Much has been written about the growing gap between the rich and poor, but an investigative piece by the New York Times provides insight into one key element of the debate: how the very rich avoid taxes. The idea that billionaires pay lawyers to look for loopholes may seem obvious enough, but the story by Noam Scheiber and Patricia Cohen makes the case that the end result is far more pronounced than is widely known. "The effect has been to create a kind of private tax system, catering to only several thousand Americans," they write. The rich do so through a "sophisticated and astonishingly effective apparatus for shielding their fortunes"—routing money to Bermuda and back, say—that enlists attorneys, estate planners, and lobbyists in what some have come to call the "income defense industry."
One stat illustrates the effectiveness: The 400 highest-earning Americans paid 27% of their income in federal taxes two decades ago; by 2012, that figure had fallen to 17%, a bit more than a family earning $100,000 a year. The story makes clear that the uber-rich who take advantage of this system come from both the left (George Soros) and the right (hedge fund magnates such as Steven Cohen), and they're all putting up big money in the 2016 election. “There’s this notion that the wealthy use their money to buy politicians; more accurately, it’s that they can buy policy, and specifically, tax policy,” says Jared Bernstein, a former Biden adviser who is now a senior fellow at the Center on Budget and Policy Priorities. “That’s why these egregious loopholes exist, and why it’s so hard to close them.” (Click for the full story.)