The Secret to Tax-Dodging in America: Be

Rich

by Bob Lord

August 6, 2024
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Photograph Source: Mike Mozart – CC BY 2.0

By all appearances, Donald Trump has cut a sweet deal with a dozen or two of America’s richest billionaires: Finance his campaign and he’ll keep their federal taxes super low — or even lower them — once he’s sitting back in the White House.

How much do billionaires like this deal? This much: In April, hedge fund billionaire John Paulsen held a Palm Beach fundraiser for Trump that brought in $50.5 million. Immediately after Trump’s late May conviction on 34 felony counts in Manhattan, Timothy Mellon, the grandson of the classic plutocrat Andrew Mellon, ponied up $50 million. Miriam Adelson, the billionaire widow of Las Vegas kingpin Sheldon Adelson, appears eager to kick in as much as $100 million.

This past spring, meanwhile, billionaires Elon Musk and David Sacks reportedly held a secret dinner party for Trump, with attendees including the illustrious deep pockets Peter Thiel, Rupert Murdoch, and Michael Milken.

America’s billionaires clearly see politics as one route to ensuring they pay as little as possible at tax time. But they don’t just make their presence felt at election time. America’s rich have their thumbs firmly on the scale of all three branches of government. In legislatures, the courts, and our executive offices, we have a system rigged in favor of the ultra-rich, rigged by everything from acts of Congress and judicial rulings to IRS budgets and audit policies.

Some of this rigging we can all easily see. The dividends and long-term capital gains of the ultra-rich have for decades faced a maximum tax rate barely half the maximum rate applicable to other forms of income. And the investment income of the rich, unlike the paychecks of working people, faces no Social Security tax.

In 2017, the first year of the Trump presidency, intense lobbying efforts helped rich business owners to a special tax rate for their business income. In 2018 alone, according to ProPublica, that special rate translated into a $67 million gift to Mike Bloomberg, whose personal wealth now reportedly exceeds $100 billion.

But these glaring privileges the rich enjoy at tax time only tell part of the billionaire tax story. Other parts get precious little attention. In 2004, for instance, lawmakers in Congress enacted a penalty for the failure to disclose potentially abusive tax avoidance transactions on tax returns. The penalty on the surface looked substantial: 75 percent of the tax sought to be avoided. But Congress capped the penalty at $100,000, a move that turned the penalty into a minor nuisance for billionaires seeking to avoid millions of dollars in taxes.

In our current rich people-friendly tax climate, IRS staff who want to do the right thing face tough going. Recently, for example, one former IRS staffer, Michael Welu, went public with his concerns that the IRS itself has both official and unofficial policies that end up treating audited rich taxpayers much more gently than small business owners.

“I was putting butchers, bakers, and candlestick makers in jail,” Welu told the International Consortium of Investigative Journalists, “but the big stuff we really wanted to go after was being ignored.”

Welu found the upper management of the IRS division tasked with auditing the super rich — and the corporations they run — distinctly uninterested in investigating America’s richest and their “most egregious, ridiculous schemes” for avoiding taxes.

IRS officials like Michael Welu do occasionally speak out. But only tax wonks truly have any real sense of how much obscure tax code penalties and IRS audit policies favor the rich. And most of those tax wonks work for the rich.

The rich themselves have actually become more brazen about avoiding taxes. Just try to stop us, they seem to be saying.

Take the recently decided Supreme Court case, Moore v. United States. Working through an array of right-wing organizations, the conservative mover-and-shaker Leonard Leo attempted to use a challenge to an obscure one-time tax as a vehicle to preempt Congress from ever taxing the wealth or unrealized gains of the ultra-rich. Ultimately, the Court decided the case without ruling on whether the rich can be taxed on their wealth or unrealized gains. But the opinions that four of the nine justices handed down made it clear that they stand prepared to do the billionaire bidding should a direct challenge to a tax on the wealth or unrealized gains of billionaires come before them.

Billionaires now have at least three Supreme Court justices firmly in their pockets. Reporting by ProPublica has revealed the massive gifts that have been flowing from Harlan Crow and other billionaires to Justice Clarence Thomas as well as the generous gifts that billionaire Paul Singer has been sending Justice Samuel Alito’s way. Justice Neil Gorsuch has had his entire career, including his appointment to the Court, funded by the billionaire Philip Anschutz.

Those three justices, along with Justice Amy Coney-Barret, have now made it patently obvious they will not allow billionaires to be taxed on their unrealized gains or their wealth. Does anyone really think the billionaires won’t have the crucial, majority-making fifth vote from Justice Brett Kavanaugh when they need it?

