How America’s Wealthiest are Saving Billions Through a Private Tax System
The nation of Bermuda, a British island territory in the North Atlantic, which the New York Times has exposed as a tax haven for some of America’s wealthiest citizens.(CC BY-SA 3.0)
By exploiting a financial loophole that involves routing their money to Bermuda and back, hedge fund magnates Daniel S. Loeb, Louis Moore Bacon and Steven A. Cohen are saving a fortune in taxes.
As the New York Times reports, the magnates “have invested large sums in art – and millions more in political candidates.”
Termed as ‘income defense industry’, there are many people working in this system for high income individuals to safeguard their money and save millions in taxes due on their income. The system involves highly paid tax lawyers, estate planners, anti-tax activists and lobbyists who work in tandem to devise the best strategies for super-rich individuals for saving taxes.
The report states, “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.”
From the New York Times:
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.
The impact on their own fortunes has been stark. Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to I.R.S. data. By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent, which is just slightly more than the typical family making $100,000 annually, when payroll taxes are included for both groups.
The ultra-wealthy “literally pay millions of dollars for these services,” said Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, “and save in the tens or hundreds of millions in taxes.”
Some of the biggest current tax battles are being waged by some of the most generous supporters of 2016 candidates. They include the families of the hedge fund investors Robert Mercer, who gives to Republicans, and James Simons, who gives to Democrats; as well as the options trader Jeffrey Yass, a libertarian-leaning donor to Republicans.
Mr. Yass’s firm is litigating what the agency deemed to be tens of millions of dollars in underpaid taxes. Renaissance Technologies, the hedge fund Mr. Simons founded and which Mr. Mercer helps run, is currently under review by the I.R.S. over a loophole that saved their fund an estimated $6.8 billion in taxes over roughly a decade, according to a Senate investigation. Some of these same families have also contributed hundreds of thousands of dollars to conservative groups that have attacked virtually any effort to raises taxes on the wealthy.
Read more here.
—Posted by Roisin Davis
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Source: http://www.truthdig.com/eartotheground/item/how_americas_wealthiest_are_saving_billions_through_a_private_tax_system_20/
