Stroke the Rich. . . David Cay Johnston

[chomerics]

Here is an article written by David Cay Johnston. I read his book, Perfectally Legal about the us tax system and it is utterly horrific. He details how billionaires abuse the tax system and why the IRS refuses to go after them. It is a good book if you want to find out how much money is being bilked by billionaires. BTW, he throws Clinton to the wolves as well in his book.

Anyway, here's his article. . .

Stroke the rich

IRS has become a subsidy system for super-wealthy Americans IRS winks at rich deadbeats

David Cay Johnston

Sunday, April 11, 2004

The federal tax system that millions of Americans are forced to deal with before April 15 is not at all what you think it is. Congress has changed it in recent decades from a progressive system in which the more one earns the more one pays in income taxes. It has become a subsidy system for the super rich.

Through explicit policies, as well as tax laws never reported in the news, Congress now literally takes money from those making $30,000 to $500,000 per year and funnels it in subtle ways to the super rich -- the top 1/100th of 1 percent of Americans.

People making $60,000 paid a larger share of their 2001 income in federal income, Social Security and Medicare taxes than a family making $25 million, the latest Internal Revenue Service data show. And in income taxes alone, people making $400,000 paid a larger share of their incomes than the 7,000 households who made $10 million or more.

While millions of Americans in the last quarter-century debated about who shot J.R. and scurried for news about who would be Jennifer Lopez's next lover, Congress quietly passed tax laws that shift the tax burden from the 28,000 Americans in households with incomes of $8 million per year or more.

One 1985 law, promoted in the Senate as relieving middle class Americans, gave a huge tax break to corporate executives who make personal use of company jets. CEOs may now fly to vacations or Saturday golf outings in luxury for a penny a mile. Congress shifted the real cost of about $6 per mile to shareholders, who pay two-thirds, and to taxpayers who suffer the rest of the cost lost as a result of reduced corporate income taxes.

Since 1988, Congress has also cut in half the Internal Revenue Service's capacity to enforce tax laws, replacing it with extra effort to reduce audits of corporations and the rich.

On March 30, Congress was told that 78 percent of known tax cheats in investment partnerships are not even asked to pay because there are not enough tax collectors to go after them. Congress and the Bush administration rejected the request by the IRS Oversight Board, a citizen panel Congress created, for extra money to pursue some of these tax cheats and stop about 1 percent of the $311 billion in estimated annual tax cheating.

In the late '90s, a crooked banker gave the IRS records on 1,600 criminal tax cheats who used his Cayman Islands bank. The Justice Department prosecuted 49 of them, but the other 1,551 were not even asked to pay, lawyers for some of them say.

Two billionaires in New York, the art dealer Alec Wildenstein and his former wife, Jocelyn, testified under oath in their divorce that for 30 years they never filed a tax return. They have not been prosecuted.

There are now seminars that show business owners how to drop out of the tax system with virtually no risk of detection by the IRS, which relies on a computer system installed when John F. Kennedy was president.

As tax law enforcement has declined, illegal tax evasion has risen, especially among the rich and more recently among the young.

All of these actions reward cheats at the expense of honest taxpayers, but because "tax" is a four letter word in Washington, nothing is done. Those who support tax law enforcement are denounced on the campaign trail as advocates of higher taxes.

While letting rich tax cheats run wild, Congress did finance a crackdown on the poor. The working poor, most of whom make less than $16,000, are eight times more likely to be audited than millionaire investors in partnerships.

The audits of low-income taxpayers found little cheating. Two-thirds of the poor get either their full refund or more than they sought.

These and other unseen changes in the tax system are major factors in profound economic changes that have caused so many in America to lurch from job to job, a fourth of which pay less than $8 an hour, while helping a very few grow very rich.

Because the news media focus on what politicians say about the tax system, rather than how it actually operates, few Americans realize that:

-- Corporate income tax laws reward companies that move jobs offshore, allowing them to earn untaxed profits as long as the money stays offshore.

-- Widespread cuts in health insurance and pensions for the rank-and- file are driven by a special law that lets top executives defer paying taxes for years, in a way that adds 35 percent to the cost of their bloated pay.

