Update:
1) My use of the term "dodge" is in the legalistic sense of "tax avoidance" (legal), not "tax evasion" (illegal).
2) I am not an accountant, tax guy, or financial expert, just a fellow with a basic understanding of math and a desire to render abstract concepts like "billions of dollars" into more tangible concepts like "x" number of policeman's salaries for "y" number of years.
Many arguments can be made about "effective tax rates, versus actual", and whether I should have used 35.9%, 23% or 17%. My point is to try and quantify what wasn't paid, and as an example I chose 35%. Anybody can build their own spreadsheet and swap their number in for mine, and see how it translates into jobs and services.
3) The point of this diary was not a legalistic discussion of the arcana of tax law and tax avoidance strategies, but a moral discussion of the ramifications of that behavior. I am obviously taking issue with Ayn Rand, the Goddess of conservative economics and by tangible example, demonstrating the moral bankruptcy of the Randian philosophy. Rand and her followers do not offer a legal defense of their views, but a moral one. I am rebutting that view in kind.
4) The other central point of this diary is that at a certain point of income, people (real and artificial) become, if not above the law, then certainly above justice. This is because that elite/wealthy 2% get to make the rules for the remaining 98%. If such people and entities are to be allowed to exist, then I don't think a 35% tax on all income is too much to ask. Actually, 45% is more than fair, and 65% worth discussing.
These people (real and artificial) distort reality in their exploitation (and I use that word in both the benign and predatious sense) of people and resources, damaging the biosphere (of which real humans are a part). Taxation and regulation are the only palliation to this damage.
5) Some folks pointed out some of the "wealthy" folk investing in hedge funds are unions, pension funds, universities and charitable non-profits. My response is "shame on them". One has a single set of ethics, not one set for show, and one set for their investment portfolio. Hedge funds make money by exploitation and manipulation of markets and companies, and this has real world consequences.
* * * *
An earlier diary discussed how using a loophole in the tax code called carried interest, hedge fund manager John Paulson paid ZERO taxes on $9 billion in income over two years.
Essentially, by letting the money ride and getting his company to simply "loan" him the money (at 2% interest) Paulson technically had no salary. Since loans are not taxable, Paulson dodges the 15% he should pay in capital gains taxes.
If this income were treated like ordinary income (like how 98% of us are treated), via a paycheck with taxes withheld, he would pay 35% of his pay, or $3.15 billion. So, what could this ONE tax payer do if he paid his fair share of taxes instead of availing himself to this loophole?
Well, this one tax dodge would:
• Fund the Dept. of Veteran Affairs for 19 days
• Fund the Dept. of the Interior for 95 days
• Fund the Dept. of Justice for 42 days
• Fund the Dept. of Education for 24 days
• Fund the Dept. of Energy for 44 days
• Fund the EPA for 104 days
• Fund the Dept. of Agriculture for 44 days
• Fund the Dept. of Transportation for 15 days
• Fund the Dept. of Labor for 88 days
• Fund the Dept. of Health & Human Services for 14 days
• Fund NASA for 60 days
• Fund the Dept. of Defense for almost 3 days
• Fund Medicaid for 4 days
Numbers from 2010 budget via The Washington Post
What could it do for the states?
How about pay off the projected 2012 budget deficits for Idaho, Vermont, South Dakota, Iowa, Nebraska, Utah, Rhode Island, Delaware, D.C. Indiana, Hawaii, and 75% of Kansas?
How much could be done on a local level with this kind of money?
Well, you could pay for:
• 1,500 school teachers for 40 years (median salary $52,000)
• 1,500 policemen for 40 years (median salary $52,000)
• 1,750 fireman for 40 years (median salary $45,000)
• Repair 3,131 bridges
• Build 215 elementary schools
• Prenatal care for 400,000 women
• Send 103,550 students to a college for 4 years
• Send 580,538 students to junior college for 2 years
But what of this poor taxpayer we have "robbed" of his "productive labor"? I mean haven't we rendered meaningless his efforts at... er, what does he do again? Is he an engineer like John Galt, building a revolutionary new motor that could solve the world's energy crisis? Nope Was he an architect like Howard Roark? Well, no, he's a "hedge fund manager" (which some would argue makes him a metaphorical financial rapist, while Roark was just a regular old creepy rapist.
What does a "hedge fund manager" do? He supposedly "creates wealth", but does so by sitting in front of a computer in a comfortable office, moving lots of electrons around, and jetting around the world getting people to pay him for passing pieces of paper back and forth. I'm sure the nurse desperately trying to keep your mother on the Alzheimer's ward from developing bed sores, while she changes her diaper and looks after the 29 other patients on her floor for $52,000 a year is really glad her job is not that strenuous.
