Dec 29, 2015
A special report out Tuesday from the New York Times shines a light on the so-called "income-defense industry," which exploits "a dizzying array of tax maneuvers" so that the uber-wealthy can shield their fortunes.
"Operating largely out of public view -- in tax court, through arcane legislative provisions, and in private negotiations with the Internal Revenue Service -- the wealthy have used their influence to steadily whittle away at the government's ability to tax them," write Times reporters Patricia Cohen and Noam Scheiber. "The effect has been to create a kind of private tax system, catering to only several thousand Americans."
That elite group, the Times points out, is also "providing much of the early cash for the 2016 presidential campaign," in the hopes of influencing tax policy and keeping large loopholes in place.
The income-shielding maneuvers, which range from organizing one's business as a partnership to capitalizing on "a range of esoteric and customized tax deductions that go far beyond writing off a home office or dinner with a client," are largely unavailable to the average taxpayer, due to cost and complexity.
The ultra-wealthy "literally pay millions of dollars for these services," Jeffrey A. Winters, a political scientist at Northwestern University who studies economic elites, told the Times. In return, he said, they "save in the tens or hundreds of millions in taxes."
Indeed, Victor Fleischer, a law professor at the University of San Diego who studies the intersection of tax policy and inequality, told the Times: "We do have two different tax systems, one for normal wage-earners and another for those who can afford sophisticated tax advice. At the very top of the income distribution, the effective rate of tax goes down, contrary to the principles of a progressive income tax system."
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