011 Jesse Eisinger (and Jake Bernstein) won the Pulitzer Prize for National Reporting for their series, The Wall Street Money Machine. I encourage you to take the time to read the Elsinger and Kiel article It is an eye-opener.
Candidates who advocate a much higher marginal income tax rate and better funding for the IRS are looking better all the time.
Keep to the high ground,
P.S. Mitt Romney was only the second wealthiest candidate for President in our history, Ross Perot was, by a factor of ten. (Adjusted for inflation, and considering family assets, Presidents Washington, Jefferson, and Kennedy might be in contention, but the calculations are challenging.) Is Trump the richest candidate and President ever? He would like you to think so, but he would like you to think a lot of things that aren't true.