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You are here: Home / The Income Defense Industry

The Income Defense Industry

by Betty Cracker|  December 29, 20151:49 pm| 34 Comments

This post is in: Ever Get The Feeling You've Been Cheated?, Jump! You Fuckers!

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The grotesquely wealthy are just like you and me, only with fuck-tons more money. Their fat stacks don’t just buy them freedom from want and the little extras like insider stock tips, fabulous toys, exotic vacations, top-drawer educations, get-out-of-jail-free cards, etc.; it turns out they get their very own tax system too! Or so says a special report in today’s NYT:

With inequality at its highest levels in nearly a century and public debate rising over whether the government should respond to it through higher taxes on the wealthy, the very richest Americans have financed a sophisticated and astonishingly effective apparatus for shielding their fortunes. Some call it the “income defense industry,” consisting of a high-priced phalanx of lawyers, estate planners, lobbyists and anti-tax activists who exploit and defend a dizzying array of tax maneuvers, virtually none of them available to taxpayers of more modest means.

[snip]

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.

[snip]

In the heat of the presidential race, the influence of wealthy donors is being tested. At stake are the Obama administration’s limited 2013 tax increase on high earners — the first in two decades — and an I.R.S. initiative to ensure that, in effect, the higher rate sticks by cracking down on tax avoidance by the wealthy.

While Democrats like Bernie Sanders and Hillary Clinton have pledged to raise taxes on these voters, virtually every Republican has advanced policies that would vastly reduce their tax bills, sometimes to as little as 10 percent of their income.

The New York Times seems to have committed an act of journalism here; the whole article is worth a read. It delved into a phenomenon with which I had fleeting experience once: the existence of the “family office” — organizations staffed with clever, industrious people that exist solely to protect the vast wealth of a single family or group of mega-rich individuals. (I wasn’t one of the clever, industrious people — just a lowly scribe serving an insignificant vassal.)

The article also mentions how crippling the IRS by slashing its budget 15% and engaging in absurd congressional witch hunts, etc., has coincidentally improved the fortunes of these indolent parasites so greatly. It’s almost as if that were the entire purpose of the Republicans’ anti-IRS jihad rather than an unfortunate side effect of standing up for fiscal responsibility and freedom…

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Reader Interactions

34Comments

  1. 1.

    goblue72

    December 29, 2015 at 1:55 pm

    We stopped living in a democracy some time ago. The legalization of bribery with Citizens United was just one of the final nails in the coffin.

  2. 2.

    Elizabelle

    December 29, 2015 at 1:55 pm

    This is a sibling to the Times’ excellent report on the 179 (?) families who’ve financed half of the 2016 presidential race. And maybe 40 of them supported Democrats. It was way out of whack although — look! George Soros!

    The NYTimes is doing pretty suckworthy coverage of Hillary and the 2016 primaries, but there’s this to remind us why they got to be paper of record.

    ETA: Ok, it was 158 families. Here’s linky. Earlier stories linked in today’s NY Times report.

    http://www.nytimes.com/interactive/2015/10/11/us/politics/2016-presidential-election-super-pac-donors.html

  3. 3.

    Elizabelle

    December 29, 2015 at 1:57 pm

    @goblue72: Yeah, I think the Times has woken up, bigtime, to what a brave new world we are in. By the time the danger of massive inequality, and its destabilizing effects, reaches their radar screen ….

    But this is what separates print from broadcast journalism. I don’t see any of the legacy networks doing as good a job on this, and they’re more about advertising revenue.

  4. 4.

    catclub

    December 29, 2015 at 1:57 pm

    Andrew Tobias wants a 1% wealth tax on home values above $1M – so the tax on a $1M home is zero, and on a $2M home is $10,000 – to fund infrastructure.

    I am in favor.

    OTOH:

    Michael Burry, Real-Life Market Genius From The Big Short, Thinks Another Financial Crisis Is Looming

    I am not so worried. In 2007 he had a mechanism. Now, He has no mechanism, that I can see.

