Getting away with not paying taxes

August 1, 2006

The timing paints a twisted image. First we learn that the Bush administration is targeting the working poor with audits, checking to see if they qualify for the Earned Income Tax Credit. Then we learn that the Bush administration is eliminating half the IRS lawyers who audit tax returns of some of the wealthiest Americans, making it easier for the rich to cheat.

Today, the New York Times adds that [tag]billionaires[/tag] are avoiding [tag]tax[/tag] payments by hiding funds in offshore tax shelters, creating a system that’s “out of control.”

So many superrich Americans evade taxes using [tag]offshore[/tag] accounts that law enforcement cannot control the growing misconduct, according to a Senate report that provides the most detailed look ever at high-level tax schemes.

Among the billionaires cited in the report are the owner of the New York Jets football team, Robert Wood Johnson IV; the producer of the “Mighty Morphin Power Rangers” children’s show, Haim Saban; and two Texas businessmen, Charles and Sam Wyly, who the Center for Public Integrity found in 2000 were the ninth-largest contributors to President Bush.

Mr. Johnson and Mr. Saban, who are portrayed as victims in the report, are scheduled to testify today before the Senate Permanent Investigations subcommittee. They are expected to say that professional advisers assured them their deals to avoid taxes were more likely lawful than not. The Wyly brothers told the committee that they would invoke their Fifth Amendment right against self-incrimination and thus were not called to testify. The report characterizes them as active participants in tax schemes.

What kind of money are we talking about here? The Times explained that “[tag]cheating[/tag] now equals about 7 cents out of each dollar paid by honest taxpayers, as much as $70 billion a year.”

In some instances, it seems that some of these billionaires were deceived by bad advice and are now paying back taxes on what they owe. But the advisors were well aware of their illegal conduct.

The technique involved a complex set of circular transactions using what the Senate report characterized as sham corporations in the Isle of Man with shell corporations given names like Jackstones. Their ownership was kept secret.

“Ain’t capitalism great!” Mr. Wilk wrote to Mr. Scheinfeld in an e-mail message extolling the tax benefits of the Johnson deal. Three weeks later, when the deal was set, Mr. Scheinfeld wrote back: “I just hope Woody doesn’t get cold feet or have the I.R.S. select his return for an audit!”

As for the politics of this mess, Mark Kleiman raises the key point: “The question of who at the IRS has been asleep at the switch, or why the Bush Administration hasn’t moved resources into catching super-rich tax cheats, isn’t even mentioned.”

That should be the next step. Dems on the Senate’s Permanent Subcommittee on Investigations, led by Sen. Carl Levin (D-Mich.), did tremendous work identifying the widespread criminal activity in this area, and prepared a voluminous report that committee Republicans have endorsed.

But the next question is how this was allowed to happen. Why is it that the Bush gang believes the working poor should be targeted for audits, but billionaires who hide money in illegal shelters should be largely ignored? Why is low-income tax cheating a scourge that needs serious attention, but high-income tax cheating, which costs the Treasury tens of billions of dollars, not worth pursuing?

Do you even need to ask? You already answered the question:
“Charles and Sam Wyly…were the ninth-largest contributors to President Bush”
Poor people don’t make campaign contributions. Rich people do. QED.

  • A great investigation, and a good political argument for the Dems. But the Times article’s statement that “cheating now equals about 7 cents out of each dollar paid by honest taxpayers, as much as $70 billion a year” is ambiguous: is that overall cheating, or cheating such as addressed in the article? It’s not clear, and that should be checked out before someone raises this argument and is accused of distorting/mistating the facts, thereby obscuring the otherwise indisputably valid point that the Bush administration is tacitly encouraging this sort of cheating by cutting back on enforcement.

  • But the next question is how this was allowed to happen. Why is it that the Bush gang believes the working poor should be targeted for audits, but billionaires who hide money in illegal shelters should be largely ignored? Why is low-income tax cheating a scourge that needs serious attention, but high-income tax cheating, which costs the Treasury tens of billions of dollars, not worth pursuing?
    There is no mystery here. BushCo.’s primary goal is to open the treasury up to wealthy contributors and to stop any programs which smack of redistribution of wealth down. When this can’t be done via legislation, it is accomplished via back door policies. There is no difference between turning a blind eye to offshore shelters and the recent story about cutting staff in the IRS division which deals with inheritance taxes. Nor is there any difference between the IRS auditing low income families and The BushCo. Congressional Subsidiary maneuvering to derail a minimum wage increase. It is all part and parcel of the BushCo domestic agenda.