-- The 2001 Bush tax cuts included a stealth tax increase on the middle class and upper-middle class that will cost them a half trillion dollars in the first 10 years and, for 35 million families, wiping out part or all of their Bush tax cuts.

-- The stealth tax boost on people making $30,000 to $500,000 was explicitly used to make sure that the super rich would get their entire Bush tax cuts.

-- A California couple who make $75,000 to $100,000 and have two children face a 97 percent chance of losing part of their Bush tax cuts to this stealth tax increase and overall will lose 42 percent of their Bush tax cuts by next year.

-- If your child becomes seriously ill, Congress, under this same law, will raise your income taxes if you spend more than 7.5 percent of your income trying to keep your child alive.

-- Since 1983, under a plan devised by Alan Greenspan, Americans have paid $1.8 trillion more in Social Security taxes than have been paid out in benefits, money that is used to finance tax cuts for the super rich while robbing the middle class of their capacity to save.

-- A family earning $50,000 this year will have about $1,500 of its money funneled to the super rich because of the Greenspan plan.

-- Since 1993, the income tax burden on the 400 highest-income Americans has been cut 40 percent when measured the way that President Bush prefers, which is by counting how many pennies out of each dollar go to income taxes. In 1993 the top 400 paid 30 cents out of each dollar in federal income taxes. By the end of the Clinton administration in 2000 they were down to 22 cents. Under Bush, their burden is less than 18 cents. Everyone else felt their tax bite rise to 15 cents on the dollar from an average of 13 cents.

Over time, the impact of tax relief for the super rich and more taxes for everyone else is profound. The rich can save and invest more and more, increasing their incomes and political power over time through the magic of compound interest, while everyone else has less of their money to spend or save and millions of people are mired in debt.

While wage earners have every dollar of income reported to the government, the super rich control what the IRS knows about their incomes. But the rich are rarely audited anymore. Congress also gives them many perfectly legal devices to defer reporting income for years or decades. That means that the real incomes of the super rich are much larger than the IRS data show and their tax burden is even lighter.

IRS data, adjusted for inflation, show that the poor are really getting poorer and the super rich are getting fabulously richer, a trend enhanced by their falling tax burden. In 1970, the poorest third of Americans had more than 10 times as much income as the super rich, the top 1/100th of one percent. Back then the poor had more than 10 percent of all income and the super rich had one percent.

By 2000 the two groups were equal -- the 28,000 Americans at the top had as much income as the 96 million at the bottom. The poor's share of income fell by half while the super rich's share rose to more than 5 percent of all income.

Not only did the poorest third's share of income shrink, they actually had less money. The average 25-year-old man in 1970 made $2 per hour more, adjusted for inflation, than in 2000.

Over those three decades the bottom 99 percent of Americans had an average increase in total income of $2,710. That is an annual raise of less than $100 per year, the equivalent of a nickel an hour raise each year for 30 years. The super rich did fabulously better, their average incomes rising $20. 3 million to an average of $24 million each.

Plot these figures on a chart and the results astound. If the increase for 99 percent of Americans is a bar 1-inch high, the bar for the super rich soars heavenward 625 feet.

All of this is having a devastating impact on America, which the preamble to our Constitution says was created to "promote the general welfare." Until Americans decide to take back their democracy and become actively engaged in politics, the super rich will continue to rig the tax system for their benefit only.

source

[Cdowwe]

Ive been reading this for the last 4 years. Nothing new.

[chomerics]

Originally posted by Cdowwe

Ive been reading this for the last 4 years. Nothing new.

So you have no problem with this??? It is geting to be more like a Plutocracy each and every day.

[twa]

So work for a larger sales tax with a exemption for basic necesities.

Good luck on taxing the rich.

[Fred Jones]

I just call this the Republican brainwashing machine.

[Kilmer17]

All the more reason to support a Natl Sales Tax.

[codeorama]

Originally posted by Kilmer17

All the more reason to support a Natl Sales Tax.

Make it happen Remlik....

[Riggo-toni]

And yet, somehow a flat tax with no deductions is considered too regressive....

