James Kwak hit the nail(s) on the head about our corrupt tax system that mostly benefits the very rich. Here are three tax avoidance strategies that he brings to light --- and says these three tax schemes top his list for the ones most in need of tax reform...
1) Ending the "step-up in basis" at death for capital gains taxes (evading the capital gains tax completely), by leaving unsold assets in an inheritance, but also by avoiding the estate tax by setting up a trust fund for their beneficiaries.
2) Ending the "carried interest" loophole [Mitt Romney's tax strategy of choice].
3) Ending the "529 tax plans" for college savings accounts, that mostly benefit the wealthy.
Posted at The Atlantic: The Rich, the Poor, and Whether Tax Policies Live or Die (by James Kwak on January 29, 2015) -- "Tax reforms that benefit the middle class at the expense of the wealthy will never pass. When push comes to shove, what politicians care about most is defending tax breaks for the rich. All it takes is a few crumbs for the 'middle class' to provide symbolic cover for policies that largely benefit the wealthy. This is one reason why real tax reform is almost impossible today."
Then he goes on to describe in detail about the "529 tax plans" (for college savings accounts, that mostly benefit the wealthy). He also links to his other article below (which is fascinating).
Posted at Medium: The Tax Loophole (Almost) Everyone Should Want to Close (by James Kwak on January 28, 2015) -- "In his latest round of tax proposals, President Obama finally called for what is probably the single most obvious change that should be made to the tax code: an end to the step-up in basis at death for capital gains taxes."
Then in his excellent and well-explained post, he describes "step-up in basis for capital gains". And at the end of his article he concludes:
"In short, the step-up of basis at death is a tax loophole that rewards one thing: dying with lots of assets that you never needed to sell. How could this loophole possibly survive in a democratic, supposedly meritocratic society? Well, we’re about to find out — because it’s going to survive at least until the Democrats have sixty votes in the Senate, which may be never."
As an aside: The Republicans call the estate tax the "death tax" — but as Jon Stewart (or was it Stephen Colbert) once pointed out, dead people don't pay taxes. And neither does a trust-fund baby on their first inherited $10 million ... but grandma at the diner must pay tax on all her tips.)
James Kwak had also said, "The other candidate for 'single most obvious change' is eliminating the 'carried interest' exemption that allows fund managers to pay capital gains tax rates on their labor income — managing people’s money."
From the Economic Policy Institute: Emmanuel Saez just released a preliminary update to 2013 of the national top income time series, and noted that the 3.2% fall in income at the top is due to high income earners shifting income from 2013 to 2012 in an effort to reduce their tax liabilities in anticipation of higher tax rates. The capital gains tax rate went up from 15% to 23.8% beginning on January 1, 2013 — that was when the Bush tax cuts expired. I can only imagine their tax attorney calling: "Sorry to bother sir but, the tax rates are going up next year. Would you like me to move $500 million into your Cayman account?"
From the BCC: Apple just made the record-highest quarterly profit ever (in the entire history of the World) — the highest ever reported for a publicly traded corporation. (Trickle down baby!)
From the New Yorker: Critics of Oxfam’s Poverty Statistics Are Missing the Point: Comparing income can make a rich (but unemployed) heir to a fortune (held in an offshore tax haven) seem poorer than a fast-food worker. And comparing consumption, which usually involves looking at purchases of household staples, makes rich people and poor people look more similar than they really are. Donald Trump doesn't drink more milk or eat more bread than anybody else. (Even though his mouth is bigger than most.)
Billionaire Nick Hanauer, in a speech at TED University, agrees: "There can never be enough super-rich people to power a great economy. Somebody like me makes hundreds or thousands as times much as the median American, but I don't buy hundreds or thousands of times as much stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and shirts a year like most American men. Occasionally we go out to eat with friends."
The Republican's response: "We don't give a rat's @ss! The super-duper rich are getting another tax break, regardless! Don't ya' know? Our aim to starve those dirty beasts!"