ProPublica report reveals tax methods of America’s super-rich | Chicago Information

A bombshell report from ProPublica, based on a vast pool of leaked tax returns from the super-rich in the United States, found that some of the richest men in the world pay little to no income tax.

The report found that the 25 richest Americans, including Amazon’s Jeff Bezos and Tesla’s Elon Musk, collectively paid a so-called “true tax rate” on their wealth of just 3.4%, despite their wealth growing by billions.

Senator Bernie Sanders (D-Vermont) said he wasn’t shocked by the report when it was released last week.

“We have a regressive and unfair tax system. We have a corrupt political system where the rich can make huge campaign contributions and have all kinds of lobbyists here on Capitol Hill, ”Sanders said. “And when you are rich, unlike a normal worker, you have dozens of lawyers and accountants to help you fill every void that is there.”

The key to understanding why billionaires can legally pay so little income tax compared to their vast wealth is that tax legislation is focused on income, not wealth.

Charlotte Crane, law professor and tax expert at Northwestern University, says the most common way to avoid taxes is to simply be wealthy and then hold that wealth in forms that don’t pay interest or dividends but have creditors ready are to be accepted as such security. “

This allows wealthy individuals to borrow against their assets. And since borrowed money doesn’t count as income, the rich can lead a lavish lifestyle while not reporting income to the IRS.

Crane says one of the problems with trying to tax the ultra-rich is that unless the assets that make up the bulk of their wealth are publicly traded, it is difficult to accurately assess their worth because an asset is actually being sold. Because many of the assets held by the wealthy are not publicly traded – and sometimes not even disclosed – it is often impossible for the IRS to assess their value and the change in that value over time for tax purposes.

“They have a real problem measuring this change in value,” said Crane. “And the richer you are, the easier it is to blur the change in value.”

Crane, who served in the office of the IRS Chief Counsel from 2010 to 2011, said the increasing complexity of tax law means that IRS auditors are often outwitted by the accountants of the rich. According to the IRS’s own estimates, at least $ 400 billion in taxes is missed each year, and could even go as high as $ 1 trillion, according to a testimony before the Senate Finance Committee in April.

Speaking of her time at the IRS, Crane said, “It was pretty clear that they didn’t have the resources not to train even the lawyers who were supposed to help the examiners understand how these things should work.”