- America's 400 top earners pay less tax than you: Propublica continues to mine the IRS Files.
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America's 400 top earners pay less tax than you (permalink)
Last June, Propublica announced that it was in possession of leaked IRS files detailing the tax affairs of America's richest people, and that the IRS Files showed that taxes are – as Leona Helmsley famously quipped – for the little people:
The initial reporting described how, for example, private equity raiders were able to debt-finance acquisitions of productive businesses, run them into the ground, pocket hundreds of millions of dollars, and avoid tax as they sprinted away from the wreckage.
A key scam that enables this looting is the "carried interest" loophole, which most normies assume has something to do with not paying tax on the interest you earn from a loan or something. That's a reasonable assumption, but it's dead wrong. "Carried interest" is a doctrine invented to make things fairer for 16th century sea-captains, and it has nothing to do with interest on loans.
How does a scam like that persist in the tax code for 500 years? Well, one thing the IRS Files showed is that lobbying for tax-breaks is an incredibly productive investment. Trump's "big, beautiful tax-cut" underwent a flurry of last-minute revisions that carved out the tax-evasion strategies of individual billionaires and their dynastic offspring.
These can be directly linked to campaign contributions to the GOP lawmakers who introduced them. Like Senator Ron Johnson, who threatened to block the tax cuts unless it was amended to favor three of his major campaign donors: Dick and Liz Uihlein (owners of Uline), and Diane Hendricks (roofing heiress), who gave $20m to Johnson's campaign and reaped $215m in the first year of the cuts (they're still getting hundreds of millions on that investment).
You may have noticed the presence of an heiress among Senator Johnson's owners: dynastic wealth plays an enormous role in shaping the US tax code and its policies. The American myth of the meritocracy has been extended to people whose "merit" consists of emerging from an extremely lucky orifice.
Dynastic fortunes are normally shrouded in secrecy. But thanks to honorable heirs, like Abigail Disney, we are starting to learn more about the dirty business of "family offices" and the ways they ensure that no matter how feckless and idiotic an heir may be, they will continue to be able to influence the lives of millions of people who work for living:
The tax code is a gnarly hairball of carve-outs and special programs, many of them designed to benefit middle-class earners, like the ROTH IRA. The ultra rich have turned these into piggy-banks they can stuff with hundreds of millions in tax-free loot. Peter Theil's ROTH is worth $5 billion.
And REITs – which are supposed to benefit mom-and-pop landlords who rent out an apartment in their retirement – have been transformed into a vehicle for offshore oligarchs to acquire hotels, smash their unions, and siphon off money needed for the local tax coffers:
Now, all work and no play make Steve a dull oligarch. The ultra-rich have figured out how to turn their hobbies and follies into tax-free money-pits, like Steve Ballmer's beloved LA Clippers. He evaded tax on $140m by buying the team – while his athletes (whose labor provides him with a handsome income) pay 30-40% income tax:
"Find a tax-sheltered hobby you love and you'll never work a day." That's the principle behind the hundreds of millions in tax-evasion practiced by the horsey set ($189m for tobacco billionaire Brad Kelley, $173m for soup heiress Charlotte Weber, $138m for hedge-fund looter Seth Klarman).
But if you just haven't found your passion yet, you can still trouser hundreds of millions, through the simple and effective tactic of cheating on your taxes.
Don't worry, the IRS has slashed its budget for auditing wealthy people and focuses its firepower on families with annual incomes of $35k and under:
The IRS Leaks are a couple of years out of date now, and it's hard to know exactly how much worse it's gotten. One bellwether is the amount of debt assumed by the ultra-wealthy – when plutes borrow, it's not like you or I going into debt, rather, it's part of a "buy-borrow-die" strategy through which unrealized, tax-free capital gains are used as collateral for cheap-as-dirt loans. The super-rich are levered up to their hairlines:
Meanwhile, President Biden has proposed a billionaire wealth tax, designed to get around the various tax-evasion strategies used by American oligarchs. Unsurprisingly, the wealthy are fighting back, insisting that they do pay tax, and lots of it:
Today, Propublica's Paul Kiel, Ash Ngu, Jesse Eisinger and Jeff Ernsthausen offer a reality check on those claims, with an in-depth analysis of America's 400 top earners:
The team start by observing that your effective rate of income tax does climb as your income does, but once you reach $29m, it plateaus – and then, it goes down, as extreme wealth unlocks access to tax evasion strategies that are beyond the reach of the merely rich.