Republican members of Congress are showing even less shame than our Supreme Court justices. Last year, these GOP lawmakers held the country hostage in negotiations to increase the country’s debt limit. Their price for agreeing to raise the debt limit, thereby avoiding a default on the country’s debt? They demanded — and won — a reduction in a scheduled IRS budget increase that would been used to increase enforcement moves against rich taxpayers.

The purported motive for this legislative hostage taking — “concern” over the federal deficit — made for an absurd justification. The proposed increase in the IRS budget would have been recovered, several times over, through increased tax collections. The IRS budget reductions the Republican lawmakers extracted will, in fact, only increasethe federal deficit. But those reductions will serve a political purpose. They’ll protect the GOP’s richest patrons from tax enforcement.

The mainstream media, to no one’s surprise, did a miserable job of exposing this Republican dishonesty in the debt limit negotiations. But at one point in our recent past a courageous soul did emerge to expose the rot in our tax system. What happened? The ultra-rich and their henchmen in Congress make sure that this soul faced a punishment far more severe than any punishment ever meted out to those few rich Americans who actually get caught evading their taxes due.

That courageous soul, Charles Littlejohn, worked as an IRS contractor. He leaked tax return information related to Trump and America’s billionaires to the New York Times and ProPublica. ProPublica used that leaked information to write over 50 stories about billionaire tax avoidance, embarrassing and angering many of our richest in the process. Two of them even brought lawsuits, one against the IRS and the other against Littlejohn’s employer.

Ultimately, Littlejohn pled guilty to one count of unauthorized tax return information disclosure, a crime that carries a recommended sentence of four to ten months. But 25 Republican members of Congress, undoubtedly at the behest of their billionaire patrons, wrote the judge in the case and urged the harshest possible sentence of five years. The judge obliged, stating in her sentencing remarks that Littlejohn posed a graver threat to democracy than the January 6th rioters. As tax law professor Reuven Avi-Yonah has noted, Littlejohn is now serving a sentence far harsher than any imposed on rich Americans convicted of tax evasion.

Littlejohn’s extreme sentence did not reflect the one single count of unauthorized tax return information disclosure he pled guilty to. That sentence reflects his “crime” of exposing the tax avoidance of the billionaire class.

Try this thought experiment: Imagine if Littlejohn had released the return information of 1,000 or so taxpayers with modest incomes to ProPublica. Imagine that ProPublica had then publicly detailed all the tip income that servers and bartenders among these taxpayers had failed to report and all the social meals that small business owners in the sample had claimed as business expenses. If Littlejohn had then pled to one count of unauthorized disclosure, would 25 members of Congress have intervened? Would the judge have imposed a sentence over six times the maximum recommended in federal sentencing guidelines?

Doesn’t it become dangerous to society when the punishment for a crime depends on who the victim happens to be?

We are now living that danger. Our billionaires sit firmly in control. And they will do whatever it takes to make sure they never pay tax at an appropriate level — even if that means locking a human being up for a preposterously long time just to send a message.

Bob Lord is a veteran tax lawyer who practices and blogs in Phoenix, Arizona. He’s an associate fellow of the Institute for Policy Studies. 

Seeing the Light of Secular Humanism

by Bob Topper

August 6, 2024
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Image by SJ Objio.

The invention of the telescope was more important than that of the steam engine, the transistor, the internet, or artificial intelligence. The telescope changed humankind’s understanding of the world.

The Greek philosopher, Aristarchus, conceived of a heliocentric solar system in which the planets revolved around the sun. Christian revelation preached an opposing view, that the earth was the center of the solar system, indeed the center of the universe with heaven above and hell below. That the earth was stationary, solid ground seemed obvious and Aristarchus’s concept was lost.

For nearly two thousand years Christian Revelation dominated western culture, not only our understanding of the universe, but ethics, morality, and behavior. The Bible governed every aspect of personal life. Freedoms were restricted and people lived in fear of the absolute power of kings like Henry the VIII, who beheaded two wives, and the Church, which regularly burned heretics at the stake.

In the 16^th century the Danish astronomer Copernicus, like Aristarchus, observed that the earth revolved around the sun. That was confirmed one hundred years later, by the German astronomer Kepler who developed laws of planetary motion. Galileo then built a telescope and showed conclusively that we did indeed live in a heliocentric world. Galileo also showed that the rate at which objects fall is independent of their weight.

Building on Galileo, Isaac Newton developed his theory of gravity and laws of motion. He was able to derive Kepler’s laws and describe the motion of the planets with exquisite accuracy, so much so that his theory was used to guide Neil Armstrong and Buzz Aldrin to the surface of the moon.

But what was far more astonishing was that Galileo’s observations and Newton’s mathematical reasoning provided a much better understanding of the natural world than Christian Revelation. The Bible was wrong. This was the dawn of the Enlightenment, the Age of Reason, and secular Humanism, the idea that humankind’s reasoning ability could lead not only to a better understanding of the natural world but also to a better understanding of human nature.

