There's a secret, separate US tax system that rich people use to save billions

The richest people in America funnel billions into the creation and maintenance of a secret and shadowy tax-system that uses a combination of lobbying by front groups, high-priced tax lawyers, and offshore money laundries to reduce the rate at which they're taxed, often below the rates imposed on middle-income earners.

This system has been built out extensively over the past two decades, changing the portion of tax paid by the richest 400 Americans from 27% to less than 17%. The fronts for the super-rich donate lavishly to both the Republicans and the Democrats, and the loopholes are exploited by everyone from the Kochs to Soros.

One area where the super-rich have had enormous success is lobbying against inheritance tax, ensuring dynastic fortunes that allow privilege to travel through the genes, rather than being the reward for economically useful activity.

The IRS, starved and cowed after the scandal over its alleged discrimination against right-wing groups, has effectively given up on collecting from the richest Americans, fearful of more political reprisals.

Several former I.R.S. officials, including Marcus Owens, who once headed the agency's Exempt Organizations division, said the controversy badly damaged the agency's willingness to investigate other taxpayers, even outside the exempt division.

"I.R.S. enforcement is either absent or diminished" in certain areas, he said. Mr. Owens added that his former department — which provides some oversight of money used by charities and nonprofits — has been decimated.

Groups like FreedomWorks and Americans for Tax Reform, which are financed partly by the foundations of wealthy families and large businesses, have called for impeaching the I.R.S. commissioner. They are bolstered by deep-pocketed advocacy groups like the Club for Growth, which has aided primary challenges against Republicans who have voted in favor of higher taxes.

In 2014, the Club for Growth Action fund raised more than $9 million and spent much of it helping candidates critical of the I.R.S. Roughly 60 percent of the money raised by the fund came from just 12 donors, including Mr. Mercer, who has given the group $2 million in the last five years. Mr. Mercer and his immediate family have also donated more than $11 million to several super PACs supporting Senator Ted Cruz of Texas, an outspoken I.R.S. critic and a presidential candidate.

For the Wealthiest, a Private Tax System That Saves Them Billions [Noam Schieber and Patricia Cohen/NYT]

(via Interesting People)

(Image: Treehugger)