Billionaires don’t pay tax
When Clinton accused Trump of paying no federal taxes, he didn’t deny it — rather, he said, “That makes me smart.”
He wasn’t the first rich sociopath to make that claim. Remember when Leona Helmsley told the press “only little people pay taxes?”
Today, Propublica published the first in a series of blockbuster analyses of leaked tax data from America’s richest billionaires — some of whom have lobbies for higher taxes on the rich! — showing that the true tax rate for billionaires is 3.4%.
These records — which include tax data for Elon Musk, Warren Buffett, Jeff Bezos, Michael Bloomberg, George Soros, Carl Icahn and others — reveal that it’s not just sneering boasters like Trump and Helmsley who avoid the tax the rest of us pay — it’s the whole cohort.
Much has been made of the “K-shaped” recovery from the pandemic-driven economic collapse, where the rich got richer and the poor got poorer, but when it comes to the 0.001%, this is far more pronounced. America’s billionaires got $1.2 trillion richer during the pandemic.
Much of this wealth accumulation is due to the fact that poor people pay high taxes, while rich people pay low taxes. A household earning $70k pays about 14% in federal tax; In 2019, Michael Bloomberg made $2B and paid 1.3% of it in federal tax.
All this wealth-accumulation creates family dynasties, meaning that the rich stay rich, and the poor stay poor, and the only real social mobility is downward, as the middle class loses ground and slips down the ladder.
A quarter of America’s richest people owe their fortune to the orifice they emerged from, not the work they did. These heirs — Waltons, Mars candy scions, Estee Lauder’s kid — are the new permanent aristocracy, uplifted by the invisible hand by virtue of their “good blood.”
The Propublica report — from Jesse Eisenger, Jeff Ernsthausen and Paul Kiel — is valuable not just for the names it names, but for the tax-evasion tactics it explains and the historical context it provides.
Whenever someone points out that Jeff Bezos is so rich that he could afford to give a living wage to his vast, precarious, food-stamp-dependent blue-collar workforce, someone inevitably points out that Bezos’s wealth is in shares, not cash and is thus illusory.
This is only partly true, and it obscures more than it illuminates. It’s true that CEOs habitually draw nominal salaries — often $1/year — and are only “rich on paper,” but this doesn’t mean they’re not immensely wealthy — rather, this is how they amass immense wealth.
Here’s how that works: the US only taxes capital gains (money you make from owning things, as opposed to doing things) when they are “realized” — that is, when you sell the asset that has appreciated in value. If you never sell your asset, you never pay tax on it.
So when an exec takes compensation in stock rather than cash, the exec pays no tax unless they sell the shares. But execs don’t have to sell any shares in order to get millions or billions of dollars to play with. Rather, they can stake those shares as collateral on loans.
If an exec sells their shares, they’ll pay a 20% capital gains tax. If they borrow against the shares, they’ll pay single-digit interest rates. What’s more, loans aren’t treated as income, so no tax is paid on the loan.
Even better, the interest on the loan can be treated as an expense, which you can apply to any money that comes in the door that you can’t help but declare as income.
Working people borrow money because they can’t afford to buy cars or houses or just close the gap between payday and an empty fridge. Rich people borrow because it lets them launder their income into tax-free loans.
Here’s the thing: this is exactly what critics of this system predicted would happen. In 1920, Rep Cordell Hull (“the father of income tax”) warned that the Supreme Court’s ruling in Macomber would let rich people “live upon the value” of stock “without ever paying” tax.
Congress could have fixed the tax law, but it left this loophole open, along with other loopholes, like the “step-up in basis” rule that allows billionaires to pass on vast fortunes without ever paying capital gains taxes on them (the true origin of “good blood”).
When Propublica called billionaires for comment, they either got stonewalled (Elon Musk sent them a single “?” then ghosted), or heard bluster about “privacy invasions” or got responses like Warren Buffett’s, about his plan to give away all his money.
That’s more “good blood” nonsense: the idea that we should let people amass vast fortunes through monopoly and exploitation, so long as they — and not democratically accountable governments — then use it for social benefit.
Elite philanthropy is no substitute for democratic programs. It’s primarily a means for the ultra-wealthy to launder their reputations.
Take the Sacklers — made richer than the Rockefellers through the opioid epidemic’s corporate mass murders:
What’s more, elite philanthropy is a vehicle for pushing “good blood” ideology. Bill Gates’s foundation didn’t just set out to eradicate malaria, but also public education.
It recycled the materials it used to lobby against letting South Africa make its own HIV medicine to lobby against a covid vaccine waiver:
This report is the first in a series based on the anonymous leaked data. Propublica says its source was motivated by their stellar reporting on the IRS, which revealed the intense lobbying to weaken the agency’s power to audit the wealthy.
Instead, the IRS was perverted so that it primarily targeted poor people for audits, because they alone were weak enough not to resist the IRS’s starved, resource-poor auditing division.
Propublica still has a lot of data to report out, but they’re interested in hearing from other sources. In this supplemental article, they explain how IRS whistleblowers and others can securely leak more documents to them.
And if you don’t have time to digest the excellent story with its great explainers and graphics, Propublica’s got a 7-minute read version:
All of this leaves us with a question, though: what should we do about it? There’s a Biden tax plan to raise taxes on the rich, but as Propublica points out, it will have virtually no effect on the “buy-borrow-die” mode of wealth accumulation.
Two other proposals would have an impact, though: Ron Wyden has proposed a capital gains tax on unrealized gains:
And both Bernie Sanders and Elizabeth Warren have proposed wealth taxes:
Cory Doctorow (craphound.com) is a science fiction author, activist, and blogger. He has a podcast, a newsletter, a Twitter feed, a Mastodon feed, and a Tumblr feed. He was born in Canada, became a British citizen and now lives in Burbank, California. His latest nonfiction book is How to Destroy Surveillance Capitalism. His latest novel for adults is Attack Surface. His latest short story collection is Radicalized. His latest picture book is Poesy the Monster Slayer. His latest YA novel is Pirate Cinema. His latest graphic novel is In Real Life. His forthcoming books include The Shakedown (with Rebecca Giblin), a book about artistic labor market and excessive buyer power; Red Team Blues, a noir thriller about cryptocurrency, corruption and money-laundering; and The Lost Cause, a utopian post-GND novel about truth and reconciliation with white nationalist militias.