Super Rich Still Have Little To Fear From IRS
By Stephanie Mencimer on Wed. April 11, 2012 7:10 AM PDT
In 2009, IRS commissioner Doug Shulman said in a speech that the IRS had formed a new group of auditors who were going to be directing their attention at a special group of taxpayers: the super rich. Dubbing them “global high wealth individuals,” Shulman promised that his agency would be taking a hard look at people who had tens of millions of dollars worth of assets and income tied up in complicated financial dealings that often involved overseas banking and aggressive tax avoidance strategies. The IRS, he said, wanted to make sure that hard-working, tax-paying Americans could be sure that everyone is paying her own fair share. It’s certainly a ripe area for the government to turn up more revenue. In fiscal 2011, audits of people making more than $1 million identified $5 billion in underreported income tax, and that’s just for the roughly 15 percent of millionaires the IRS audited.
Two-and-a-half years later, though, the effort to target the super rich has proven underwhelming. According to a new study by the Transactional Records Access Clearinghouse (TRAC) at Syracuse University, the IRS has completed a mere 36 audits from the over-$10 million set since launching the global high wealth group. TRAC researchers estimate that this means the IRS audited only between 12 and 18 people, because the audits were counted by annual returns, not by individuals, who may have had more than one year of returns examined. That’s not even one percent of the more than 8,000 annual returns that the IRS has said include gross income of $10 million or more. (By comparison, working poor people with children who claim the Earned Income Tax Credit get audited at twice the rate of any other taxpayer.)
As part of its global high wealth group effort, the IRS has also promised to focus more on “flow through” entities—the partnerships and S corporationsthat super rich people use to avoid paying taxes. The group didn’t have the most ambitious goals to begin with, according to TRAC. But it failed to even meet those. The IRS hoped to audit 122 of these sorts of corporate entities in fiscal 2011, but completed only 40.
The IRS hasn’t come up totally empty handed by looking at the portfolios and tax returns of the super rich. They found $47 million in additional taxes owed. But if you consider how much the IRS turns up just in simple audits of ordinary millionaires, that’s pretty small potatoes. TRAC can’t say whether the disappointing results from the IRS are due to a lack of resources for the agency or the fact that the super rich might just have incredibly complicated financial affairs that aren’t quickly and easily tackled by the average IRS auditor. Either way, more resources for the IRS ought to be a priority for anyone who really cares about the budget deficit. The government is clearly leaving money on the table that it could surely use right now.
Source: Mother Jones
Obama promotes ‘Buffett Rule’ among wealthy endorsers
President Obama plugged his plan to increase taxes on millionaires yet again Wednesday morning, but this time with a new twist – appearing alongside rich people who support the signature tenet.
The proposal would require that people earning $1 million a year or more pay at least the same tax rate as middle-class families. Obama calls it the “Buffett rule” after billionaire investor Warren Buffett, who has famously complained that he pays a lower rate than does his secretary.
To help make the point, the endorsers showed up with their assistants. Appearing on stage with Obama were Abigail Disney, president of the Daphne Foundation, and her assistant, Celine Justice. Whitney Tilson, managing partner of T2 Partners LLC, appeared with her assistant, Kelli Alires; Google retiree Frank Jernigan joined with his assistant, Teresa Gardiner; and Lawrence Benenson, of Benenson Capital, appeared with his assistant, Carmen Peterson.
None of those millionaires has told him they’re excited about paying more taxes, Obama said.
But “they agree with Warren,” he said. “This should be fixed.”
The measure is highly unlikely to pass the divided Congress this election year. But the message was live on network television this morning, same as Tuesday, giving the president’s “tax fairness” message the kind of exposure that money can’t buy.
Source: Los Angeles Times
Obama vs. Romney on tax rates: As you can see, rates are largely the same—except for the nation’s richest and poorest. The poor would pay almost twice as much in taxes under Romney’s plan; meanwhile, the very richest in the country would be forced to cough up about 10% more of their income under Obama. The net effect? In short, Romney’s plan would reduce federal revenues to about 17% of GDP—down .9% from where they are now. Obama’s budget would raise revenues 19.2%, with most of that money coming from those making over $250,000 a year (Graphic and data courtesy of The Washington Post / Tax Policy Center).
List of some of the 10 worst corporate income tax avoiders.
1) Exxon Mobil made $19 billion in profits in 2009. Exxon not only paid no federal income taxes, it actually received a $156 million rebate from the IRS, according to its SEC filings. (Source: Exxon Mobil’s 2009 shareholder report filed with the SEC here.)
2) Bank of America received a $1.9 billion tax refund from the IRS last year, although it made $4.4 billion in profits and received a bailout from the Federal Reserve and the Treasury Department of nearly $1 trillion. (Source: Forbes.com here, ProPublica here and Treasuryhere.)
3) Over the past five years, while General Electric made $26 billion in profits in the United States, it received a $4.1 billion refund from the IRS. (Source: Citizens for Tax Justice hereand The New York Times here. Note: despite rumors to the contrary, the Times has stood by its story.)
4) Chevron received a $19 million refund from the IRS last year after it made $10 billion in profits in 2009. (Source: See 2009 Chevron annual report here. Note 15 on page FS-46 of this report shows a U.S. federal income tax liability of $128 million, but that it was able to defer $147 million for a U.S. federal income tax liability of $-19 million)
5) Boeing, which received a $30 billion contract from the Pentagon to build 179 airborne tankers, got a $124 million refund from the IRS last year. . (Source: Paul Buchheit, professor, DePaul University, here and Citizens for Tax Justice here.)
6) Valero Energy, the 25th largest company in America with $68 billion in sales last year received a $157 million tax refund check from the IRS and, over the past three years, it received a $134 million tax break from the oil and gas manufacturing tax deduction. (Source: the company’s 2009 annual report, pg. 112, here.)