The Enlightenment questioned how societies should be governed, especially the symbiotic relationship between authoritarian kings and popes that had controlled western civilization. What followed was a revolution in our understanding of law, property, human rights, and governance. The idea of democracy, originated by the Greeks, and independently developed by Native Americans, appealed to the Enlightenment thinkers.

The most important outcome of this revolution in thought and understanding of the natural world and government is the United States of America. Our Declaration of Independence and Constitution are the embodiments of Enlightenment philosophy and an embrace of secular Humanism. They guarantee religious freedom, but do not endorse religion.

The founders were remarkable people but still human and imperfect. Washington and Jefferson were slave owners. Nonetheless, when Jefferson wrote the Declaration of Independence, he rooted our nation in three basic principles – freedom, equality, and democracy. These three principles have guided us for 250 years. Established in the Enlightenment, they are a product of rational thought.

The new nation and its founding principles were rejected by those with a stake in preserving the established order. King George III fought a five-year war trying to hold power over the colonies. Christianity was also threatened. The source of Christian authority was the Bible, which was now questioned, and the new nation paid homage, not to God, but to “We the People.”

From the beginning, Christian leaders objected to the secular nature of our Constitution. Today Christian Nationalists, failing to see the genius in the separation of church and state, openly campaign against it.

Humankinds’ ability to reason led to a profound understanding of the natural world. Reason brought the invention of thermal engines, flight, space travel, the Webb Telescope, and a host of modern-day medical miracles like radiation therapy and monoclonal antibodies. With recent discoveries in quantum physics and the advance of AI, we are on the cusp of another revolution in human development.

At the same time, our reasoning ability has led to a refined perception of human nature. The field of psychology has increased our understanding of behavior and the subconscious mind. The discovery of the DNA molecule has shown a fundamental connection between all animals, including humans. And research has shown that lesbian, gay and transgender people who comprise seven percent of the world’s population, are not abnormal but as nature intended them to be.

Though never an objective, from Newton onward, science has shown that the Bible is flawed. A few examples: contrary to the Bible, the earth and other planets orbit the sun; our world is not 6,000 years old but 4.5 billion years; humankind did not descend from the Garden of Eden, but evolved, and promiscuous and gay people should not be stoned to death.

Conclusions drawn from scientific research are based in fact. Religious beliefs are opinions. No one’s opinion is better than another’s, and it is hubris for a group to be certain that their beliefs are true, and others are false. Fundamentalists believe that personhood begins at conception, but that is their opinion, not fact. To believe that personhood begins at viability or birth, are equally valid opinions. But for those indoctrinated with extreme religions views from childhood, it is only belief that matters.

Religious extremism is a form of mass hysteria, a mental madness that turns worlds upside-down such that fantasy equals fact; fair elections are fraudulent; presidents are kings; the right to own a gun exceeds the right to life; embryos stand equal with adults; authoritarian government trumps democracy; judges write laws; convicted felons run for president; insurrectionists are patriots; and state laws enforce religious beliefs.

And extremism can lead to violence. Before the Enlightenment there was the Inquisition, the Salem Witch Trials, and Mary Dyer’s hanging. Examples today include Jeff Durbin, a far-right “abortion abolitionist” and influential Christian nationalist, who said that women who have an abortion deserve to be executed. This, he claimed, is “the historical position of the Christian church.” And speaking in a small-town church last month, Mark Robinson, the Trump-endorsed GOP nominee for governor of North Carolina, told his audience that “some folks need killing.”

Fundamentalists see a binary world. You are on the side of God or the side of the devil. Yet they are unable to show that either one exists. Such fanaticism reflects a world that existed not a generation or two ago, but a time before the Enlightenment when religious belief controlled the western world, and autocrats and wealthy oligarchs ruled society. That is the world that Christian fundamentalists seek, a world rejected by the Enlightenment and America’s founders.

Members of my family and close friends are devout Christians. They are some of the finest people I know. And I have atheist, Jewish, Moslem, Hindu, and Buddhist friends who are also outstanding individuals. But extremism in any religious sect poses a threat to our basic freedoms.

Organized religions have not brought peace to the world, and, unlike secular Humanism, they have not improved the lot of humanity in fundamental ways. Regrettably, after three thousand years, there is no reason to think that they can. The best prospect for the future of humanity, the only real hope, is our ability to reason. Looking back over the past 250 years, secular Humanism has been remarkably successful. We should not be afraid to believe in ourselves. That is why I chose the light and truths of secular Humanism over fearing the fantasies written, rewritten, and interpreted over several thousand years in the name of God.

Bob Topper is a retired engineer and is syndicated by PeaceVoice.