  5. 5.

    catclub

    December 29, 2015 at 2:06 pm

    @catclub: Trump proposed a one time 13% wealth tax in 1999. That would do a lot of good in the inequality category.

    OTOH: It is better to have bad tax doing good things in the government’s hands ( like building transit infrastructure)
    than having no income from pie in the sky good taxes.

  6. 6.

    Paul in KY

    December 29, 2015 at 2:10 pm

    I could have sworn there was a thread about police dogs biting people down in FL.

  7. 7.

    Goblue72

    December 29, 2015 at 2:11 pm

    @Elizabelle: Oh they’ve known for a long time. They just need think pieces like this to maintain “paper of record” respectability.

    This is a newspaper whose revenue model is based in significant part on Profiles of the Rich and Richer – the NYT Real Estate section, Styles section, Travel section, Food section, Weddings section…

  8. 8.

    Goblue72

    December 29, 2015 at 2:12 pm

    @Paul in KY: Me too. I think Cole maybe de-bigfooted.

  9. 9.

    scav

    December 29, 2015 at 2:14 pm

    @Paul in KY: One of John’s. I’m sure we’ll see it in a few hours. It’s amazing reading the comments because there clearly are people that will justify any and all behavior of officers.

  10. 10.

    boatboy_srq

    December 29, 2015 at 2:18 pm

    This dovetails with much of the discussion in the Military/Civilian Divide thread below: the idea of “sacrifice”, like “service”, is delegated to Those People. The difference is that for the 1%, Those People are far more numerous.

  11. 11.

    c u n d gulag

    December 29, 2015 at 2:19 pm

    Before there’s an increase in taxes on the wealthy, look for a %1000 tax on pitchforks, torches, pikes, axes, wagons that can be used to ferry people to the chopping-block, wicker baskets, and things that can be used to make guillotines.

    We can’t have the riff-raff even think of taking matters into their own grubby little hands!

  12. 12.

    catclub

    December 29, 2015 at 2:20 pm

    Pierce has a way with words:

    But, holy cantaloupe calves, Batman! If you put all these guys on a bus, and it rolled over, there’d always be a crazy sumbitch on top.

  13. 13.

    boatboy_srq

    December 29, 2015 at 2:26 pm

    @c u n d gulag: With the off-the-shelf products so restricted, this might be the one time I’d be in favor of logging in the National Forests – so long as the lumber so produced could be used to replace the cheap sh!t tools found at Home Depot and Walmart and languishing unpurchased thanks to the tax.

  14. 14.

    Brachiator

    December 29, 2015 at 2:31 pm

    Former Times reporter David Cay Johnston used to cover this beat and has produced a number of easy to read books on tax policy including “Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich – and Cheat Everybody Else.”

    Hamstringing the IRS largely cuts down on audits, but the IRS is just the enforcement arm of Treasury. The major failure here is Congress, which too willingly toadies to the wealthy to change the laws.

    The article mentions charitable trusts. The TImes should know. I will bet good money that the family that owns the Times has a hell of a charitable trust set up.

  15. 15.

    boatboy_srq

    December 29, 2015 at 2:34 pm

    @catclub: That sounds perfect – just so long as the valuation can be adjusted for inflation over time and a rising floor can be respected. Too many tax strategies like that end up doing more harm than good in the long run. Income taxes IIRC were first assessed on only the top 10% of earners; nowadays the tax hits everyone EXCEPT them harder, and the 1%ers are trying to make the burden less. I like the idea – but if implemented it would need to be watched carefully and the original concept defended constantly.

  16. 16.

    catclub

    December 29, 2015 at 2:36 pm

    @boatboy_srq: if you check out the link, most of those caveats are already there.

    Andrew Tobias is the Treasurer ( maybe was) of the Democratic Party.

  17. 17.

    Frankensteinbeck

    December 29, 2015 at 2:37 pm

    entire purpose of the Republicans’ anti-IRS jihad

    Not true. It’s also a dog whistle (‘Giving my money to lazy blacks’ and ‘Damn feds not letting us treat blacks/fags/women like they deserve anymore, why should I pay for that?’) and a bone for the conspiracy theorist (…actually, these are so weird I don’t have room to explain them) movement.