7) Goldman Sachs in 2008 only paid 1.1 percent of its income in taxes even though it earned a profit of $2.3 billion and received an almost $800 billion from the Federal Reserve and U.S. Treasury Department. (Source: Bloomberg News here, ProPublica here, Treasury Department here.)
8) Citigroup last year made more than $4 billion in profits but paid no federal income taxes. It received a $2.5 trillion bailout from the Federal Reserve and U.S. Treasury. (Source: Paul Buchheit, professor, DePaul University, here, ProPublica here, Treasury Department here.)
9) ConocoPhillips, the fifth largest oil company in the United States, made $16 billion in profits from 2006 through 2009, but received $451 million in tax breaks through the oil and gas manufacturing deduction. (Sources: Profits can be found here. The deduction can be found on the company’s 2010 SEC 10-K report to shareholders on 2009 finances, pg. 127,here)
10) Over the past five years, Carnival Cruise Lines made more than $11 billion in profits, but its federal income tax rate during those years was just 1.1 percent. (Source: The New York Times here)
Don’t say the government “raises taxes on the rich” …
Committing mass fraud against the world is hard work, man! I need a break on my yacht as a reward. Oh shit, the government took the hard work money I had set aside for the new Midas Yacht. It is made entirely out of gold and sinks immediately, but I was having it engraved - think of the legacy! I’m a pirate, arrr.
This is great, but the first point is so brilliantly simple that I feel they almost gloss over it too quickly. Just to make sure it isn’t missed I will expound upon it here.
When the top marginal tax rate is 92% it encourages business owners to reinvest in their businesses and create jobs.
This is the reverse of everything that Libertarians and Republicans in this country have been telling us for the past 30 years, and because it has been repeated so many times that lowering taxes creates more jobs in the private sector it is hard for many Americans to digest the reality that the exact opposite is true.
Take this example: If you are a business owner and your business makes $5 million dollars in profit this year, what are you going to do with that money? Well, if the top marginal tax rate is 35% and you pay yourself a $500,000 salary, putting you in that top tax bracket already, you might as well just give yourself a nice $5 million dollar bonus at the end of the year. Now you’ve made $5.5 million for the year, and paid $1.925 million in taxes, but taken home a fat $3.575 million. Chances are there’s nothing in particular you need to buy that’s going to cost 3 and half million dollars so you give it to a hedge fund to gamble with on Wall Street.
But suppose that there was a top marginal tax rate of 92% that kicked in at over one million dollars. No one would ever pay it because no one would pay themselves that much! In the same scenario you would probably still give yourself a bonus of $500,000, for a cool million, paying $350,000 in taxes and taking home a healthy $650,000 in your pocket. But what would you do with the rest of those profits? Reinvest it in your business! Hire more workers, give your current workers raises or bonuses, after all they helped bring in your big profits, expand and grow the value of your business, invest in research and development, maybe opt for a better health plan for your employees, or create an onsite daycare facility… you know all those things that made Capitalism cool in the first place.
Engineer Explains Taxes at Occupy Wall Street (by thetopvlog)
What ‘Percent’ Are You? The Numbers Behind the Tax Divide Debate
When it comes to dividing up our class structure, the middle is a good place to start — namely, the 60% of households wedged between the poorest 20% and the richest 20%. These families make between $20,001 and $100,065 a year, and were the group hardest hit by the recession: In 2008, their average income fell by 3.6%, thebiggest single-year dropin history. At the same time, they were also devastated by rising unemployment, mass foreclosures, soaring tuitions and frozen wages. By comparison, households below the 20% line often qualify for social welfare programs, were far less likely to own real estate, and were less affected by massive layoffs. In other words, they had less to lose, and ended up losing less.
On the other end of the spectrum, many of those above the 80% line were shielded from the harsher effects of economic downturns. And over the last 30 years, the top 20% have done quite well: Their share of all wages paid in the U.S. has gone from 50% to 60%. Everyone else has lost ground.
The 53% vs. the 47%
The dividing line between the 99% and the 1% is stark, but some argue there’s a better one: The boundary between those who pay income taxes and those who don’t. According to the nonpartisan Tax Policy Center, 53% of households pay federal income tax; the rest either break even or get back more in refunds than they pay.
In fact, thesecond-to-lowest20% of the country — households making between $20,001 and $38,043 — get back about 0.4% more income tax than they pay; for families who make less than $20,000, it’s about 6.8%.
Some conservatives — notably on the Tumblr blogWe are the 53%— have taken these numbers to heart, arguing that this means the bottom 47% is getting a free ride. But the 53%/47% division is a bit misleading.
To begin with, almost all households pay state taxes, Medicare tax, Social Security tax, excise taxes, sales taxes, and a raft of other government fees. When this broader, and more accurate, assessment of taxation is used, the 47% doesn’t look to be getting off so easy: Thesecond poorest quintile— the ones that got 0.4% of their income tax back — still paid more 10% of their incomes in various federal taxes.
In fact, when everything is factored in, 86% of the country pays more than it gets back in federal taxes.As for the rest, it’s not the split you might expect: More than half (8% of Americans) are senior citizens receiving Social Security.
And that last 6% — the ones who really pay nothing to the federal government? They are unemployed, disabled, in school, or making very low incomes. But even this small group pays state and local taxes, sales taxes, and other government fees.
Where the Poor Pay More
When it comes to percentage of income, the line is even clearer: For some taxes, the bottom 20% of the Americans pay more than the top 20%. For example, a household on the bottom pays almost 54% more of its income into Social Security than a household on the top. The same goes for excise taxes — fees attached to certain commodities like gasoline and alcohol: As a percentage of income, the poorest 20% pays more than four times as much as the richest 20%.