Statements At Finance Committee Hearing Examining Tax Schemes Used by Ultra-Wealthy Americans

Statements At Finance Committee Hearing Examining Tax Schemes Used by Ultra-Wealthy Americans

Senate Finance Committee Chairman Ron Wyman (Senator Oregon – Leading U.S. Senate Democrat Statement)

This Congress the Senate Finance Committee has investigated a number of tax schemes that the very wealthy – with the help of armies of high-priced tax lawyers and accountants – use to pay virtually no federal tax for years on end.

Today, we’ll examine one strategy – among others – called “Buy Borrow Die.” Just three little words on the chart behind me, that have a huge impact. Here’s how it works:

A corporate raider buys a business, and then borrows against its growing, untaxed value to fund their extravagant lifestyle. Everything from superyachts, to luxurious vacations, expensive art deals, you name it. It goes up and up in value all while not paying a dime in tax. And when they die, their assets are passed to their kids – often entirely tax-free – and the cycle continues.

Now let’s contrast Buy Borrow Die against the tax system mandated for everyone else.

A nurse or a firefighter living in Philomath, Oregon are required to pay taxes out of each paycheck. Working people don’t get to play by the same rules as billionaires. They don’t get to call up an accountant every time they don’t feel like paying taxes.

Right now, the average billionaire wriggles their way into a measly 8 percent tax rate while a nurse or firefighter making $45,000 is paying a 22 percent tax on their wages.

How is that fair? Americans overwhelmingly believe it’s not. So it’s time to look to solutions that restore fairness to the tax code while still rewarding success. After all, that’s what our country is founded on: the idea that everyone has a chance to get ahead.

Luckily, there’s a solution that achieves both fairness and economic growth. It’s called mark to market. And here’s the kicker: there’s already a version of it in the tax code. That means we have the blueprint right in front of us to use as a model for mark-to-market provisions for billionaires. Put simply: mark-to-market would require billionaires to pay tax every year, just like everyone else.

Buy Borrow Die is the primary mechanism billionaires use to dodge taxes. And if left unchecked, you’re inviting more gaming into the system. Ending Buy Borrow Die is the best way to ensure billionaires pay their fair share.

Tax laws don’t apply to billionaires in the same way they do for everybody else. They’re optional where everybody else’s tax rules are mandatory. It’s time to close these loopholes and make sure those at the very top are paying taxes on their income as it’s earned, just like everybody else.

My team on the Finance Committee and I are fighting tax injustices from every angle. We’ve investigated crooked Swiss bankers hiding Americans’ income; $34 billion in unpaid taxes from millionaires; tax dodging schemes between Leon Black and Jeffrey Epstein; and Supreme Court Justice Clarence Thomas’s wealthy buddy secretly forgiving a massive, private loan.

Americans deserve a tax system that can be both fair and encourage success. My hope is that effort could be bipartisan. The invention of Roth IRAs – a Republican idea – has helped working Americans save for the future and get ahead. But now, the ultra-wealthy are abusing them to shield their vast fortunes from federal tax. It’s time to end this exploitation of current tax laws and use the funds to give more families a chance to get ahead by starting child savings accounts, something my colleague, Senator Bob Casey, has been working on for years.

I’ve laid out just a few of the endless ways the super-wealthy are avoiding paying their fair share, but here’s the real gut punch: it’s all perfectly legal. If that doesn’t make your blood boil, I don’t know what will.

The decks are stacked against working families. Wealth continues to build up in the hands of the fortunate few, leaving everyone else behind. Over one-third of families in America don’t have the cash on hand to pay for a $400 emergency if they had to.

Meanwhile, during the pandemic when families were forced to make tough choices between paying rent and buying groceries, billionaires increased their wealth by over one trillion dollars.

Bottom line: it’s time to throw out business as usual here.

I’ll close with this, there is growing support and demand for solutions that restore fairness to the tax code and level the playing field for working families. You can only have a successful economy if you have a tax code that treats everyone fairly.

It’s past time to close the gap between those at the top, and everyone else, and I look forward to working with my colleagues on the Committee to make it happen.

Crapo Statement At Hearing on How the Tax Code Affects High-Income Individuals

Washington, D.C.–U.S. Senator Mike Crapo (R-Idaho), Ranking Member of the U.S. Senate Finance Committee, delivered the following remarks at hearing entitled “Examining How the Tax Code Affects High-Income Individuals and Tax Planning Strategies.”

