It’s a tantalizing headline from investigative journalism group ProPublica: “The IRS Secret Files: Treasure Trove of Never-Before-Seen Records Show How The Richest Avoid Income Taxes.”
The source material for the report is allegedly a “huge cache of IRS information” that may have been leaked illegally.
A US Treasury Department spokesman said Angle had been referred to the FBI, federal prosecutors and other investigative agencies.
And the title was clearly designed to get our indignation gears working.
But when you dive into the details, the promised revelation is … well, kind of boring. How do the richest Americans “avoid” income tax? By having no “income”.
Really. Words mean things, and the IRS spills a lot of ink defining those things.
How much ink According to PolitiFact, the 2017 Internal Revenue Code was 6,550 pages long – excluding (Politifact cited Tax Foundation) 6.6 million words of additional IRS regulations and 60,000 pages of case law.
And as it turns out, most of the wealthiest wealth is not “income” as defined by the IRS.
I’ll take Jeff Bezos as an example because everyone does, right?
You’ve probably seen the headlines after a big move in stocks: “Bezos’ fortune goes up $ 4 billion” and so on.
The obvious way to visualize this headline is with a truck full of $ 100 bills pulling up in front of Bezos’ house and a crew carting those bills into the room, where Bezos loves tossing money a la Scrooge McDuck.
What really happened is that the estimated sales value of Bezos shares has increased. As long as he doesn’t sell this stock, he hasn’t made a penny.
If he sells that stock at a higher price than he received it, he will be charged a capital gains tax of up to 20% on the price difference. That’s nowhere near the top tax rate of 37% … but Jeff Bezos didn’t write the tax code, did he?
As a libertarian, I would love to do without taxes altogether. When the Navy wants a new aircraft carrier, have them hold a cake sale or send the Marines to knock on doors and sell subscriptions to Rolling Stone to raise the money.
But when we have taxes, it’s kind of silly to blame people who pay what they have to pay under the tax law and no longer just because the amount paid doesn’t seem “enough”.
Thomas L. Knapp (Twitter: @thomaslknapp) is the director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in north central Florida.