    By the way, Sam Wyly is no ordinary BushCo. stockholderSen. John McCain of Arizona called him a “sleazy buddy” of Gov. George W. Bush’s, and environmentalists expressed outrage at what they call his misleading message.

    Sam Wyly of Dallas, a longtime Bush family backer, bought his way into the national political consciousness last week by laying out more than $2.5 million for TV ads in three key states — New York, California and Ohio — with presidential primaries today.

    The ads attack McCain’s environmental record, tout Bush’s and at the same time boost Wyly’s own renewable energy company. The ads also put Bush, their intended beneficiary, on the defensive: McCain on Monday filed a complaint with the Federal Election Commission, claiming that the spots are tantamount to an illegal political contribution

  • Give these cheats the same “due process” as they allow a medical marijuana grower. Seize all their assets first, then let them attempt to explain things.

    We all know them Dems don’t care about this stuff, they are corporate whores just like the Bushies. It was allowed to happen because money is the only thing a Capitalist society values.
    The Corportarians want a return to not just indebted servitude, but a return to slavery itself.
    Their actions are the proof. It is what they DO, not what they say.

  • Said the Bushies to America: We’re gonna work you like a Dickens novel. Just as there is “no such thing as rich enough,” so there is equally “no such thing as “poor enough.” Since the commodities resource pool is a somewhat fixed item, the only way to transform the rich from “merely rich” to “richer than merely rich” is to accomodate the Law of Relativity—for every action, there is an equal, yet opposite, reaction—and transform the porr from being “merely poor” to “poorer than merely poor.”

    There are no “three ghosts” to bring “the Scrooge of Pennsylvania Avenue” and his ilk back into the realm of humanity. There are “Three Kindred Spirits,” however.

    The Spirit of the Pen (or, the keyboard).

    The Spirit of the Ballot.

    And, there is “The Spirit of ’76.” It worked rather nicely, the last time the People had to remove “a king named George” from power….

  • It’s not just the poor who might qualify for the Earned Income Credit. It’s poor taxpayers in general. I speak from experience. The Republicans slashed the IRS enforcement budget over the years, so at first the IRS said they would only go after the tax cheats that made “economic sense,” i.e., those where the money recovered would be more than was spent on enforcement, lawyers, auditors etc. Then they realized that when you go after the rich, they have lawyers and such and make a fight, and it costs a lot of money. The poorer (like freelance writers), on the other hand, likely don’t have the $1500 to get a lawyer to take their case, so all they can do is “bend over.” This costs the IRS very little in enforcement, so they get more money back than they spend. And of course the actual poor who go for the Earned Income Credit have even less to spend on a lawyer.

    If you think about it, it makes perfect Republican economic sense. (/snark)

  • Isn’t there some sort of equal protection lawsuit waiting to happen here? Enforcing the tax laws more strictly on poor people while turning a blind eye to abuses by the rich is probably illegal, especially because poor people are more likely to be minorities.

  • The trickle down, geyser up policy. Should leave enough money in the pockets of the rich to buy a mega yacht or two. They’ll recapture the revenue with the luxury tax. Oh, I forgot, they got rid of that. Ok, so the working stiff building the boats will be paying more into social security trust fund. Oh, they stole that to make up for the deficits created by the tax cuts. Damn, these republicans just about got the bases covered.

  • Good thing folks like Wyly can save so much in taxes that they still have enough money to buy the government. It’s the Rethuglican way.

  • Democrats should be shouting the tax fraud thing from the mountain tops. After all, the primary reason the rank and file right supports tax cuts for the ultra-rich that are clearly counter to their own best interests is that in their world view, wealth is a reward for virtue. They actually believe that the extremely wealthy are that much harder-working, thriftier and wiser than the rest of us and therefore, ultimately deserving of the largess being heaped upon them. In their universe Kenny-boy Lay is still a hero to many.

    So hammering home loudly and repeatedly that a lot of these folks are really just bigger cheaters and better thieves than the rest of us has the potential, over time, to really cut to the heart of those fondly held beliefs. I also dig the “Paris Hilton Tax Cut” angle Howard Dean has been pushing for the same reasons. Neither of these arguments can be repeated often enough, I think.

  • Democrats won’t dare even mention this, because hidden in plain site in that New York Times article is a dirty little secret of their own: the Quellos Group is a major Democratic donor. And they evaded taxes that were due on over $9 BILLION.

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