ProPublica’s tax report: much ado about non-income | Chroniclers

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It’s a tantalizing headline from investigative journalism group ProPublica: “IRS Secret Files: Never-Before-Seen Mine of Documents Reveals How Riches Avoid Income Tax.”

The source of the report is an alleged “vast cache of IRS information” that may have been unlawfully disclosed. A spokesperson for the US Treasury said that angle was referred to the FBI, federal prosecutors and other investigative agencies. And the title was clearly designed to turn our gears of indignation.

But digging into the details, the promised revelation is… well, a little boring. How do the richest Americans “avoid” income tax? By not having “income”.

Yes really. Words mean things, and the IRS spills a lot of ink on defining these things.

How much ink? In 2017, according to PolitiFact, the Internal Revenue Code was 6,550 pages, not counting (Politifact cites the Tax Foundation) 6.6 million words of additional IRS regulations and 60,000 pages of case law.

And, it turns out that most of the wealth of the wealthiest is not “income” by IRS definitions.

I’m going to use Jeff Bezos as an example, because everyone does, right?

You’ve probably seen the headlines after a big stock market move: “Bezos’ wealth grows by $ 4 billion” and so on.

The obvious way to visualize this headline is that a truck full of $ 100 bills pulled up at Bezos’ and a team hauled those bills into the room where Bezos likes to roll with cash a la Scrooge McDuck.

What really happened was that the potential sale value of the shares held by Bezos increased. Until and unless he actually sold that stock, he didn’t make a dime. If he sells that stock for more than it was worth when he got it, he will be subject to capital gains tax of up to 20% on the price difference. Which is a far cry from the top 37% tax rate … but Jeff Bezos didn’t write the tax code, did he?

As a libertarian, I would rather do away with taxes altogether. If the Navy wants a new aircraft carrier, have a bake sale, or maybe send the Marines knocking on doors and selling Rolling Stone subscriptions to raise money.

But if we’re going to have taxes, it’s a little silly to blame the people who pay what the tax code says they have to pay, rather than more, just because the amount paid doesn’t seem “enough.”

Thomas L. Knapp (Twitter: @thomaslknapp) is Director and Senior News Analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism (thegarrisoncenter.org). He lives and works in North Central Florida.


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