Benjamin Franklin famously quipped that the only certainties in life are “death and taxes.” That might have been true in his day, but back then there were no Republican politicians doing the bidding of their billionaire donors. You’ve got to hand it to them. They have been very creative in finding ways to avoid taxation.
Among the billionaires who have managed to pay nothing in federal income taxes at least once are Jeff Bezos, Elon Musk, Michael Bloomberg, Carl Icahn, and George Soros. Most or all of their ability to avoid paying taxes was undoubtedly legal, which in itself is a scandal. At the same time, we don’t really know how much revenue the government has lost due to dodgy accounting. Donald Trump is surely not the only culprit.
We don’t know because the IRS hasn’t had the resources needed to audit the complex dealings of the wealthy. In an effort to remedy that, $80 billion was alloated to the IRS as part of the Inflation Reduction Act. Part of that would go toward modernizing systems and improving taxpayer service, but a big chunk would enable the agency to do more checking up on large corporations and individuals earning more than $400,000.
It should come as no surprise that the very first bill that the Republican-controlled House passed this year would gut that funding. Michelle Fischbach was among its enthusiastic supporters. They justified this outrage with a pack of lies, claiming falsely that the IRS would hire 87,000 new “agents” to go after middle- and low-income taxpayers. The Congressional Budget Office estimates that the Republican bill, which fortunately has no chance of becoming law, would cost the government $186 billion in lost revenue over the next decade.
Still, tax cheating is not the main reason the rich pay so little in taxes compared to how much their wealth has skyrocketed. Oxfam America (one of my favorite charities) just came out with a report finding that the number of billionaires in the U.S. grew by 60% over the last decade, and their overall wealth increased by 86%. Much of that growth occurred during the pandemic, when so many other Americans were struggling. If we measure tax avoidance by comparing how much they paid in taxes against how much their wealth has grown, the champion is Warren Buffett. Between 2014 and 2018, he grew $24.3 billion richer and paid $23.7 million in taxes, a tax rate of 0.10%.
The basic problem is that we don’t tax wealth as such. The value of stocks and other property can and has increased astronomically, but it doesn’t become income subject to taxation unless it gets sold – and even then capital gains are taxed at a lower rate than wages. Repealing the massive tax giveaways enacted during the Trump administration would help, but Congress should go further and pass the Ultra-Millionaire Tax Act championed by Sen. Elizabeth Warren. The bill would impose a 2% annual tax on the net worth of households and trusts exceeding $50 million, plus a 1% annual surtax on billionaires. An analysis by a pair of economists estimates that “the tax would bring in at least $3 trillion in revenue over 10 years without raising taxes on 99.95% of American households.”
As you file your tax return this year, I hope you can do it with a smile. Unlike the billionaire class, you are fulfilling a basic civic duty. Of course we all wish the government would use our tax dollars differently than they do, but think of how much worse off we would be if everyone could get away with the dodges used by the rich.
Paul Harris