The main way that the super-rich avoid tax is by arranging their payouts so they come as capital gains and not salaries, which are taxed at 20% rather than the 37% top rate for income derived from doing stuff, rather than owning stuff. Note that the 20% rate is only for long-term capital gains, and that means that nominally flippers who buy and sell assets quickly can't get it – but have no fear, private equity barons can pretend to be 16th century sea-captains and avail themselves of the carried interest loophole.
The US tax code has had special treatment for capital gains for about a century, but GW Bush's tax cuts in 2003 supercharged these breaks for the owning class. America's richest 400 people save an average of $1.9b/year thanks to ole GW.
The American tax-code is especially kind to people who emerge from lucky orifices. If you're in the DeVos or Walton family, tax giveaways are the key to your ability to shower candidates, PACs and think-tanks with money. 11 Walton orifice-emergers pocket $371m/year thanks to preferential treatment for dynastic fortunes.
But the real winners are tech billionaires, those rapacious, mediocre monopolists who have homogenized the internet into five giant websites filled with screenshots of text from the other four. Their "charitable contributions" of stock (which can simply be donations to their own family foundations) let them deduct the full value of the stock without any capital gains tax.
The top 400 American earners each make at least $110m/year. That's 2,750 times the average American annual wage. The richest 11 US earners make more than $1b/year. A typical American would have to work for 25,000 years to make that much.
During those 25,000 years, you'll pay more of your income as tax than billionaires. While they nominally pay a higher rate than you, you're paying a much larger share of your income into Social Security and Medicare, goosing your tax rate over theirs.
Now all of this is a little misleading. The rich are actually richer than this analysis suggests. As the authors describe, "the richest avoid income when they can." By using the buy-borrow-die method, the wealthy actually pay a true tax rate of 3.4%.
That number shrinks even further when you consider America's top 15 earners who are singled out by name in a companion feature:
Despite what you may have guessed, there are no celebs on that list. Even LeBron James and Taylor Swift don't approach the fortunes of the tech billionaires, hedge fund looters, and professional orifice-emergers atop the steep slopes of the American wealth-pyramid.
Hey look at this (permalink)
- Wil Wheaton, "Still Just a Geek" https://whatever.scalzi.com/2022/04/12/the-big-idea-wil-wheaton/
Wax cylinder laser-scanner https://www.endpointaudio.com/endpoint-cylinder-machine (h/t JWZ)
This day in history (permalink)
#20yrsago Simpsons to Brazil: Sorry! https://people.com/celebrity/homer-simpson-rio-patch-things-up/
#20yrsago Gateway PCs does the right thing, RIAA flips out https://web.archive.org/web/20020418103504/http://www.riaa.org/PR_story.cfm?id=510
#20yrsago Bruce Perens writes to the CEO of Lindows https://web.archive.org/web/20021002051202/http://newsforge.com/newsforge/02/04/13/1331214.shtml?tid=19
#10yrsago Facebook supports internet censorship law CISPA https://act.demandprogress.org/sign/cispa_facebook/?akid=1309.606560.hIzXuJ&rd=1&t=3
#10yrsago How to Sharpen Pencils: A Practical and Theoretical Treatise on the Artisinal Craft of Pencil Sharpening https://memex.craphound.com/2012/04/13/how-to-sharpen-pencils-a-practical-and-theoretical-treatise-on-the-artisinal-craft-of-pencil-sharpening/
#5yrsago In America, “proximity and shared values” is all it takes to turn protesters into felons https://www.esquire.com/news-politics/a54391/how-the-government-is-turning-protesters-into-felons/
#5yrsago United’s passenger-beatings are a feature of its business, not a bug https://www.nytimes.com/2017/04/11/opinion/united-airlines-is-not-alone.html
