Accordingto IRS data, almost $1trillion a year in adjusted gross income is NOT taxed for Social Security orMedicare, because the top one-percent's "investment income"isn't taxed for FICA. And half of that "investment" income is onlytaxed at 15% for "capital gains", not at the higher marginal rate of35% (and that doesn't include the billionsthat is lost every year due to tax evasion).
Medicare and Social Security taxes (FICA) are paid on "ordinary payrollwages" at 6.20% for Social Security (capped at $110,000) and 1.45% on allwages or salaries for Medicare. Most of us pay these taxes on 100% percent ofour regular hourly wages or salaries -- but most of the highest income earnersare exempt from these taxes altogether because of a tax loophole they've enjoyedsince 1965, including the $110,000 cap on Social Security.
They've also enjoyed thepreferential treatment of capital gains taxes for 91 years, since 1921.
But with ObamaCare®, this"investment" income may be subjected to Medicare taxes startingJanuary 1, 2013 if the law isn't struck down my the Supreme Court. And that'sanother reason why the GOP and the top 1% is so opposed to universalhealthcare...and because they don't need it for themselves (it has nothing to dowith "trampling on the Constitution").
But even with the present historically low tax rates (and the gobs ofloopholes they have in the U.S. Tax Code), will the wealthy still continue torenounce their U.S. citizenships to avoid paying Medicare taxes? Would MittRomney eventually renounce his U.S. citizenship if he loses the presidentialelection, and Obama raises his taxes when he passes the Buffett Rule?
One answer is: YES!
The Facebook co-founder has already renouncedhis U.S. citizenship before selling his stock to dodge a fortune in taxes onincome he was allowed to accumulate in the U.S. -- now he's jumping the shiplike a drowning rat.
From the New York Times by Bruce Bartlett: "On April 30, 2012 theTreasury Department announced that 461 Americans had renounced their citizenshipin the first quarter of 2012 (Here'sthe list) A 1996 law requires that every person doing so be named, withtheir names published in the Federal Register. The idea is to shame those whomay be renouncing their citizenship solely to escape taxation." (Readthe whole article here)
Even today, with our historically low tax rates, rich Americans are stillevading taxes by abandoning this country by renouncing their U.S. citizenships-- ever since a crackdown on tax evasion four years ago. The Financial Timeshas labeledthese people the "stateless and super rich". These uber-wealthyhave no interest in the notoriety of renunciation, they just live their lives asif they had no nation to call their own. “The more money you have,” explainsJeremy Davidson, a property consultant, “the more rootless you become becauseeverything is possible.”
With their vast wealth, these people want for nothing, are loyal to no one,and are not PatrioticMillionaires; but more like "traitors" to their country who usedtaxpayer-paid research and redevelopment to create personal wealth forthemselves, and then abandoned them and refused to give back to the community.
Wealthy people have been quitting their American citizenship for tax reasonsfor years. Billionaire John Dorrance III, the grandson of Campbell Soupsfounder John Dorrance, renouncedhis United States citizenship in the 1990s to avoid capital gains taxes --so did members of the Getty Family.
"Another positive is that investments in individual savings accounts andself-invested personal pensions will not draw scrutiny from the Internal RevenueService and remain tax-shelters," sayadvisers at London & Capital, the wealth management firm. Mitt Romneystill has many off-shore bank accounts, several in the Cayman Islands and inLuxembourg. He claims he closed his Swiss banks accounts and that he pays taxeson his other off-shore accounts (Nottrue, Mitt Romney is a tax dodger! Prove me wrong and release ALL your taxrecords!)
Renunciationsare higher in Switzerland because American expatriates expect extra scrutinyof their affairs after the UBS case and as the U.S. probes 11 other Swissfinancial firms for aiding offshore tax evasion, said Martin Naville, head ofthe Swiss-American Chamber of Commerce in Zurich.
NewYork Times: "Almost three years after UBS, Switzerland’s biggestbank, paid a $780 million fine for helping Americans evade taxes and agreed tohand over the names of more than 4,500 American account holders, the Swissbanking industry [still] refuses to exit the business of tax evasion."
Two years ago Senate Finance Committee Chairman Max Baucus had urged the IRSto be more vigilant in cracking down on tax evaders. (The Hill: IRSofficial urges additional action to curb offshore tax abuse). But since thattime, the millionaire-members of Congress have cut the budget to reduce the IRSauditors. (The Republicans would prefer to cut food stamps to make up thisshortfall in tax revenue while they continue to wage war on the unemployed bycutting unemployment benefits.)
Reuters- January 17, 2012 - There is "around $19 million of lost revenue annually for every senior corporate auditor position cut from the [IRS]payroll. Keep in mind, the IRS costs just a half penny for each dollar of taxcollected." So how much tax revenue is lost with an $11.8 billion budget cut?
The winners will be tax cheats among sole proprietors and other business owners such as hedge funds and private equity firms like Bain Capital, who are subject to less verification. The latest IRS tax gap report, issued Jan. 6,2012 estimates that just one percent of wages escapes tax, while 56 percent of “amounts subject to little or no” verification do so.
America’s biggest corporations, those with more than $250 million in assets, also may escape some tax if the IRS budget is cut. From 2005 to 2009, hours spent auditing the biggest corporations declined by 33 percent.
Two decades ago, when the economy was a third smaller, the IRS staff numbered about 118,000. Now it numbers 95,000 and is on the way to about 90,000. The likelihood of a big company being audited has plummeted 50 percentage points -- from 72 percent in 1990 to 22 percent in 2010.
IRS budget cuts worsen budget deficits and send a corrosive signal that only"chumps" file honest tax returns. Thirteen years ago the New York Times reported that "the poor were more likely than the rich to have their tax returns audited."IRS whistle-blowers have lost their jobs.
The GOP has been de-funding the IRS because they don't want the IRS to have enough funding to do their job.De-funding the government is a major goal of the GOP, and part of their bigger plan of"Starve theBeast".
Maybe we should draft these tax dodgers into the U.S. Army for punishment. Accordingto the U.S. State Department’s website: “Persons who wish to renounceU.S. citizenship should also be aware that the fact that a person has renouncedU.S. citizenship may have no effect whatsoever on his or her U.S. tax ormilitary service obligations.”
To President Obama: Would you consider signing an executive order brandingwealthy American citizens traitors for renouncing their U.S. citizenship tododge taxes, then freeze their U.S. assets and forbid them from returning tothis country - - - even for medical care? The super-rich Americans now havetheir own emergency rooms anyway. (See: WesleySnipes and other Rich and Famous Celebrity Tax Dodgers)
Yet the Republicans still insist, "We don't have a revenue problem"--- and they want to lower taxes on the top 1% even more, claiming they are all"job creators" like Paris Hilton. (I wish they would renounce theircitizenships!)
* Garry Davis, a World War II veteran and peace activist, renounced hisUnited States citizenship in 1948 in Paris in order to become a "citizen ofthe world". He created the first WorldPassport.
My Related Posts:
- Wesley Snipes and other Rich and Famous Celebrity Tax Dodgers
- $385 Billion a Year Lost to Tax Evasion
- Mitt Romney: Lobbyists, Special Tax Rates & Tax Evasion
- GOP Claims Tax Evasion as Excuse to Cut Taxes
- How Mitt Romney & the 1% Evades Taxes
- How Corporate Tax Dodgers Hoarded $2 Trillion
- How CEOs are Rewarded for Fraud
Tweet to: @SenSanders @RBReich @NYTimeskrugman @edshow @samsteinhp@VanJones68
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