    This is why the Reagan Coalition ever worked. If the social conservatives can’t get their white power fix, the evangelicals can’t get their white JAYZUS power fix, and the lunatics can’t destroy the government, everything the MBA crowd wants looks like second prize.

  18. 18.

    catclub

    December 29, 2015 at 2:52 pm

    @Frankensteinbeck: They don’t even need to try to cover up what they are doing in cutting the IRS – to reduce audits of rich people – hence to also reduce the amount of money brought in by the tax system.

  19. 19.

    catclub

    December 29, 2015 at 2:54 pm

    @boatboy_srq:

    valuation can be adjusted for inflation over time and a rising floor can be respected.

    This is an interesting point about all the the things like the Medicare doc fix (last year) and other annual fixes to taxes that have now been made permanent in the past year — what will they have to swap and haggle over in the coming years?

  20. 20.

    boatboy_srq

    December 29, 2015 at 2:55 pm

    @catclub: I did; and the indexing of the base rate is noticeably absent.

  21. 21.

    Frankensteinbeck

    December 29, 2015 at 2:56 pm

    @catclub:
    Yep. Their base doesn’t mind… so long as they can’t get what they really want. Trump is bludgeoning the coalition, because if they can actually get their direct ‘outlaw brown people’ desires, they don’t need to screw everybody so that the Other gets screwed worse. They can add The Rich to their list of enemies, even!

  22. 22.

    boatboy_srq

    December 29, 2015 at 2:59 pm

    @catclub: I honestly haven’t any idea. I’m just sick and tired of taxes intended to touch only the wealthiest being leveraged against the poorest, and the constant whinge that “we can’t afford [insert paltry social spending program]” while the US is throwing trillions at boondoggles like the F-35, Trident, and the Ford class CVN.

  23. 23.

    Brachiator

    December 29, 2015 at 3:03 pm

    @Elizabelle:

    But this is what separates print from broadcast journalism. I don’t see any of the legacy networks doing as good a job on this, and they’re more about advertising revenue.

    The Times, like most newspapers and TV stations, depend on ad revenue. There is not yet any good alternative model. But the 1 percent (including the family that owns the Times) is an easily accessible part of the territory that the paper normally covers.

    But I guess they decided to specialize in this area several months ago. From a June NYT blog post:

    After a dozen remarkable years as chief television critic, Alessandra Stanley has decided to return to reporting. As part of The Times’s deepening focus on economic inequality in America, she will be creating a new beat: an interdisciplinary look at the way the richest of the rich — the top 1 percent of the 1 percent — are influencing, indeed rewiring, the nation’s institutions, including universities, philanthropies, museums, sports franchises and, of course, political parties and government.

    It will be interesting to see whether the coverage hits hard and leads to anything meaningful or will just be puff pieces for the uber wealthy to bask in.

  24. 24.

    Betty Cracker

    December 29, 2015 at 3:04 pm

    @Frankensteinbeck: One of us may be confusing tactics with strategy. I didn’t attempt an exhaustive survey of the bullshit talking points, just noted the convenience and tidiness of the end result — less oversight on the parasites who bankrolled the tea party.

  25. 25.

    Paul in KY

    December 29, 2015 at 3:06 pm

    @scav: Thank’s y’al!

  26. 26.

    schrodinger's cat

    December 29, 2015 at 3:26 pm

    The right wingers are supposedly very proud of their country and love to wrap themselves in the red white and blue but they are also hell bent on destroying everything that makes this unique and the envy of other nations.

    1. Technological and scientific advancement: Wingtards hate science and learning are always trying to cut funding to NIH, NSF etc.

    2. The broad based prosperity enjoyed by citizens and/or residents of these United States: Republican policy preferences are skewed towards the 0.1%

  27. 27.

    gene108

    December 29, 2015 at 4:11 pm

    @schrodinger’s cat:

    The right wingers are supposedly very proud of their country and love to wrap themselves in the red white and blue but they are also hell bent on destroying everything that makes this unique and the envy of other nations.

