CLOSED SYSTEM

Posted in Quick Hits on December 18th, 2013 by Ed

One of the more puzzling aspects of our economic betters' obsession with tax policy is the reality that, in practice, they're not paying much in taxes. The rates are largely irrelevant. They matter to some extent to you and I, but to the moneyed class it is the equivalent of the "recommended servings" on a bag of chips. Much as how everything is single serving if you're sad enough, the effective tax rate is always under 10% if you're rich enough.

This is the reason that America can have simultaneously the highest corporate tax rate in the world and multibillion dollar corporations that pay a couple hundred bucks in taxes during a profitable year. It also explains how Mitt Romney can pay something like 15% on his annual income that runs into eight figures. There are dozens of obvious loopholes in the system and creative lawyers, accountants, and financial planners are coming up with new ones every day. Check out this Bloomberg article detailing a neat trick, pioneered by the Waltons, that Sheldon "I'm so rich I can piss $150 million away on Newt Gingrich" Adelson is using to skirt hundreds of millions in taxes.

Look at the graphic and explain to me in what way this is different than money laundering. I'll wait.