Jesse Drucker at Bloomberg reports on how, back in pre-dotcom-crash 1999, a trust Mitt Romney set up for his children and grandchildren returned a 1,000 percent return on the sale of shares in Internet advertising giant DoubleClick Inc. "If Romney had given the cash directly, he could have owed a gift tax at a rate as high as 55 percent. He avoided gift and estate taxes by using a type of generation-skipping trust known to tax planners by the nickname: 'I Dig It.'"

  • Alexander Borsi

    Don’t get mad at the people who use the loopholes, get mad at the people who put the loopholes in. Now the secret is out, so hurry up and deposit all your millions of dollars in now before they change the laws ever-so-slightly so that you won’t know about them until years later.

    OH WAIT NOBODY HAS THAT KIND OF MONEY EXCEPT THE PEOPLE WHO PUT TEH LOOPHOLES IN.

    • http://mordicai.livejournal.com Mordicai

      Right; this is the thing in a nutshell!  People are all “Oh well what, was Romney supposed to take a bath & not do all the weird quasi-ethical things he could to dodge taxes?” but that neglects the crux of the argument…that Romney is essentially running on a “more loopholes, tax breaks for the wealthy & corporate tax cuts” platform.

    • Mitchell Glaser

      If there is something awful but lamentably legal, then you are still an asshole for doing it, don’t you think?

      • AnthonyC

        Yes. But there is a deeper level of assholery: its legality is not a coincidence, but a choice made by and for the very people who intend to exploit it. Laws don’t spring into being from the aether, they are written in large part by people with influence over politicians.

  • http://profile.yahoo.com/WBGGYYQTEBJQLOQ2K6I3DU5VCA Otis

    Gregory v Helvering
    293 US 465
    “Tax Avoidance is not tax evasion”.
    And does anyone think a 55% tax rate on inheritance is justifiable?   So why shouldn’t he do it?

    • http://www.facebook.com/devook Devin Miller

      Seems like Mitt apologists are focusing hard on the number 55 without actually reading the article.  Yes, 55% is an absurd amount to tax, but that’s because the kind of exchanges that incur this tax rate simply shouldn’t be happening.  Want to avoid 55% taxes on an amount of money?  Then don’t try to offload 100 million dollars to your heirs in an attempt to dodge estate tax…

    • atimoshenko

      Considering that the inheritor has done absolutely nothing to earn his or her inheritance, and that inheritance is a fundamentally non-market transaction (there is no free competition for inheritances), a 100% tax on inheritance is perfectly justifiable. 

      • invictus

        Just so I understand: Are you in favour of a 100% tax on *all* non-market transactions, or is this one magically special in your eyes?

        • atimoshenko

          If by “non-market transactions” we both understand “not substantially open to free competition among all interested potential counter-parties”, then yes I would be in favour of such a tax on these transactions by default (the real world is too complex for ideological zealotry, so there is always the possibility of some exceptions to pretty much any default).

          EDIT: This, however, is not to suggest that questions around lifetime capital surpluses and inter-generational transfer are not important enough to deserve “magically special” consideration within economics, but such consideration would be merited regardless of whether we are dealing with inheritance, burying all worldly possessions with the deceased’s body in a giant pyramid, or whatever else.

          • Chad Smith

            So if you won the lotto, it’s OK for the government to take 100 freaking %?!?!?  I think not.  They just won the family lotto.  Get real.  The tax system we have is broke.  You shouldn’t tax income (no one gets anything by hoarding money – only when they spend it!).  Some sort of consumption tax levels everything out – the haves and the have nots.

          • atimoshenko

            So if you won the lotto, it’s OK for the government to take 100 freaking %?!?!?

            Everyone who wanted to was free to play the lotto. Indeed, the winnings of the lotto are pooled from the sales of the tickets. This is not parallel to inheritance where participation is not voluntary, competition is not free, and no sacrifices are made by one of the counte-rparties.