(Is it my imagination, or does the majority of jobs absolutely critical to the day-to-day functioning of this nation all pay about $50K a year?)
And who does this hedge fun manager work for? Well, he works for lots of other extremely wealthy people, some actual "captain's of industry" whose main job seems to be "maximizing shareholder value"* by raising profits. How do they raise profits, by doing everything possible to drive down wages of their workers, cheat them out of their pensions, scam people out of their homes with shady mortgage practices and driving them into crippling debt with loans charging interest rates that make the neighborhood loan shark complain about unfair competition.
* When they are not cheating the shareholders by collecting massive salaries for running the companies into the ground, then pulling the chord on a massive severance package, and moving on to the next group of sucker... er, I mean shareholders
OK, back to our billionaire who we "moochers who claim [his} product by tears" are victimizing.
We have taken 35% of his income, how will he possibly survive on the remaining $5.85 billion?
Well, he could:
• Spend $534,246.58 a day, every day for the next 30 years.
• Put the money in a 30 day treasury bill and live on the paltry $1.75 million that would generate each month (though he would have to pay our tax again, leaving him with a meager $1.14 million per month to get by on, poor fellow)
• Buy a country or two, or three, like Dominica, Saint Kitts, The Federated States of Micronesia, Grenada, Seychelles, San Marino, Gibraltar, Belize, Cape Verde, The Isle of Man, Somalia (that Ayn Randian paradise), Barbados, Greenland, Lichtenstein, Fiji or any of the other 49 countries whose GDP is less than $5 billion a year. (Yes, you would be buying the country for a single year, but maybe an installment plan could be worked out).
• Buy his own nuclear-powered aircraft carrier (aircraft and sailors sold separately).
Well, you get the point. Exactly how much money is enough for one man? And if I am going to demand an answer to that question, who am I to deserve an answer?
To answer the first question, when a person reaches a certain level of wealth, the rules and laws no longer really apply to them. We could quibble about how much, realistically starting at around $10 million, but I think we would all agree that once you hit a billion, you can pretty much buy anything you could reasonably wish for except true love and immortality. You can live where you want, do whatever you want, say whatever you want, and pretty much break any law and get away with it. Seriously, you don't find many billionaires in prison unless they are very, very stupid.
You could have people killed and never face anything but a quantumly small chance of going to jail, and a zero percent chance of being executed.
Besides, according to Anton Scalia and J.C. Bancroft Davis, corporations are people, and corporate people routinely murder people with the seven-figure management almost never being arrested, never mind convicted.
Don't believe me?
Seen any CEO's arrested for the various mine disasters, oil well disasters, nuclear disasters of late?
Hell, you can run down a man on a bicycle with your Mercedes, drive off like it never happened and the local DA will bend over backwards to see to it that you aren't charged with a felony, because “Felony convictions have some pretty serious job implications for someone in Mr. Erzinger's profession, and that entered into it."
"It" being a felony charge that could have cost him his job as a "wealth manager".
What if you PERSONALLY get liquored and coked up, blow through a stop sign at 63 mph and kill someone? Well, call me cynical, but I am pretty sure that this guy is not going to do any hard time.
So, the answer to my question "how much money is enough", would be "When you have so much money that the rules and laws no longer apply to you, you have enough money."
Now to the second question, "Who am I to deserve an answer?" I am one of the hundreds of millions of people in this country that makes wealth of this magnitude possible for these people. It is upon our backs, and by our daily toil that markets exists for these 100 or so, obscenely wealthy people (1,000 or so, when you add corporations as "people").
These people who routinely dodge their taxes, and whine of persecution when they are expected to make contributions to the upkeep of society commensurate with their wealth are the actual "moochers", "parasites" and "looters" of Ayn Rand's wet dreams. These people's wealth also exists because there IS a government in place that facilitates commerce, creates banking systems, backs up the currency, maintains the roads, and enforce law and order to 300+ million people, minus themselves, of course.
They want a government large enough to provide all these things, but beholden to them, so that they may fleece the masses without reprisal, distraction or interference.
In essence, they don't want government, they want an accomplice.
What is the solution to this situation? Well, there isn't one solution, but dozens, probably hundreds. But until we truly understand, and get everyone else laboring under these Teabagger/Randian delusions about taxation to understand the consequence of just a single tax dodger on our society, we have little chance of implementing any of them.
Update: Yay! I (briefly) made the rec list front page!