Stroke the Rich. IRS has become a subsidy system for super-wealthy Americans IRS

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Tue, 12 Apr 2005 22:02:21 -0700 (PDT)

 

Stroke the Rich. IRS has become a subsidy system for

super-wealthy Americans IRS winks at rich deadbeats.

 

 

 

http://www.truthout.org/docs_2005/printer_041105Y.shtml

 

 

Stroke the Rich

By David Cay Johnston

The San Francisco Chronicle

 

Monday 11 April 2004

 

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

at rich deadbeats.

 

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.

 

http://www.truthout.org/docs_2005/printer_041105Y.shtml