            You shouldn’t tax income

            In the abstract, I would also prefer a wealth adjusted tax on spending rather than a tax on earnings. But not all income can be reasonably seen as earnings, and it’s also a pretty big and difficult change to the system to make.

      • quandmeme

        Remember that the money in this case was taxed when it was earned. He saved it and invested it in a capital asset. It is not clear that there is a moral requirement that the proceeds of the sale of that capital asset be taxed again.

        I’m a member of 99%, but I’m just saying that oversimplified arguments don’t get us where we need to get. (c.f. tea party)

        • atimoshenko

          Remember that the money in this case was taxed when it was earned.

          And there should be no special taxes on it when he uses that money to consume what he has earned. Inheritance, on the other hand, is a transfer of the right to consume to people who never did anything to earn that right.

    • http://twitter.com/CASemonEY Casey Conway

      It’s called the ‘lottery of birth’. The argument is this: ‘imagine before you’re born you know nothing of who you’ll be, (rich or poor), now design a tax system that will produce a fair outcome for you in either case.” i.e. since those born poor are more likely to remain so and the same goes for the wealthy, a high inheritance tax (in theory anyway) should be used to provide those born poor an opportunity to die rich, while not significantly impacting the quality of life those fortunate enough to be born into, earn, or accumulate wealth (or their offspring) from doing the same.   

      • Marc45

        It would be an interesting world if when you die, everything you’ve made is given back to the general population with no exceptions.
        We wouldn’t need any taxes, tax accountants, loopholes or the IRS and it would encourage those who are rich to spend it all!

        • jorgenfleisterman

           That would be awesome. Imagine how much money would continue to circulate in the economy.

          That’s the great contradiction of the whole “job creators” myth. Wealthy people are expressly not job creators because they accumulate too much wealth without spending it the way regular consumers would. Rich people aren’t going to buy 1000 iPhones. But 1000 consumers with the same money disbursed amongst them would.

          It’s basic economics. Poor people spend the money they get. Rich people hoard. Which is better for the economy?

      • AnthonyC

        Thanks Rawls!

    • http://twitter.com/ErnestValdemar Ernest Valdemar

      does anyone think a 55% tax rate on inheritance is justifiable?

      “A power to dispose of estates for ever is manifestly absurd. The earth and the fulness of it belongs to every generation, and the preceding one can have no right to bind it up from posterity. Such extension of property is quite unnatural.” — Adam Smith

      See also Jefferson, Thomas; Roosevelt, Theodore; Hoover, Herbert; et al.

      A steeply graduated inheritance tax is not only good for the nation, it is intrinsically Conservative and pro-Capitalism. Anyone who describes himself as a “fiscal conservative” should by all rights embrace inheritance taxes. To argue the opposite is rank hypocrisy.

      • Brainspore

        Anyone who describes himself as a “fiscal conservative” should by all rights embrace inheritance taxes. To argue the opposite is rank hypocrisy.

        Also plutocracy.

    • wysinwyg

      I hear “conservatives” and libertarians talking a lot about “equality of opportunity, not equality of outcome.”  They never take it to its logical conclusion: the only way to guarantee equality of opportunity is 100% estate taxes and no loopholes like this one. 

      It has a lot of other nasty consequences as well.  All the more reason to drop the moralistic political frames and talk about what’s good for society rather than what’s “justifiable” or “moral” (which of course no one is ever going to agree on in the first place).

  • http://profile.yahoo.com/WBGGYYQTEBJQLOQ2K6I3DU5VCA Otis

     So in order to show what an upstanding person you are you’d gladly pay at the 55% rate yourself.  Yes?

    • Snig

      Since that means I’d be a mega millionaire to have to pay that rate, yes please.  Thank you very much for this opportunity. 

      • Navin_Johnson

        Yes please, I’d love to be able to pay 55% and still have 200 million or so to play with!

    • http://twitter.com/ErnestValdemar Ernest Valdemar

       Yes.