    Republican voters often have strong feelings of patriotism.

    The 0.1% that fund the Republican Party feel they are only living in the USA because of an accident of birth and if the USA won’t kiss their ass, they will leave for a country more deserving of their presence.

    This really stuck out to me during the 2008/2009 financial crisis / Great Recession, the number of Wall Street billionaires, who have no attachment to the USA other than they were just born here and if here isn’t doing what what they want they’ll move to somewhere else that will.

    The total lack of respect for their country, as a whole, was astonishing. Everything was about what they were getting out of it.

    And how this country provided no distinct avenues for their wealth generation. They did everything on their own and we’re lucky to have them.

  28. 28.

    goblue72

    December 29, 2015 at 4:15 pm

    The New York Times has decreed – its been long enough, its time for Iraq War III.

  29. 29.

    schrodinger's cat

    December 29, 2015 at 4:37 pm

    @gene108: For a vibrant market based economy, a strong government is absolutely essential. Without a functioning government you get a Somalia or Russia in the immediate aftermath of the collapse of the Soviet Union.

  30. 30.

    Archon

    December 29, 2015 at 5:54 pm

    @gene108:

    A turning point for me wasn’t the bailout, it was when Wall Street used bailout money for junkets and to give themselves massive bonuses. That’s when I realized that the average executive on Wall Street could care less about this country, much less what the average pleb thinks about them.

    I’m at a loss to give a historical comparison to a nation’s elite on average caring so little about the interests of the nation at-large. The only thing I can think of is pre-revolutionary France and that’s not a good sign.

  31. 31.

    burnspbesq

    December 29, 2015 at 8:58 pm

    @catclub:

    Not the way it is working in practice. The IRS is doing everything it can to maintain audit coverage of high-income individuals and large corporations (whether that audit rate is high enough is a conversation for another time). The Service even created an entirely new group called Global High Wealth (or something similar) to deal with those issues.

    What is really suffering is routine taxpayer and practitioner service. Try getting somebody on the phone. Try getting an acknowledgement that you filed something.

    Read the most recent annual report from the National Taxpayer Advocate, but keep an extra dose of your blood pressure medication handy.

  32. 32.

    Zinsky

    December 29, 2015 at 10:11 pm

    All this talk of the American tax system being too complicated is hogwash. Period. Over half of American households could file their income tax return on a postcard. The bloated, lengthy segments of the IRS code were put there to benefit wealthy individuals (read, $1 million+ income per year) and businesses). Give me one logical reason why a hedge fund manager making $50 million per year in income pays a lower percentage of his income than a welder making $50,000 per year. I’ll wait…

  33. 33.

    David Cay Johnston

    December 30, 2015 at 7:09 am

    @Brachiator: Oh I still cover this stuff. I write weekly for AlJazeera America, breaking news often on taxes, regulation and the economy http://america.aljazeera.com/profiles/j/david-cay-johnston.html

    I also write for Newsweek including a cover story last year on how major corporations PROFIT off the tax system: http://bit.ly/1Aa8xQ3

    And I write a column, irregularly, for Tax Analysts, a nonprofit, non advertising publisher of about 200 pages of tax journalism each week (subscribers pay a lot and they get a lot for their money). http://www.taxanalysts.com/www/website.nsf/Web/DavidCayJohnston?OpenDocument

    Today’s NYT piece is excellent in the depth of reporting and clarity of writing and the only lint is so fine only tax policy experts will notice (and maybe not even then).

  34. 34.

    kd bart

    December 30, 2015 at 11:29 am

    I’ve maintained that the reason Romney would not share his full tax returns with the American public was not because of anything illegal that would be revealed but rather what legally he could get away with due to loopholes written into the US Tax Code by tax lawyers that benefit only the super rich in this country. He was not going to open that area to scrutiny on behalf of his fellow 0.1 percenters.

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