In the wake of ProPublica’s recent disclosure of how billionaires avoid income taxes, a narrative has been manufactured: We are told that while the moguls’ schemes to reduce tax liability may be immoral, the tactics are all “perfectly legal,” in the words of ProPublica, an idea that was then echoed by the Associated Press, the New York Times, and the pundit world.
This conventional wisdom — depicted as unquestionable fact throughout corporate media — is held up as don’t-hate-the-player-hate-the-game proof that we should be angry only at the tax system, but not necessarily at the oligarchs getting rich off it. In fact, the only person so far presumed to be worthy of any law enforcement scrutiny is not any of the billionaires avoiding taxes, but the whistleblowing source of the IRS leak.
But ask yourself: Why does anyone make such charitable assumptions about the supposed legality of billionaires’ tax tactics? Such assumptions, in fact, reflect deep bias and privilege by the people making them.
Let’s stipulate that much of what is legal — tax loopholes, deductions, and other shady schemes — is a huge, scandalous problem.
Let’s also acknowledge that billionaires have armies of lawyers and accountants to devise tax circumvention schemes that adhere to the letter (though not the spirit) of the law, allowing them to pay a pittance in taxes compared to the riches they’re reaping, as ProPublica documented.
And it is absolutely true that so far, no evidence has been presented showing that any of the specific billionaires in ProPublica’s report violated America’s tax statutes.
However, an appropriate legal presumption of innocence is a far cry from what’s happening here. Over the last few weeks, we have witnessed a blanket assumption that billionaires would never even attempt to stretch or violate the rules. We are led to believe that when it comes to taxes, what tycoons, aristocrats, scions, and Masters of the Universe do is not merely permissible, but perfectly legal — as in the rules are not merely followed, but deeply respected.
It is a familiar benefit of the doubt: Billionaires may give a lot of cash to politicians, but they are hardly ever reported on as if they are explicitly corrupt. They may leverage their philanthropic empires to boost their business interests, but they are almost never depicted as crooked. They may pay a lower tax rate than everyone else, but they are rarely depicted by the media as outright scofflaws. Instead, we get a lot of talk about this being “just the way things work.”
Please understand that I am not accusing Jeff Bezos, Elon Musk, Warren Buffett, or anyone else of actually committing crimes — if I was, an army of attorneys and PR flacks would already be knocking down the Daily Poster’s door.
I am simply pointing out that in the same political arena where the indigent are regularly tried and convicted in the press, few are daring to even consider that anything slightly shady might go down on billionaires’ tax returns. Few are daring to ask how many of these schemes existed in the gray area between legal tax avoidance and impermissible tax evasion. Even fewer are suggesting the findings should prompt any kind of government probe of sophisticated tax shelters and circumvention tactics.
This is akin to Leslie Nielsen in The Naked Gun saying “nothing to see here, please disperse” in front of a burning building, only it’s even more ridiculous. It is as if a news outlet released video of the Bellagio caper, and then every Nevada politician and Vegas reporter rushed out to insist that we shouldn’t even investigate the possibility that Danny Ocean’s eleven-man crew could have ever broken any laws.
It is a presumption of innocence never afforded to poor people accused of petty theft — a presumption that very rich people couldn’t possibly be as uncouth as to knowingly break the law in service of self-enrichment.
And what’s striking is how this presumption runs up against ample evidence that America’s tax laws — even as weak as they are — are actually being systematically flouted by the wealthy.
A Tax Crime Spree
In the last decade, high-profile cases have spotlighted a veritable white-collar crime wave among the wealthy — and in the inimitable words of Big Lebowski’s Walter Sobchak, much of what’s been going on ain’t legal, either.
For instance, after using a one-time gift of free tuition to generate positive headlines for himself, Vista Equity Partners billionaire Robert Smith last year settled a massive criminal case over tax evasion.
Similarly, UBS, Credit Suisse, HSBC, and KPMG have paid fines to settle Justice Department cases uncovering their roles in rampant tax evasion — and in the process some of them have confessed to criminal wrongdoing. These schemes were not isolated incidents: As prosecutors noted in the emblematic Credit Suisse case, the bank “knowingly and willfully aided and assisted thousands of U.S. clients in opening and maintaining undeclared accounts and concealing their offshore assets and income from the IRS.”
