Doing the Tax Dodge Tap Dance

Doing the tax dodge tap dance is complicated, requiring sophisticated techniques and tricky maneuvers.

Sen. Russell Long, the powerful Senate Finance Committee chair from 1966 to 1981 from the great state of Louisiana, liked to recite a little jingle highlighting the thorny political process of tax dodge reform: “Don’t tax you. Don’t tax me. Tax that man behind the tree.”

Yes, let’s do just that! Today, our nominee for “that man behind the tree” is the superrich — the 0.1%. Over the past 40 years or so, these plutocratic elites have used their political clout to create a radical level of wealth inequality that is tearing our country apart. The gap has become a chasm, separating the lavish fortunes of a privileged few from the well-being of the many. Currently, this small fraction of our country now owns the same amount of wealth as the bottom 90% of our country — a statistic that has not been seen in our country since prior to World War II. This wealth gap is antithetical to our people’s democratic ideals, fundamentally unjust and socially destructive — in a word, un-American.

In large part, the fortunate few have amassed and expanded their vast fortunes by hiding in the forest of tax policies that let them avoid paying their fair share. Of course, doing the tax dodge tap dance is complicated, requiring sophisticated techniques and tricky maneuvers perpetrated by a large but secretive industry of pricy tax lawyers, lobbyists, wealth managers and other fixers to exploit special exemptions, convoluted loopholes and arcane breaks. This avoidance industry also provides uberrich clients with a wide selection of underground channels ranging from exotic offshore tax shelters to the ultimate dodge: renouncing U.S. citizenship.

For a lesson on how to tap-dance around one’s tax obligation, follow the lead of Jared Kushner, President Donald Trump’s son-in-law and White House senior adviser. A 2018 New York Times investigation reveals that a few years prior to becoming a Trump operative, Kushner and his family’s real estate corporation spent billions buying up properties, quintupling Kushner’s net worth to almost $324 million. Yet, according to financial documents, the lucky lad appears to have paid little or no federal income tax from 2009 through 2016!

Why? Largely because a special tax break allows big-time developers to take depreciation deductions for losses caused by wear and tear on their properties. But — watch the fancy footwork here — various buildings owned by Kushner appear to have suffered no actual losses and, in fact, have likely increased in value. The trick is that the depreciation provision assumes such properties decline in value every year, even when they clearly do not.

Then came a spectacular buck-and-wing dance move: The law allows developers themselves to calculate depreciation — and the IRS almost never audits those claims. In 2015, for example, Kushner pocketed $1.7 million in income but claimed $8.3 million in losses from “significant depreciation” in his real estate holdings. Another break allows developers to dodge capital gains taxes when they make a profit selling property. That income, if used within a short time to buy other properties, is not taxed. So — voila! — tax law subsidizes them to accumulate yet more wealth and do the tax-dodge dance on an even bigger scale. The Times found that this break helped the Kushners profit from more than $2 billion in real estate sales yet helped Jared Kushner avoid taxes on that income.

Once ensconced in the White House, Kushner promptly helped his daddy-in-law pass a big package of new corporate tax breaks. Surprisingly, there were real reforms that eliminated some of the capital gains flimflam from which both he and Trump had long profited. Unsurprisingly, the Kushner-Trump “reform” included an exception that allows one particular business group to keep profiting from the flimflam: real estate developers.

And that, children, is how the rich become superrich.

Jim Hightower