ProPublica recently got hold of the federal tax returns from the 25 richest Americans and has now published an “analysis” of them. It might be mentioned that there are only two ways it could have gotten this data. One is that it was leaked to ProPublica by someone at the IRS. That would be a felony. Otherwise, it got the data through a major security breach, which puts everyone’s tax data, and thus privacy, at risk (and would also be illegal).
The “analysis” is blatantly tendentious. ProPublica compared the amount of taxes paid by these people not to their earned income but to the amount their wealth grew during the period in question. That’s not an analysis of their incomes but their wealth. So, what ProPublica is engaged in isn’t a dive into our tax code but a speculative lobbying effort in favor of taxing wealth.
As I detailed a year ago January, a wealth tax would be unconstitutional in at least three separate ways. If such a measure was somehow enacted and upheld, it would set off a stock market crash that would make 1929 look like a day at the beach.
ProPublica fails to note that these billionaires own vast amounts of stock in companies that pay large corporate income taxes. In a recent year, Berkshire Hathaway paid $6 billion in corporate income taxes, and Warren Buffett owns one-third of Berkshire Hathaway. So, didn’t he pay $2 billion of that corporate tax bill? It says that Jeff Bezos paid no income tax one year because he could offset his earned income with investment losses. Perhaps we should establish a GoFundMe page for Mr. Bezos, as you can only offset $2,500 of ordinary income with investment losses. (It should also be noted that most countries that experimented with taxing net wealth soon repealed those levies because of their unintended consequences. A wealth tax only makes economic sense in a faculty lounge).
Both ProPublica and the New York Times’s front-page story on its investigation note that people in this bracket have little ordinary income compared to their wealth. And that there is no end to the ways they can avoid taxes that are not available to people who aren’t that rich. Both are true. But the late Senator Russell Long once explained the art of taxation: “Don’t tax you and don’t tax me, tax that man behind the tree.” And the “rich” are the man behind the tree.
“Make them pay their fair share,” bellow the Elizabeth Warrens of the country. But then Congress quietly inserts provisions into the tax code to make sure that, first, the rich have ways to escape the taxation and, second, they will continue to make large political contributions. The tax code has been amended thousands of times in the last 20 years, and most of these amendments benefit the rich. It is corrupt to its core.
In his Times column, Binyamin Applebaum says that the idea that the very rich will pay eventually is “risible.” He notes that “Assets can also be passed on to children and grandchildren. Better yet, the government allows heirs to take ownership at the present value, easing the accumulated tax liability.” This is breathtakingly dishonest. Yes, assets can be passed on to heirs, but not before paying a very large estate tax (currently 40 percent in the top bracket), which is calculated at the decedent’s cost basis, which in the case of first-generation billionaires like Jeff Bezos, is essentially zero. In 2010, the one year when there was no estate tax, heirs inherited not only the assets but the original cost basis.
It is political science 101 that it is easier to enact a law than to repeal one because the direct beneficiaries of the law, however perverse it is, will always fight to preserve it. When among the direct beneficiaries are the legislators who would have to repeal the law that goes, at the least, double. And that, alas, is very much the case with the U.S. Tax Code.