These cases provide important context for three reports over the last year showing the scope of what can be accurately labeled a full-scale tax crime spree that has unfolded in the lead up to the leak of tax records to ProPublica.
The first analysis, which came from the Congressional Budget Office, showed that roughly $380 billion of owed taxes goes unpaid every year.
Then came a report from Harvard University researchers showing that about three quarters of that tax gap is from underpayment by the wealthiest 1 percent.
And then came a study from the Center for Equitable Growth finding that more than one-fifth of the top 1 percent’s income is going unreported to tax authorities.
The takeaway: The richest 1.6 million households are pilfering somewhere between $175 billion and a quarter trillion dollars of owed-but-unpaid taxes every single year — and they are apparently breaking the law to do it.
“Rich People Hire Good Accountants”
In light of this, why does a leak like ProPublica’s still somehow prompt a societal presumption of innocence? It is one thing to benefit from such a presumption in a court of law, which everyone deserves. But why on a cultural level — in the public imagination — are we led to just assume that magnates must be following all the rules when they avoid paying billions in taxes?
Two words: Class bias. And it comes from both government and media.
For decades, public officials have beaten the tough-on-crime drum at the working class, while actively helping the wealthy cheat the system — a message insinuating that moguls’ plots to bilk the country must all be permissible under the law.
George W. Bush slashed the IRS units that audit the wealthy, then declared that “most people in America understand that the rich people hire good accountants and figure out how not to necessarily pay all the taxes” — expecting everyone to be too dumb to realize the connection between the IRS cuts and the tax theft.
It’s the same dynamic inside the law enforcement agencies: In the most recent tax evasion cases, billionaire Robert Smith was granted a non-prosecution agreement, giving his firm necessary cover to continue managing workers’ pension money. The banks and accounting firms in the aforementioned tax evasion cases were given deferred prosecution agreements. Both Credit Suisse and UBS were granted government waivers from laws that could have barred them from managing retirees’ money.
These get-out-of-jail-free cards were all microcosmic examples of the larger class bias: The IRS now audits low-income beneficiaries of the Earned Income Tax Credit at twice the rate as it audits corporations, the IRS audit rate for those making more than $1 million has plummeted, and the agency has been referring a record low amount of cases for criminal prosecution, according to the most recent data.
The bias is clear: In a nation where white-collar crime is almost never prosecuted, crime is seen by the government as something that only poor people do. Through this lens, aristocrats’ larceny is presumed to be just shrewd accounting rather than lawbreaking.
This perception is reinforced by a press corps operating with its own class concerns. News outlets quick to convict the poor via sensational headlines are hesitant to do the same to billionaires who can weaponize media law — and who bankroll the political and media ecosystem itself.
Those billionaires are the owners of television stations and newspapers. They are the benefactors of think tanks and universities who employ the pundit class. They pay talking heads for speeches. They can take matters to court with unlimited resources, bankrupting media outlets that cross them. They are the donors who bankroll the politicians around which news revolves — the political fundraisers who get themselves legislative favors and then hold wine-cave galas with congressional leaders and presidential candidates.
The superrich, in short, provide the financial manna on which the political and media class relies for survival. And so between their style-section puff pieces and their glossy magazine profiles, billionaires may occasionally be portrayed as a bit too powerful and greedy — but they are rarely depicted in ways that might allow an audience to consider the possibility that they are robber barons, oligarchs, or straight-up criminals, even when they are driving getaway cars full of moolah. They’re only villains in movies.
This is not an argument for a reflexive presumption of billionaire guilt. It is instead a case for recognizing the deep ideological programming at work.
ProPublica’s tax revelations certainly spotlight the need for lawmakers to fix a rigged tax system and for Congress to beef up IRS enforcement for the long haul. But they also illustrate the need for law enforcement officials to investigate the elaborate tax schemes that billionaires are using to enrich themselves in the here and now. After all, this is a whodunit unfolding inside a larger tax crime spree, and there is a smoking gun of IRS records showing billionaires squirreling away piles of cash.
Beholding that kind of looting, and then simply declaring that everything must be “perfectly legal” before a probe ever happens doesn’t make a lot of sense.
If this were a TV police procedural, the audience would see that misdirect for what it is: a cover-up.