November 9, 2021
November 9, 2021
ProPublica this year released multiple exposés revealing how the nation’s wealthiest individuals and families avoid taxes on an unimaginable scale. Most recently, it uncovered Republican and Democratic elected officials and political appointees who used complex strategies to avoid taxes.
Richard Painter, a White House ethics lawyer under George W. Bush, said these revelations should be “troubling to voters” regardless of party affiliation. “They (politicians) have the power to decide how much the rest of us pay and the power to spend the money, and they’re not paying their fair share,” he told ProPublica.
Among the newest revelations from ProPublica are that Sen. Rick Scott (R-FL), West Virginia Gov. Jim Justice, and former U.S. Education Secretary Betsy DeVos have chosen to shield at least some of their fortunes from the estate tax using a scheme known as the grantor retained annuity trust (GRAT). Other notable individuals exploiting this loophole include former New York City Mayor Michael Bloomberg, billionaire political donor Charles Koch, and tech titan Mark Zuckerberg. ProPublica reports that the strategy has been used by more than half of the nation’s 100 richest individuals and a recent survey of 70 randomly selected S&P 500 companies revealed that more than half had executives and top shareholders who used GRATs.
The only thing worse than a tax cheat is a politician who is a tax cheat.
It’s time to shut this circus down.
Paying The Estate Tax Shouldn’t Be Optional for the Super Rich – ITEP https://t.co/2CSRrCIIvD
— Richard W. Painter (@RWPUSA) November 9, 2021
The estate tax—which is meant to apply when an extremely wealthy person dies and passes their assets on to their heirs—is an essential tool for curbing the accumulation of dynastic wealth across generations. This makes the tax important to both economic and racial justice. But under a GRAT, extremely wealthy people can place their assets into trusts designed to benefit their heirs, and much of the gains on those assets over time are never subject to estate or gift taxes. If this sounds like a major problem for the integrity of the estate tax, that’s because it is.
The GRAT is such a powerful and straightforward way to dodge the estate tax that lawyers who help their clients employ the strategy have referred to it as an “off-the-shelf solution” for tax-averse wealthy people. All told, the lawyer who pioneered the use of GRATs estimates that they sliced the estate and gift taxes by about one-third between 2000 and 2013, for a loss of about $100 billion in federal revenue over that period and billions more in states that levy estate taxes. With wealth inequality continuing to soar, that figure has surely ballooned even further since then. And GRATs are just one of many strategies that wealthy families are using to escape the estate tax. Tax attorney Robert Lord recently declared that the loopholes have gotten so out of hand that “the estate tax is entirely avoidable.”
A few short weeks ago, it appeared that this debacle might finally be nearing an end. The GRAT loophole was accidentally created by Congress more than 30 years ago, but a revenue proposal associated with the Build Back Better (BBB) plan that passed out of the House Ways & Means Committee in September would have taken long-overdue steps to weaken this loophole and other, related tax avoidance schemes. But those reforms have since been removed from the version of the BBB bill working its way through the U.S. House.
Unlike other tax and spending provisions that died a very public death at the hands of Sens. Joe Manchin and Krysten Sinema, estate tax reform appears to have been stripped out in backroom dealing that yielded a huge payoff for the nation’s billionaires. But the Senate still has an opportunity to add these reforms back into the package. Senate Budget Committee Chairman Bernie Sanders, for example, has championed estate tax loophole closure for years, and the case for leaving these loopholes intact is exceptionally weak.
This latest ProPublica expose revealing that prominent political leaders are exploiting loopholes speaks volumes about weaknesses in our political system. Ensuring that billionaires like Betsy Devos, Charles Koch, and Mark Zuckerberg cannot opt out of paying the estate tax is essential to putting the brakes on runaway wealth inequality and showing the American people that the federal government can fairly enforce the taxes that it already has on the books.