While billionaires brag about tax evasion, the highest tax burden as a percentage of income falls on the poorest Americans. The lowest 20 percent of taxpayers pay a tax rate more than 50 percent higher than the top 1 percent of households. This should come as no surprise after the Panama Papers bombshell of 2016 that revealed rampant tax evasion from the oligarchy. Most recently, President Trump’s tax returns revealed that he paid $0 in federal income taxes in 10 out of the 15 past years and just $750 in 2016 and 2017 per a New York Times report. This unfairness — part in due to huge losses and tax breaks for real estate developers — point to a larger problem of income inequality in America. The problem is a lot of it is legal. Tax law in this country bears the burden on the working-middle-class families while billionaires like Amazon evade taxes while exploiting those very working-class employees who create their wealth.
Trump has paid about $400 million less than the average highest-earning 0.001% of tax filers in the US does. This is in part due to tax breaks, inflated write-offs for $70,000 in hair care, consultation fees, and falsely classifying personal estates as “investment properties” to reduce his taxable profit. and huge losses.Trump’s tax returns revealed“struggling properties, vast write-offs, and hundreds of millions in debt coming due.” The IRS will determine whether he broke the law after his audit. But he did illegally take $70,00 in tax deductions for hair care according to The New York Times’ expose.
The racist, tax-evading, con-man in chief has called himself smart for not paying taxes yet rails about illegal immigrants who pay $27.2 billion in federal, state, and local taxes each year. Corrupt plutocrats are openly bragging about cheating the system.
How Did Trump Avoid Taxes?
It’s all due to a combination of tax breaks and huge losses. Real estate moguls get tax breaks such as deducted interest on loans to reduce their taxes. Unlike people who take out credit cards and pay high interest rates who don’t deduct their interest. They gain another tax break on depreciation even if the building is appreciating. (Something about him being a conman and hypocrisy against immigrants)
Since 2000, Trump has reported hundreds of millions of dollars in losses on golf courses alone. Tax records show that his Trump International Hotel in D.C. lost $55.5 million along with big casino losses in Atlantic city.
The wealthy use losses to cancel out other income and harness the power to accountants and lawyers while making money flow to tax-exempt organizations or offshore.
However, Trump is an exceptionally bad businessman who paid no taxes for 10 years because he had massive losses year after year due to dumb investments. This revelation should come as no surprise as the conman stiffed vulnerable Americans through fraudulent “Trump University,” regularly stiffed contractors, and even stole kids’ cancer charity funds.
Moreover, personal expenses written off as cost of business vastly reduced his tax liability. Only the IRS audit will determine if those write-offs (such as a $70,000 for his hair care, $100,000 for his daughter Ivanka’s) were illegal.
To further reduce his reported profit, the NYT expose revealed that he classifies his personal estates as “investment properties” and reports inflated “consultation fees” for nearly all of his projects. For just one property, he “has been able to write off $2.2 million in property taxes since 2014.”
His $72.9 million tax refund is also the subject of a battle with the IRS.
Tax Evasion
The Panama papers, a massive document leak published by International Consortium of Investigative Journalists in 2016, revealed how the world-wide oligarchy commits tax evasion through offshore tax havens. However, the largest proportion of tax-avoidance is committed legally on US soil through a system of infinitely deferred capital gains taxes, false write-offs, weakened estate tax, and shrinking top tax rate that allows billionaires to literally never pay taxes.
In 2018, Amazon paid $0 in U.S. federal income tax on over $11 billion in profits before taxes. It also received a $129 million tax rebate from the federal government. This is all while the lowest 20 percent of taxpayers pay a tax rate more than 50 percent higher than the top 1 percent of households.
The Wealthy’s Tax Code
But how is this tax-avoidance possible? It’s simple. Income from wealth is taxed more lightly than labor income (which accounts for 80% of total income). This is all while the top one-percent’s capital income enjoys preferential tax rates. Tax code also allows the wealthy to exclude much of their income from tax returns – because it’s investment income.