As prepared for delivery:

“Thank you, Mr. Chairman.

“I look forward to our discussion today on the effect of the Tax Code on individuals and families as they work, save and invest.

“The scope of today’s hearing provides members the opportunity to cover a broad range of topics, and we will no doubt hear a number of concerns raised about how the Code treats high-income taxpayers.

“We should dispel the notion that there is any support for taxpayers who evade their tax obligations; we all agree taxpayers should pay the tax they legally owe.

“For the gray area of taxpayers who aggressively structure their affairs to reduce their tax liability, we should constantly assess how the Code can better target certain activity.

“But framing this issue through the subjective lens of ‘fairness’ often ignores the facts and turns a blind eye to favored incentives.

“Rather than focusing on rhetoric, we should examine the data and how the Code affects behaviors.

“That includes examining provisions that primarily benefit a select group of the financially well-off – including tax credits for those who can afford expensive electric vehicles, costly energy efficient home upgrades, and proposals to repeal the cap or expand the highly-regressive deduction for State and Local Taxes.

“As for the data, these are the indisputable facts:

  • Most of the federal tax burden is paid by high earners;
  • Federal tax collections have been near all-time highs;
  • The voluntary tax compliance rate is high and stable; and
  • Higher income taxes serve as disincentives to work, save and invest.

“My Republican colleagues and I remain focused on safeguarding taxpayers and their rights; reducing barriers to work, savings and investment; and promoting opportunity and wealth to improve the quality of life for all Americans.

“In 2017, Republicans lowered individual rates across the board, with middle-income taxpayers getting the largest proportional benefits.

“Republicans also simplified filing for many, expanded the child tax credit and limited regressive tax spending like the SALT deduction.

“Critics charged that letting Americans keep more of their earnings would stifle the economy, dry up federal revenue and favor the wealthy.

“Instead, it created one of the strongest economies in our nation’s history, including an unemployment rate that reached a generational low, increased federal tax collections to near all-time highs, grew wages across the income spectrum and expanded job participation.

All Americans benefitted.

“Notwithstanding claims that high earners pay the least taxes, the reverse is actually true.

“According to the Biden Treasury Department, in 2023, the top 1 percent of earners paid 42.2 percent of all federal income taxes – the highest – despite only earning 19 percent of all income.

“In 2001, the top 1 percent of earners contributed 33.2 percent of income tax revenue, nine points lower.

“In other words, the country’s income tax burden is more progressive today than it was decades ago.

“Expanding the aperture to examine the top 5 percent of taxpayers – those with incomes above $200,000 a year – mirrors this dynamic.

“These Americans pay 65.3 percent of all federal income taxes while making only 34 percent of all income.

“Meanwhile, federal tax collections reached an all-time high of $4.9 trillion in FY 2022 – with individual income tax collections contributing the most, growing 29 percent year-over-year.

“In fact, individual income tax collections reached 10.5 percent of GDP in FY 2022, the highest level on record.

“All of this is after the impact of Republican-led tax reform.

“In arguing for tax code fairness, some have pointed to a recent tax gap projection from the IRS, which shows an increase over the previous estimate.

“This growth actually shows one of the many effects of inflation.

“Despite headlines to the contrary, the tax gap is proportionately flat and historically average relative to the economy’s size.

“According to the Cato Institute’s examination of the tax gap as a percentage of GDP, for 2021, that ratio was 2.9 percent, squarely in line with the twenty-year average.

“And the voluntary tax compliance rate – around 85 percent – remains substantially unchanged.

“While we should work to find bipartisan measures to narrow the tax gap, any such effort must not reduce economic growth.

“I look forward to hearing the perspectives of today’s witnesses on how the individual tax system affects taxpayers from all income groups and how increased taxes – in the midst of high and sustained inflation – would impact our economy.”

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1 comment on “Statements At Finance Committee Hearing Examining Tax Schemes Used by Ultra-Wealthy Americans”

  • The first step should be to allow the same tax amount deducted for personal exemptions. As it is, personal exemptions are deducted from income to determine taxes payable. This means that personal exemptions for someone taxed at 50% save him more money than someone taxed at 22%.

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