It’s a good look at how billionaires get out of paying taxes. Drucker, an old Wall Street Journal colleague of mine, gives us this excellent context on the richest 400, pointing out that their federal tax burden fell by nearly half from 1995 to 2007:
For the 400 U.S. taxpayers with the highest adjusted gross income, the effective federal income tax rate—what they actually pay—fell from almost 30 percent in 1995 to just under 17 percent in 2007, according to the IRS. And for the approximately 1.4 million people who make up the top 1 percent of taxpayers, the effective federal income tax rate dropped from 29 percent to 23 percent in 2008.
He also points to the McCourt anecdote:
Several of those techniques involve some variation of complicated borrowings that never get repaid, netting the beneficiaries hundreds of millions in tax-free cash. From 2003 to 2008, for example, Los Angeles Dodgers owner and real estate developer Frank H. McCourt Jr. paid no federal or state regular income taxes, as stated in court records dug up by the Los Angeles Times. Developers such as McCourt, according to a declaration in his divorce proceeding, “typically fund their lifestyle through lines of credit and loan proceeds secured by their assets while paying little or no personal income taxes.”
Swell guys. Real estate developers, of all people, depend on taxpayers and government—sometimes through direct subsidies—to make their investments go. Taxpayers usually foot the bill for the infrastructure that makes developers’ projects feasible.
Drucker runs through several different techniques the wealthiest use to avoid taxes, including the “‘No-Sale’ Sale,” the “IRA Monte Carlo,” and the “Estate Tax Eliminator.” It’s an excellent compilation of tax tactics that ought to be scrutinized.
Meantime, Johnston also emphasizes the income inequality that’s run amok in the last thirty years. At the same time taxes on the rich have tumbled, their gross income has skyrocketed. Meantime, median wages have been flat over that time and actually declined in the last decade.
It’s worth remarking that it’s nice to have these two stories out at the same time. Johnston’s piece is running on the covers of alt-weeklies across the country. Drucker’s is on the cover of a major business mag at your nearest mainstream newsstand.
Combined, they hammer the point home that the system is rigged in favor of the wealthiest at everyone else’s expense.