When ProPublica published its report Last week on the tax profiles of 25 of the richest Americans, the jaws fell across the United States. How was it possible that plutocrats like Elon Musk, Jeff Bezos, and Warren Buffett paid nothing in income taxes to the federal government? What sly tricks of the pen, what subterfuge, what acts of turpitude could have led to this result?
The shock comes, in part, from a disturbing reality: Nowhere does ProPublica claim that these men cheated, lied or done anything criminal to reduce their tax burdens. The crude fact of the matter is that none of the documented methods and practices that enabled these billionaires to so drastically minimize their tax obligations were illegal.
Worse yet, these methods and practices — things like offsetting income with losses in independent businesses; structure the assets to grow rather than generate income, then borrow against those growing assets for cash flow needs; and deducting interest payments and state taxes from taxable income – are so commonplace and commonly applied that most of the wealthy don’t see them as unethical. The more interesting question is not how the men in the ProPublica report were able to avoid paying a lot or anything in federal income tax, but why. What motivates people with so much money to try to hide every bit of it from the public eye?
One factor is the common ideology behind all of these practices: the government is bad and it cannot be trusted with money. Much better for the rich to keep as much as possible for themselves and use (a fraction) of it to do good things through philanthropy.
My grandfather Roy O. Disney, who co-founded the Walt Disney Company with his brother Walt, was a strong supporter of this idea. He was so determined to stop the government from taking the money he wanted to bequeath to his family that he created generation leap trusts to end IRS management. What he did then was so effective that most of it is illegal today.
I will protest until my last breath that he was a good man, one of the best, in fact.
But I will also add, at the very end of this last breath, that he should not have been able to do it.
Concretely, the way the trusts were designed means that I made a significant amount of money at the age of 21. I became an asset manager before a lot of people got their first apartment. I’m 61 now, which means that for four decades I have received tax advice from decent, good, kind men (yes, they were all men) that was put in place by my grandparents, then my parents, to make sure I wouldn’t do anything stupid with what I was given.
Every method and practice described in the ProPublica report has been suggested to me at one time or another by these honest men as a credible, perfectly legal and not at all questionable way of managing my assets. And, over the years, I have said yes to many of these suggestions. So that’s right: if you were to get your hands on my tax returns, there you would find a record of someone who scrupulously followed the law and in doing so also took advantage of the many holes our legal system has left. wide-open.
When you step into money like I did – young, scared and unfamiliar with the world – you are taught certain precepts as if they were evangelical: never spend the “corpus” (also known as capital ) that was left to you. Manage your assets to leave more for your kids, then teach them how to do the same. And finally, use all the tools at your disposal within the law, especially through estate planning, to keep as much of that money as possible out of the hands of government bureaucrats who will only abuse it.
If you are raised in a deeply conservative family like mine, you are taught a few additional doctrines: Philanthropy is good, but too often it is improper and performative. Marry people “of your own class” to spare yourself the complexity and strife that come with a wide gap in income, assets and, therefore, power. And, as one of my uncles told me during the Reagan administration, it is better to leave the important decision-making to the “successful” people, rather than in the pitiful hands of the unsuccessful. .
I have taken far too long to examine these precepts with clarity and to see them for what they are: plans for dynastic wealth. Why it took me so long is a good question. All I know is if you are a fish it’s hard to describe water, let alone ask if water is necessary, ethical, and structured the way it should be. As long as no one raised an eyebrow on the ethics of the CRAT, the CRUISE, and credit swap, who do I think I am to question the fundamentals? I did not have the emotional courage to take this path.
There was another reason for my inaction, and I am deeply ashamed to say what it was. But here it is: having money – a lot of money – is very, very pleasant. It’s damn hard to resist the enticements of what money buys you. I was never very materialistic, but I wallowed in the less concrete privileges that come with a trust fund, such as time, control, security, care, power and choice. The point is, this is fairly standard software that comes with the hardware of a human body.
Over time, I have come to realize that the dynamics of wealth are similar to the dynamics of addiction. The more you have, the more you need. While once a single beer was enough to get a sense of calm, now you find that you can’t stop at six. Likewise, if you go from being a coach to a business to first class, you will not want to go back to coach. And once you’ve flown privately, wild horses will never drag you into a public airport terminal again.
The comforts, once acquired, become necessities. And if enough of these comforts become a necessity, you will eventually break away from any common feeling with the rest of humanity.
I am telling you all this so as not to defend myself; it is between me and my conscience. I tell you this because human nature is a powerful force, and fighting it requires understanding it.
What made me question my indoctrination was ethics. Fucking ethics. For many people, especially those most deeply rooted in the culture of having and getting money, ethics is a vague and ineffective nuisance – an abstract set of principles that probably cannot resist. the rigors of life lived quickly, business conducted efficiently, and competitors eaten up and pushed aside.
The older I got and the more clearly I understood these things, the more the impulse to betray my own class took over my judgment.
What’s shocking about the ProPublica report is not only that the tax bills are so low, but that these billionaires can live on their own.
If your comfort demands that society be structured so that a decent percentage of your fellow citizens live in a constant state of terror as to whether they will receive health care in an emergency, or whether they can keep a roof over their families, or they will just have enough to eat, maybe the problem is not with these people, but with you and what you consider necessary, appropriate and acceptable.