Here’s a news flash that’s not news: The richest Americans have shaped the U.S. tax code so that it saves them potentially billions.
The reason the rich essentially have what the New York Times calls their own private tax system is simple. They can afford to hire the best and brightest tax attorneys and accountants.
Those tax experts, according to the newspaper’s special report, employ a “dizzying array of tax maneuvers” to help the very wealthy 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 reporters Patricia Cohen and Noam Scheiber.
And those same wealthy tax break beneficiaries are, according to the New York Times’ story, “providing much of the early cash for the 2016 presidential campaign.”
So how are those political contributions working out?
GOP tax plans favor the wealthy
Donald Trump, the leader in many polls for the Republican nomination, talks a good tax game. He is, after all, a salesman. And he’s slammed the millions that hedge fund managers make by, in his words, pushing paper.
But he also wants to end the estate tax, which applies only to a statistically tiny group of rich U.S. taxpayers.
An analysis of Trump’s tax plan by the Washington, D.C.-based Tax Policy Center, or TPC, shows that its greatest benefits will go to The Donald’s peers, the wealthiest Americans. TPC’s analysts say Trump’s proposal would grant the top 0.1% a tax cut of almost 19%, while providing the lowest income bracket a tax break of only about 1%.
The same can be said about another Republican White House hopeful, Jeb Bush, who also favors repeal of the estate tax. The TPC says that under the former Florida governor’s tax plan, the top 0.1% of U.S. taxpayers would get about a 12% tax break, while the lowest income bracket would see a 1.4% tax break.
Sen. Marco Rubio, R-Florida, who’s moving up in the polls, wants to condense the current 7 tax rates to just 3. Tax Foundation analysts say that would provide the largest benefits to the lowest-income Americans, who would see their after-tax incomes rise by more than 44%. But the next largest group of beneficiaries under Rubio is the country’s highest-income earners, who would see their after-tax incomes grow by 11.5%.
Democrats less helpful to wealthy’s tax concerns
The rich don’t fare as well under proposals by the 2016 Democratic presidential hopefuls.
Front-runner Hillary Clinton is calling for, among other things, enactment of the Buffett Rule. This proposal, named after the financier Warren Buffett, would require that the rich pay at least a minimum ordinary income tax rate instead of primarily lower capital gains tax rates.
Bernie Sanders, Clinton’s nearest competitor, would like to see a new top tax rate of at least 50%. Income falling into the current top income bracket is taxed at 39.6%.
Flat, but not that fair tax
Then there are the flat taxers. Proposals to do away with the current progressive tax system and enact 1 tax rate to be paid by all are touted by several Republican candidates: retired neurosurgeon Ben Carson (a 15% rate), Texas Sen. Ted Cruz (10%), Kentucky Sen. Rand Paul (14.5%) and former Pennsylvania Sen. Rick Santorum (20%).
While one rate for all sounds like a fair plan, our current progressive tax rates are more beneficial for lower-income taxpayers.
And, as the New York Times reports, the wealthy have become quite adept at dealing with our 7 tax brackets and assorted other tax laws so that they don’t suffer as much at the hands of the IRS.
So basically, the bottom line is that the rich rule when it comes to taxes. And not to be a nay-saying cynic, but changing that is going to take much more than one election cycle.
Still, we have to start somewhere and voting is a great beginning. We average Joe and Jane taxpayers who are very far from rich must make all public office candidates address our tax issues and hold them accountable for our concerns.
We can’t afford to be swayed by swagger and snippets of tax proposals that, on the surface, sound appealing, but that in reality don’t do us much tax good at all.