The reason billionaires like Jeff Bezos can pay $0 in Texas is because they defer capital gains income each year, delaying by decades their taxes until the tax bracket is favorable or will have larger capital losses to offset the gains. Amazon founder Bezos receives an annual salary of $81,840 that is subject to income tax. However, his wealth is in the form of Amazon stock holdings which grew over $100 billion in the last decade. This $100 billion is only taxed when or if he sells some of his stock. Therefore, the income tax is mostly voluntary for billionaires by way of infinite deferment of capital gain taxes. His tax bill was $1.5 billion on a decade of stocks because he only sold $6.3 billion in shares — the tax code ignores the $100 billion gain. Many wealthy individuals choose to never sell their valuable stock and avoid taxes their entire lives. When they need cash they can pledge stock as collateral for credit as Larry Ellison did for a $10 billion credit line. They can obtain cash without selling their shares and paying taxes while the stock appreciates.
Another way the wealthy avoid taxes is through industry-specific capital gains tax breaks like real-estate in which sellers can avoid paying tax on realized capital gain when exchanging for a different building. They can keep avoiding taxes by continuously exchanging properties.
The biggest source of wealth concentration is large inheritances (40% of all wealth) that are subject to a weakened estate tax. The 2017 tax law doubled the amount of inheritance that can be passed on tax-free to $22 million. Less than 1/1,000 estates will owe any estate tax. While the estates big enough to face the tax utilize loopholes to reduce or eliminate their tax burden by artificially devaluing their assets.
Moreover, even the wealthy’s source of taxable income also enjoys a more favorable income tax burden than the 99% with today’s historical low top tax rate and lower rate for capital gains than for wages and salaries.The top tax rate is 37% — much below the post-WWII average of 59%, and high rate of 70% early in the postwar decades. These decades experienced strong growth and standards of living. Furthermore, there is no progressive tax rate above the top $480,000 income threshold. The tax code makes no distinction between someone earning $500,000, $10 million, or $100 million.
Corporate tax loopholes are a whole different article. They’re the Amazon paid $0 in federal taxes on over $11 billion in posted income in 2018. That same year they even received a federal refund of $129 million. The U.S. corporate tax rate was cut from 35% to 21% thanks to the Tax Cuts and Jobs Act
Widening Inequality
While billionaires brag about tax evasion, the highest tax burden as a percentage of income falls on the poorest Americans. The lowest 20 percent of taxpayers pay a tax rate more than 50 percent higher than the top 1 percent of households.
Income inequality is at an all time high since the Census Bureau began tracking it. Despite being the wealthiest country on earth, and worker productivity doubling, 12.3% of families continue living in poverty, and 40 million go hungry.
The richest 10% of U.S. households represented 70% of all U.S. wealth in 2018, and the top 1% hold 42.5% of national wealth, a far greater share than in other OECD countries. In no other industrialized nation does the wealthiest 1% own more than 28% of their country’s wealth. Economic inequality in the U.S. ranks higher than in any other wealthy, democratic country, and it has the most poor individuals than any other similar developed nations. Inequality has drastically increased since the 1960s were the top 10 percent of families owned around one-third of the national income, and the top 1 percent received less than 10% of all income (Manza, 2018, p.652). The Gini Index shows that the level of inequality in the United States is almost twice as much as in Sweden and a third more than most other European countries according to The Sociology Project 2.5 (Manza, 2018, p.654).
Economic inequality has increased since the 1960s due to technology, decline of manufacturing, globalization, stagnating wages and government policies that have not grown the wealth of the middle-class. People without access to the “college wage premium” have seen their earnings decline in this technology age with less manufacturing jobs. Deindustrialization has decreased these well-paying jobs for many Americans and only low-wage jobs have been growing for those who are non-college educated (Manza, 2018, p.657).
Tax evasion has only exacerbated this income inequality as the rich continue to reap a higher share of profits produced by the workers and not pay their fair share of taxes through weakened estate taxes, deferred capital gains, and artificial write-offs.
Leave a Reply