Thread: "Income defense industry" shields income of richest Americans

If anyone still wonders why Americans are so cynical towards politics:

With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy, the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the "income defense industry," consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means.

In recent years, this apparatus has become one of the most powerful avenues of influence for wealthy Americans of all political stripes, including Mr. Loeb and Mr. Cohen, who give heavily to Republicans, and the liberal billionaire George Soros, who has called for higher levies on the rich while at the same time using tax loopholes to bolster his own fortune.

All are among a small group providing much of the early cash for the 2016 presidential campaign.

Operating largely out of public view — in tax court, through arcane legislative provisions and in private negotiations with the Internal Revenue Service — the wealthy have used their influence to steadily whittle away at the government's ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans.

http://www.nytimes.com/2015/12/30/bu...=top-news&_r=0

http://eml.berkeley.edu/~saez/saez-U...comes-2013.pdf

Look at figure 2. It traces the share the top 1% earners in the US have had of the income since about 1900. The share has gone from under 10% during the seventies to over 20% since about 2000. Which is higher than it was before World War 2 and similar to the situation just before the great depression in 1929. The doubling to tripling in the space of a few decades is a clear negative sign concerning the state of American society.

Of COURSE rick people are going to do whatever they can to shield their fortunes. SO WHAT! We don't have access to their loopholes because we have nowhere near the amount of money they have. I don't believe in putting my hands into other people's pockets!

Yes, people can be expected to minimize their tax burden. The problem is not with the billionaires, it is with the system that permits billionaires to pay a lower rate of tax than a truck driver or a high school teacher.

Originally Posted by njtom

Yes, people can be expected to minimize their tax burden. The problem is not with the billionaires, it is with the system that permits billionaires to pay a lower rate of tax than a truck driver or a high school teacher.

I have no problem with that. I have a bigger problem with the % of people that pay NO tax at all, they have no skin in the game and basically keep voting for the politician that will give them the biggest goodies. They are a FAR bigger threat than the producers that provide the jobs and services we all need.

Originally Posted by Susan

I have no problem with that. I have a bigger problem with the % of people that pay NO tax at all, they have no skin in the game and basically keep voting for the politician that will give them the biggest goodies. They are a FAR bigger threat than the producers that provide the jobs and services we all need.

Outside of the underground economy, I would guess that very few people pay no taxes at all. Retail purchases, even by poor people, incur sales taxes. Wage income (even minimum wage income) incurs the social security tax, medicare tax, and unemployment tax. Driving a car incurs the gasoline tax and road tolls. And so on.

Originally Posted by njtom

Outside of the underground economy, I would guess that very few people pay no taxes at all. Retail purchases, even by poor people, incur sales taxes. Wage income (even minimum wage income) incurs the social security tax, medicare tax, and unemployment tax. Driving a car incurs the gasoline tax and road tolls. And so on.

But there are other entitlements that wipe most of that out.

The problem in the US is that the low taxes for the lowest earners and the various entitlements are there to counter a society that produces an even larger stretching of the distribution of income and wealth. You may call it a quick fix and maybe it is but there is a huge underlying problem there, where the wealthiest are able to amass and control a larger and larger proportion of the wealth. Not because they are fantastic entrepreneurs but rather because society is geared towards it.

Originally Posted by Colonel

The problem in the US is that the low taxes for the lowest earners and the various entitlements are there to counter a society that produces an even larger stretching of the distribution of income and wealth. You may call it a quick fix and maybe it is but there is a huge underlying problem there, where the wealthiest are able to amass and control a larger and larger proportion of the wealth. Not because they are fantastic entrepreneurs but rather because society is geared towards it.

Yes, and there's a phrase that describe the trend: the "winner take all" economy. Reasons cited for the trend include: 1) globalization, including free trade with nations that don't have environmental and labor protections, 2) technological changes that have increased the value differential between the highest performers and everyone else (an extension of the existing pay structure in the entertainment and professional sports industries), 3) interlocking corporate boards of directors that provide a "rubber stamp" of approval for excessive CEO pay, 4) non-enforcement of labor union regulations, 5) non-enforcement of anti-trust regulations, and 6) a growing culture of greed.

But what I find particularly disturbing, regarding the article referenced in the original post, is the fact that the attorneys and lobbyists of billionaires have the ability to influence government tax policy to such a large extent, and in such an unfair manner.

You forgot about

7) Effective marketing of executives as doing such an insanely good job that they deserve 7 or 8 figure amounts (salaries, bonuses, stock options)

They know how to work public opinion until everyone is starry eyed.