Funny how in all this class warfare stuff, noone ever writes about/gets enraged by how much we SPEND on the rich. Sam Donaldson lambasts the GOP for tax cuts for the wealthy, while he collects $40k a year from the gov't in mohair subsidies. Ethanol subsidies are a huge corporate welfare program for Archer Daniels Midland, but trying to end it means you're an eco-terrorist (even though every study shows it actually costs more enrgy to produce than it provides, and increases smog). Part time farmers with 6 figure salaries getting handouts, millionaires getting subsidised healthcare because they're over 65....

By the way, Dole was the primary figure behind the increase in SS payments. Greenspan merely pointed out, quite correctly, that the system was headed for disaster. If only we'd introduced private accounts the, instead of doubling the taxes.

[chomerics]

Originally posted by Riggo-toni

And yet, somehow a flat tax with no deductions is considered too regressive....

Ummm, that's because it IS regressive. It is the most regressive form of tax there is.

Funny how in all this class warfare stuff, noone ever writes about/gets enraged by how much we SPEND on the rich. Sam Donaldson lambasts the GOP for tax cuts for the wealthy, while he collects $40k a year from the gov't in mohair subsidies. Ethanol subsidies are a huge corporate welfare program for Archer Daniels Midland, but trying to end it means you're an eco-terrorist (even though every study shows it actually costs more enrgy to produce than it provides, and increases smog). Part time farmers with 6 figure salaries getting handouts, millionaires getting subsidised healthcare because they're over 65....

I think you'll have a hard time finding people who are for subsidies, unless they are the ones receiving the subsidies themselves.

By the way, Dole was the primary figure behind the increase in SS payments. Greenspan merely pointed out, quite correctly, that the system was headed for disaster. If only we'd introduced private accounts the, instead of doubling the taxes.

And how does removing MORE money from the system help? It makes it worse.

[Riggo-toni]

Originally posted by chomerics

Ummm, that's because it IS regressive. It is the most regressive form of tax there is.

I think you'll have a hard time finding people who are for subsidies, unless they are the ones receiving the subsidies themselves.

And how does removing MORE money from the system help? It makes it worse.

1.) No, it's not regressive, it's just not progressive (at least in theory) as statists want. Furthermore, by eliminating loopholes and deductions, the "idle rich" would actually have to cough up money instead of funneling into trusts, shelters, etc.

2.) Maybe you'd have a hard time finding people who are for subsidies, but my point was, you don't have any of these same class warriors you like to bring up expressing the same outrage about giving money to the rich, whilst they all decry with utter contempt not taking enough of money that "wealthy" people earn.

3.) It helps for this simple reason: Unified Budget. A simple accounting trick started by LBJ to hide the costs of the Vietnam War and all his miserable social programs. By raising the FICA tax, we simply gave the gov't more $$$ to squander, whereas had we instead forced the gov't to get by on what it had and pushed individuals into mandatory savings accounts, that money would be theirs, and would be providing people with enough of a nest egg to live on lower gov't handouts. EVERY time the gov't raises taxes, spending goes up more. For every dollar in tax hikes during the 19080s, spending increased $1.58. It was even worse with Bush 41's tax hike: spending went up more than $2 for every dollar increase.

[Larry]

Originally posted by Riggo-toni

1.) No, it's not regressive, it's just not progressive (at least in theory) as statists want. Furthermore, by eliminating loopholes and deductions, the "idle rich" would actually have to cough up money instead of funneling into trusts, shelters, etc.

Um, I think it's a safe bet that under the "flat tax", that:

People who buy a house in the US will be taxed on it. People who buy a house in Costa Rica will not.

The same thing will apply to boats. Or airplanes.

People who own businesses will also be able to dodge taxes by simply claiming "it's for my business". Granting, it also goes on right now, but the tax people occasionally catch and punish people for doing so. (Although, they don't get caught nearly as often as they used to. One of the GOP's stealth agendas has been stripping the IRS's ability to catch rich tax cheats.) But, one claim for the superiority of the new system is to "eliminate the IRS". (Meaning "eliminating the ability to catch cheaters".)

2.) Maybe you'd have a hard time finding people who are for subsidies, but my point was, you don't have any of these same class warriors you like to bring up expressing the same outrage about giving money to the rich, whilst they all decry with utter contempt not taking enough of money that "wealthy" people earn.

Um, could you please explain that in English?

