Friday, April 15, 2005

When Poor People Start Wishing They Were Rich


Tax season is here again. Would you like to know a sure-fire way of reducing your tax bill?

Simple. Become rich. The richer, the better.

Example: let's say your wealth puts you in the top 1/100th of 1 percent of all Americans. That's about 28,000 people in the U.S. These people, on average, make around $2 million every five days, which is what the average American earns over the course of a lifetime.

The tax burden for these super-rich people has been steadily falling for years. For example, in 1993, they paid 30 cents of every dollar into federal income tax. In 2000, that had fallen to 22 cents. Now, with the Bush tax cuts, it has fallen to 18 cents.

In his book Perfectly Legal, Pulitzer Prize-winning journalist David Cay Johnston details an outrageously unfair tax system that screws the poor and working class. It's a tax system that has been increasing shifting the burden away from the rich and onto lower-income tax payers for years, a phenomenon that's gotten little coverage in the mainstream media.

Not only do the rich avoid paying taxes, but they also usually avoid tax audits. Johnston points out that working class people are eight times more likely to face an audit than the wealthy.

Johnston is only one of a number of high-profile investigative journalists who've detailed America's unfair tax system over the years.

In 1994, Pulitzer Prize-winning journalists Donald Barlett and James Steele published an eye-opening account of America's unfair tax system in their book, America: Who Really Pays the Taxes?

Barlett and Steele painted a gloomy picture of a beleaguered middle- and working class that is soaking up more and more of the nation's tax burden. They also detail how the tax burden is quietly shifting in other ways.

For example, the tax burden in the U.S. over the years has been shifting from corporations to individual tax payers. In the 1950s, corporations paid around half of all taxes. Today, their burden has shrunk to less than 10 percent. In fact, today, 60 percent of all U.S. corporations pay zero income tax.

Johnston, Bartlett and Steele point out numerous cases in which wealthy individuals don't even bother to file a tax return.

Johnston cites the example of two billionaires, Alec and Jocelyn Wildenstein, who admitted under oath that for 30 years, they never even filed a tax return---and faced no consequences as a result.

In their book, Barlett and Steele point out that in 1989, there were 1,081 people earning over $200,000 who paid zero income tax. I would suspect that since Barlett and Steele's 1994 book was released that the number of wealthy tax avoiders has increased further still.

In the interviews they conducted to research their books, Barlett, Steele and Johnston describe ordinary tax payers' seething anger and frustration with the unfairness of the tax code.

Johnston, in particular, seems pessimistic that the U.S. tax system will ever be fixed. He considers open revolt and social disruption a possibility in the future.

For their part, Barlett and Steele, offer modest proposals for making the tax system more equitable, such as closing all loopholes. However, the odds of real change to make the tax system more fair in Bush's America seem remote indeed.

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