It’s been making headlines all around the nation for quite a while now: The top one percent own 35 percent of the nation’s wealth according to G. William Domhoff, a professor at the University of California Santa Cruz.
Despite this disturbing and steadily increasing percentage, the top 400 highest-earning taxpayers have slowly lowered their federal income tax from about 27 percent two decades ago to about 17 percent in 2012, according to I.R.S data.
How is it that the rich are able to get away with paying such a minimal amount in taxes?
According to the New York Times, the answer is incredibly simple: all they have to do is route their money to Bermuda and back and they can same billions in taxes.
Using special high-end lawyers, estate planners, lobbyists, and anti-tax activists, the rich have created a shield against all those taxes they don’t want to pay. It’s called the “income defense strategy” — and it’s completely legal.
Through these channels, the rich were able to slowly diminish the government’s ability to tax them, essentially robbing the government of much-needed funding while simultaneously accepting government bail-outs for their multi-million dollar companies, typically voting against government-funded services like Planned Parenthood, and shaking their heads when low-income families demand a higher minimum wage.
Even worse, if you think that political leaders are going out of their way to close the tax loopholes that have top-earners paying even less than they should, you would be (at least partly) wrong.
While some candidates like Sanders have avoided muddling their campaign money in corporate dollars, some have gladly accepted the funding while listening to “suggestions” from their donors about what they would like to see happen to a specific bill or policy. So long as there is no contractual and written connection between those funds and the bills that the political leaders vote for (or against), it’s completely legal.
“There’s this notion that the wealthy use their money to buy politicians; more accurately, it’s that they can buy policy, and specifically, tax policy,” said Jared Bernstein, a senior fellow at the left-leaning Center on Budget and Policy Priorities who served as chief economic adviser to Vice President Joseph R. Biden Jr. “That’s why these egregious loopholes exist, and why it’s so hard to close them."
Federal taxes aren't the only thing the ultra-rich want to try and whittle down. It's also the estate tax (or death tax), as well as the inheritance tax that they want to see diminished or eliminated.
While the motives for these kinds of taxes are transparent, policies and bills continue to decrease the percentage of these taxes that contribute to such a large part of the government's revenue.
The reality is, these incredibly wealthy individuals "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.”
Hopefully, with news like this making headlines across the country, enough light will be shed on these shady practices that candidates will have to make it part of their campaign to rid the rich of their brand-new tax system.
Until then, the top one percent will continue to laugh away taxes all the way to their bank in Bermuda.
Banner Image Credit: 401(K) 2012/Flickr