3.) It helps for this simple reason: Unified Budget. A simple accounting trick started by LBJ to hide the costs of the Vietnam War and all his miserable social programs. By raising the FICA tax, we simply gave the gov't more $$$ to squander, whereas had we instead forced the gov't to get by on what it had and pushed individuals into mandatory savings accounts, that money would be theirs, and would be providing people with enough of a nest egg to live on lower gov't handouts. EVERY time the gov't raises taxes, spending goes up more. For every dollar in tax hikes during the 19080s, spending increased $1.58. It was even worse with Bush 41's tax hike: spending went up more than $2 for every dollar increase.

Granting that increasing spending to match whatever a politician can get away with is a Bad Thing, but do you really think, if Bush's SS plan (whenever he proposes one) gets approved, that it (and the Medicare drug plan) won't instantly get the blame for all future defecits (ignoring all the defecits we had even before.)

In short, granting that all politicians are scum, do you really think it won't occur to them that they could then go into debt even further, and the voters likely won't hold it against them?

[chomerics]

Originally posted by Riggo-toni

1.) No, it's not regressive, it's just not progressive (at least in theory) as statists want. Furthermore, by eliminating loopholes and deductions, the "idle rich" would actually have to cough up money instead of funneling into trusts, shelters, etc.

Well then define regressive. . . In my eyes, a regressive tax is one which hurts the bottom worse then the top. If you instituted a flat tax, or a sales tax, the lower you are, the more you get hurt. It IS the definition of regressive.

2.) Maybe you'd have a hard time finding people who are for subsidies, but my point was, you don't have any of these same class warriors you like to bring up expressing the same outrage about giving money to the rich, whilst they all decry with utter contempt not taking enough of money that "wealthy" people earn.

Your missing the point that wealthy people, like the ones mentioned, "earn" thier money. Their money makes money, they don't earn it the traditional way, like regular people. I think there is a real problem with the simple fact that the richest people in this country pay less tax on a % basis then I do. I don't mind paying more then people making less then I do, but when people making 9 figures are paying less taxes in terms of % then I do, then I do have a problem with that. I'd be willing to bet the majority of Americans think along these lines as well.

3.) It helps for this simple reason: Unified Budget. A simple accounting trick started by LBJ to hide the costs of the Vietnam War and all his miserable social programs. By raising the FICA tax, we simply gave the gov't more $$$ to squander, whereas had we instead forced the gov't to get by on what it had and pushed individuals into mandatory savings accounts, that money would be theirs, and would be providing people with enough of a nest egg to live on lower gov't handouts. EVERY time the gov't raises taxes, spending goes up more. For every dollar in tax hikes during the 19080s, spending increased $1.58. It was even worse with Bush 41's tax hike: spending went up more than $2 for every dollar increase.

Yet when Clinton raised taxes, spending went up slightly, and the revenue streams outpaced spending. Our deficit DECREASED. I would like to think this is the way to run a government, not try to force a country into bankruptcy like we are currently doing.

[Larry]

Originally posted by chomerics

Well then define regressive. . . In my eyes, a regressive tax is one which hurts the bottom worse then the top. If you instituted a flat tax, or a sales tax, the lower you are, the more you get hurt. It IS the definition of regressive.

Point: Currently-structured state sales taxes are usually very regressive. But the reason for this is that current state sales taxes collect from "retail" sales (like groceries and department stores), but not from other things (like houses and cars). Poor people spend a much higher percentage of their income on groceries. (Point: Some states don't apply sales tax to groceries, for exactly that reason.)

The "flat tax" proposal will apply, according to claims, to all sales.

Needless to say, there will be exceptions. One will be that items purchased for resale will not be taxed. (The rule is supposed to be that every thing gets taxed once. If you don't do things that way, then small businesses are doomed. I predict that this is where cheating will be rampant, unless we keep some kind of police around to catch cheaters. This also means, for example, that there would be "sales tax" on new houses, but not on "used" ones.) I'd also bet that purchases of stock would not be taxed. (The theory will be: If you make money on the stock, then you'll get taxed when you spend it.)

In short, the flat-tax advocates (of which, I am not) will claim the tax wouldn't be regressive (unlike present sales taxes) because they'll be taxing everything. (And I would agree that it might make sense, in theory.)