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1% Still Beating The Crap Out Of The Tax Code

While no one likes paying taxes, the rich in America have turned dodging the tax man into an art form. Not only have the wealthy funded candidates who get into office to get tax rates formally lowered, they use armies of lawyers and accountants to lobby legislatures for loopholes and outmaneuver tax officials at filing time.

Although avoiding taxes has been an issue in the country since the founding (the American revolution was partly a tax revolt after all) the 1980s saw a new dynamic where taxes were not only being avoided by the rich, but the launching of a hostile takeover of tax policymaking by the rich and their confederates.

Reporter David Cay Johnston has continually noted that since the 1980s the rich have used the tax system to redistribute income up, forcing what remains of the middle class and poor to pay a larger share of the taxes. This was achieved by cutting taxes that only effect the rich like capital gains while keeping payroll taxes (Social Security, Medicare and unemployment insurance) at the same levels.

The rich and their lobbyists have also devised a number of massive loopholes to avoid even paying taxes. The most blatant loophole has to be how carried interest is currently taxed, which allows hedge-fund managers to completely avoid paying income taxes on their profits from financial speculation.

But, as The New York Times noted yesterday, the rich have been upping their game in recent years creating an essentially private tax system that saves them billions of dollars.

The Times details an increased use by the rich of partnerships, investment funds, family trusts, and foreign shell-corporations to avoid paying taxes on their wealth and income. The key goal for the rich and their apparatchiks is to shift how, when, and if their income is taxed. That goal has been achieved:

Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to I.R.S. data. By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent, which is just slightly more than the typical family making $100,000 annually, when payroll taxes are included for both groups.

The rich have not only been getting the richer, they have been getting taxed less while doing so.

Not surprisingly, many of the beneficiaries of the gaming of the tax system highlighted by the Times are also substantial presidential and congressional campaign donors. Also, not surprisingly, they come from Wall Street and give to both political parties. Large Republican Party donors like Daniel Loeb and large Democratic Party donors like George Soros are doing everything they can to not pay their fair share of taxes.

Given the Citizens United decision it looks like the rich will be beating the crap out of the tax code for years to come.

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Dan Wright

Dan Wright

Daniel Wright is a longtime blogger and currently writes for Shadowproof. He lives in New Jersey, by choice.