Pluralistic: 03 Aug 2021


Today's links


The Wall Street 'Charging Bull' sculpture; the cobblestones beneath his feet have been replaced by ranks of gold bullion, and a French revolutionary engraving of a guillotine beheading a bourgeois stands by his front foot.

Elite debt hits record heights (permalink)

This summer started with a bang, with Propublica's secret IRS Files leaks – a massive data-set detailing the tax-evasion strategies of the rich, confirming F Scott Fitzgerald's maxim that "they are different from you and me" (We pay tax. They don't).

https://pluralistic.net/2021/06/08/leona-helmsley-was-a-pioneer/#eat-the-rich

When you are very rich, you can borrow money at interest rates that are next to zero; you can also take your income in stock, rather than cash. Stock is only taxed when you sell it, and then at the lower capital gains rate, because the IRS rewards gambling and punishes work.

Put those two facts together, and you've got wealthy people who effectively never "earn" any taxable income – instead, they stake their assets as collateral on tax-free loans at sub-1% interest.

The Propublica stories even reveal wealthy people illegally taking deductions on the loan interest, which the IRS doesn't seem to punish. Why would they? The rich are different from you and me. We pay tax. They don't.

If you live in a $70k household, your federal tax bill is about 14%. If you're Michael Bloomberg, your IRS bill on 2019's $2b in income is 1.3%.

https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax

Propublica's series has continued, naming and shaming ultra-wealthy people who take Helmsley's Law ("only little people pay taxes") to heart. But they're being (appropriately) cautious, so we're really only getting a limited view of things – the big picture is still obscure.

Writing in Counter Punch, Sam Pizzigati delves into elite debt on a macro scale, noting that the total loaned out by banks' "wealth management" divisions has hit $600b for 2021 – 17.5% higher than last year.

https://www.counterpunch.org/2021/08/02/americas-billionaires-borrowing-their-way-to-ever-more-fabulous-fortunes/

That accounts for 22.5% of the banks' total loan book – up from 16.3% in 2017. Jpmorgan and Citi are loaning more money to a handful of super-wealthy people than they are to all US credit-card holders combined. 10 years ago, credit card debt outstripped elite debt 10:1.

These loans aren't just risk-free – they're also good for business. The ultra-wealthy have an outsized say in the banking choices of large companies. A banker who cuts a sweetheart loan to a billionaire is setting themselves up for business with that billionaire's companies.

So these loans are (per Bloomberg), "highly strategic" for banks.

Now, America has an army of simps for plutes who'll be along to insist all of this is legal, and if we don't like it, force Congress to change the tax-code. "Don't hate the sociopath, hate the game."

Obviously, this is simpleminded rationalization. For one thing, it's often not legal – the tax code contains a woefully underused clause called the "economic substance doctrine" that prohibits pretextual financial arrangements that exist solely to evade taxes.

https://prospect.org/economy/one-weird-trick-force-billionaires-pay-taxes-economic-substance-doctrine/

This isn't enforced, and it should be, and the tax code should be updated, and while we're at it, we should adopt Elizabeth Warren's wealth tax – but we haven't, because the same people who evade their taxes use those savings to determine our political outcomes.

That's why "Economic elites and organized groups representing business interests have substantial independent impacts on U.S. government policy, while average citizens and mass-based interest groups have little or no independent influence."

https://www.cambridge.org/core/journals/perspectives-on-politics/article/testing-theories-of-american-politics-elites-interest-groups-and-average-citizens/62327F513959D0A304D4893B382B992B#authors-details

We don't need billionaires' money to fund our programs. The US government – not taxpayers – is where money comes from (money is spent into existence and taxed out of existence – the constraint on US spending is resources, not tax "revenue"):

https://pluralistic.net/2021/05/17/disgracenote/#false-consciousness

The reason to tax money out of existence is – in part – to blunt the power of the wealthy, and keep it in the hands of democratic accountable lawmakers. The project of American elites is to transfer power from the workers and voters to bosses and investors.

This infects every US political struggle. That "election audit" in Arizona? It exists because of the whims of a tiny number of billionaires, who act through think-tanks and other proxies to turn those whims into an existential crisis for democracy:

https://www.newyorker.com/magazine/2021/08/09/the-big-money-behind-the-big-lie

We hear a lot about how the wealthy amass huge art collections, superyachts, rare wines and other assets, and think of them like Scrooge McDuck, filling a vault with bullion and art treasures.

What's actually going on is a lot more cursed: these are part of an elaborate scheme to avoid taxation, amass political power, and wield that power at the expense of the rest of us.

(Image: Sam Valadi, CC BY, modified)


This day in history (permalink)

#20yrsago Linda Barry’s Doggy Summer Bingo https://web.archive.org/web/20020606053404/https://www.salon.com/mwt/comics/2001/08/03/barry3/index.html

#15yrsago Global warming beer made from melting ice-caps http://news.bbc.co.uk/2/hi/europe/5234194.stm

#10yrsago Virtual pets starve after bungled resolution to Second Life’s “unauthorized food” war https://nwn.blogs.com/nwn/2011/08/sl-meeroos-griefed.html

#10yrsago Law prof: it would be legal to mint 2x $1 trillion platinum coins & use them to pay the US debt https://edition.cnn.com/2011/OPINION/07/28/balkin.obama.options/index.html

#5yrsago Big rigs can be hijacked and driven with software-based attacks https://www.usenix.org/conference/woot16/workshop-program/presentation/burakova

#5yrsago Chinese government decrees that it is always legal to video-record the police https://www.scmp.com/news/china/policies-politics/article/1995447/chinese-free-film-police-long-they-dont-get-way

#5yrsago Mexico-US illegal migration has been at zero for 8 years, and other eye-opening facts https://www.wnyc.org/story/bnch-migration-doug-massey/

#5yrsago Lawsuit: Getty Images copyfrauded 47,000 photos from indie press agency Zuma https://arstechnica.com/tech-policy/2016/08/getty-images-sued-again-over-alleged-misuse-of-over-47000-photos/

#1yrago NSO Group cyberweapons targeted Togo's opposition https://pluralistic.net/2020/08/03/turnkey-authoritarianism/#nso-togo

#1yrago The sordid tale of We Charity https://pluralistic.net/2020/08/03/turnkey-authoritarianism/#we-charity

#1yrago A universal remote for killing people https://pluralistic.net/2020/08/03/turnkey-authoritarianism/#minimed


Colophon (permalink)

Today's top sources: Naked Capitalism (https://www.nakedcapitalism.com/).

Currently writing:

  • Spill, a Little Brother short story about pipeline protests. Friday's progress: 258 words (12669 words total)

  • A Little Brother short story about remote invigilation. PLANNING

  • A nonfiction book about excessive buyer-power in the arts, co-written with Rebecca Giblin, "The Shakedown." FINAL EDITS

  • A post-GND utopian novel, "The Lost Cause." FINISHED

  • A cyberpunk noir thriller novel, "Red Team Blues." FINISHED

Currently reading: Analogia by George Dyson.

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  • The Shakedown, with Rebecca Giblin, nonfiction/business/politics, Beacon Press 2022

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