The big takeaway from the past week’s business news is that A) secretly released documents show that billionaires aren’t paying their fair share in taxes. (Gee, you think?) And meanwhile, B) hotels, restaurants, and other businesses can’t find enough people to work as maids, dishwashers, etc.
I don’t know what will happen if that doesn’t get your “hmmm” juices flowing.
Let me explain by going through the A and B elements and discussing how they’re connected. The billionaire tax news I’m referring to comes from a blockbuster ProPublica story that dropped on Tuesday (highly recommended reading, by the way.) Here’s a money sentence: “Taken together, [all the documents] demolish the cornerstone myth of the American tax system: that everyone pays their fair share and the richest Americans pay the most.”
The main takeaways are 1) that the super-wealthy, the .001%, make most of their money by appreciating the property, especially stock, which isn’t taxed. And that there are various means at their disposal to derive funds from these troves, like bank loans, so that they can live high on the hog tax-free. And 2) to the extent that they do have income, none of these billionaires are paying anywhere near the top marginal rate of 37%—thanks to loopholes and deductions—and some have paid no taxes at all.
If you think these tax avoiders are all a bunch of rock-ribbed, Trump-loving Republicans, you are wrong. Subjects include Warren Buffett, George Soros, and Jeff Bezos, Democrats or lean that way. In some instances, it appears they are paying massive amounts of taxes, but look again. Check out this on Bezos from the ProPublica piece:
“His tax avoidance is even more striking if you examine 2006 to 2018, a period for which ProPublica has complete data. According to Forbes, Bezos’ wealth increased by $127 billion, but he reported a total of $6.5 billion in income. The $1.4 billion he paid in personal federal taxes is a massive number — yet it amounts to a 1.1% actual tax rate on the rise in his fortune.”
ProPublica doesn’t even bother calculating the rate he paid on his $6.5 billion income. I did. It’s 21.5%, thanks to no doubt tax avoidance schemes. If he were producing at today’s top marginal rate of 37%, he would have paid $2.4 billion instead of $1.4 billion. (The maximum marginal rate ranged from 35% to 39.6% in that period.) The difference—the avoidance, if you will—a cool $1 billion is enough to…well, maybe we should ask Bezos what he did with it.