#5yrsago EPA-hating EPA chairman Scott Pruitt wants to spend millions on 24/7 bodyguards https://www.govexec.com/management/2017/04/scott-pruitt-requests-funds-247-fleet-bodyguards-epa-poised-cut-health-and-safety-programs/136934/
#5yrsago Aga added networking to their super-high-end cookers, integrating them into the Internet of Shit https://www.pentestpartners.com/security-blog/iot-aga-cast-iron-security-flaw/
#5yrsago Politicians like it when economists disagree because then they can safely ignore the ones they dislike https://www.washingtonpost.com/news/monkey-cage/wp/2017/04/12/economists-are-arguing-over-how-their-profession-messed-up-during-the-great-recession-this-is-what-happened/
#5yrsago California’s charter schools: hundreds of millions of tax dollars for wasteful, redundant, low-quality education https://www.inthepublicinterest.org/wp-content/uploads/FINAL_ITPI_SpendingBlind_April2017.pdf
#1yrago Data-brokerages vs the world: The public-private partnership from hell https://pluralistic.net/2021/04/13/public-interest-pharma/#axciom
#1yrago What "IP" means: Control over customers, critics and competitors https://pluralistic.net/2021/04/13/public-interest-pharma/#ip
#1yrago Bill Gates will kill us all https://pluralistic.net/2021/04/13/public-interest-pharma/#gates-foundation
#1yrago Jackpot: Inequality sucks…for everyone https://pluralistic.net/2021/04/13/public-interest-pharma/#affluenza
Today's top sources:
- Picks and Shovels, a Martin Hench noir thriller about the heroic era of the PC. Yesterday's progress: 535 words (82761 words total).
A Little Brother short story about DIY insulin PLANNING
Vigilant, Little Brother short story about remote invigilation. FIRST DRAFT COMPLETE, WAITING FOR EXPERT REVIEW
Moral Hazard, a short story for MIT Tech Review's 12 Tomorrows. FIRST DRAFT COMPLETE, ACCEPTED FOR PUBLICATION
Spill, a Little Brother short story about pipeline protests. FINAL DRAFT COMPLETE
A post-GND utopian novel, "The Lost Cause." FINISHED
A cyberpunk noir thriller novel, "Red Team Blues." FINISHED
Currently reading: Analogia by George Dyson.
Latest podcast: When Automation Becomes Enforcement
- Surveillance Capitalism, Borders, and the Police (San Diego DSA), Apr 14
Launch for Jennifer Egan's "The Candy House" (Vancouver Public Library), Apr 19
Seize the Means of Computation, Emerging Technologies For the Enterprise, Apr 20
UK Competition and Markets Authority Data Technology and Analytics conference, Jun 15-16
- Breaking Free From the Corporate Matrix (Audiblegate podcast):
The Long, Slow Death of the Internet (Factually with Adam Conover):
Creative Commons Open Minds Podcast:
- "Attack Surface": The third Little Brother novel, a standalone technothriller for adults. The Washington Post called it "a political cyberthriller, vigorous, bold and savvy about the limits of revolution and resistance." Order signed, personalized copies from Dark Delicacies https://www.darkdel.com/store/p1840/Available_Now%3A_Attack_Surface.html
"How to Destroy Surveillance Capitalism": an anti-monopoly pamphlet analyzing the true harms of surveillance capitalism and proposing a solution. https://onezero.medium.com/how-to-destroy-surveillance-capitalism-8135e6744d59 (print edition: https://bookshop.org/books/how-to-destroy-surveillance-capitalism/9781736205907) (signed copies: https://www.darkdel.com/store/p2024/Available_Now%3A__How_to_Destroy_Surveillance_Capitalism.html)
"Little Brother/Homeland": A reissue omnibus edition with a new introduction by Edward Snowden: https://us.macmillan.com/books/9781250774583; personalized/signed copies here: https://www.darkdel.com/store/p1750/July%3A__Little_Brother_%26_Homeland.html
"Poesy the Monster Slayer" a picture book about monsters, bedtime, gender, and kicking ass. Order here: https://us.macmillan.com/books/9781626723627. Get a personalized, signed copy here: https://www.darkdel.com/store/p1562/_Poesy_the_Monster_Slayer.html.
- Chokepoint Capitalism: How to Beat Big Tech, Tame Big Content, and Get Artists Paid, with Rebecca Giblin, nonfiction/business/politics, Beacon Press, September 2022
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