    • http://www.youtube.com/user/Freethinkersanon Christopher

      You do realize there’s a cutoff, that people who have below a specified amount don’t pay the tax, don’t you? But, yes, if I had that kind of money I like to think that I would like to think I’d be willing to pay that rate. If I had that kind of money I should give some of it back since it would be incredibly dishonest to try and hoard it by claiming “I built this!” 

    • Antinous / Moderator

      Yes. Some people, including me, are perfectly willing to pay the full tax rate.

  • http://profiles.google.com/michael.geier Michael Geier

    Romney dodges $100 million in taxes (on this one transaction), and then complains that we’re in a deficit caused by those other guys…but he can fix it!

    FACEPALM!

  • http://disqus.com/Kimmoth/ Kimmo

    I’ve yet to come across a convincing argument as to why anyone should be allowed to become so obscenely wealthy in the first place.

    • jorgenfleisterman

       Because…freedom and American pie, you commie bastard!

      Yeah, at a certain point it seems like the economy is perceived as just a big game and some people are those assholes who are way too serious and have to win all the time no matter what. At a certain point, if the winningest players continually rewrite the rules so that they can continue to win while screwing over the rest of the players, it’s not worth playing any more and the pieces need to go back in the box.

  • Brainspore

    …a trust Mitt Romney set up for his children and grandchildren…

    That guy really cares about kids.
    (Note: I know this was a photoshop job but it still seemed appropriate.)

  • Mitchell Glaser

    I’ve got no problem with a 55% inheritance tax rate on the super rich. But I object strenuously to where that money goes: into the bottomless pit of government spending under the control of the corrupt bureaucracy (both parties impugned).

    • http://twitter.com/ErnestValdemar Ernest Valdemar

       Quick quiz: What happens to money when it is spent? (Hint: It doesn’t go away.)

    • Navin_Johnson

      Then you’ve kind of got a conundrum there, unless you think that tax revenue should just be diverted to the rest of Americans under a certain income level as a direct check or something. Of course, I would argue that the worst kind of government spending (war, needless subsidies etc) is a direct consequence of the sway that these plutocrats have in government.  All the more reason to try to keep a check on them amassing too much wealth and power.

      Edit: Funny enough, I just heard Romney on the radio stumping in Virginia and bragging about how he would make no cuts to the military.

      • http://bhtooefr.org/ Eric Rucker

        You could decirculate it, which would basically be writing a check to EVERYONE holding US dollars for that value (by increasing the value of the currency, although, that would be proportional to their wealth), without the administration costs of actually writing those checks.

    • Antinous / Moderator

      I object strenuously to where that money goes: into the bottomless pit of government spending…

      So leave it to charity. Mischief managed.

  • wysinwyg

    The real significance of this is to contrast it with Wolff’s recent work on inheritance.  (For example.)  The thrust of that research is that inheritance doesn’t seem to contribute that much to wealth.  I doubt Wolff was tracking vehicles like this — or for that matter money that’s been off-shored.

  • James Penrose

    I don’t distrust him because he is rich and successful and smart enough to use the laws as written. I distrust him because he wears magic underwear and thinks Native Americans are the Lost Tribes of Israel.

    • jorgenfleisterman

       I distrust him because he is unethical enough to be rich and successful despite not actually producing anything of value and morally corrupt enough to use the laws as written since they were written by the rich for the rich instead of being written by people who truly represent American citizens as a whole for the benefit of all Americans. That shows right there that he’d be will to do something that’s unethical just because it’s legal or to even try to get it made legal do something that is unethical. That’s the last person I want as president. Unfortunately, that’s probably most of the people in Congress too.

    • Brainspore

      I don’t distrust him because he is rich and successful and smart enough to use the laws as written.

      Those laws didn’t just materialize from the ether. They were created by (and continue to be defended by) people like Mitt Romney.

  • http://deansli.st/ Dean Putney

    Sounds like a man with an intimate knowledge if the US tax code! Presidential material if I ever saw it!

  • http://scavenger-ethic.blogspot.com/ scav

    Also, note that he invested in DoubleClick. That guy is such an arsehole on so many different levels.