How the Wealthiest Americans Play the Tax Game

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Brian Lehrer: It's the Brian Lehrer Show on WNYC, good Monday morning, everyone. If you've been listening to the station over the last couple of days, you know that many people today are acknowledging the 50th anniversary of the publication of the Pentagon Papers which lifted the veil on US Government secrets about the Vietnam War, and helped lead to the resignation of Richard Nixon, right? There were multiple segments on the station yesterday and today about that history, but we've got a fresh one for you. Not a new set of Pentagon Papers, it's not about the military. Instead, it's an article called The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Taxes.

Now, maybe you've heard a little about this already, three ProPublica reporters analyzed over 15 years of tax returns from the richest Americans like Warren Buffett, Bill Gates, Mark Zuckerberg, Elon Musk, and many more. In addition to just income and taxes, these records showed investments, audits, and debts. What did they find out? Well, the obtained records showed that American business moguls who have managed to exponentially grow their wealth throughout the years pay little, and even in some cases, zero income taxes.

Now, that may sound like something you already knew or at least suspected, but one interesting thing about the report is it alleges that the ultra-wealthy are able to avoid paying taxes on most years legally, and without even any need for offshore accounts or secret holdings. What does this say about our tax code and the unequal treatment built into it, or should we all really just be taking notes so we can do this ourselves? Just kidding. What does it say about the rest of us? Are we paying a high percentage of our income in taxes? A higher percentage than some of the world's richest people, and is that fair? Are we the 99.9% subsidizing the means for these ultra-wealthy Americans to live extravagant lives? Does our government need to do a serious reexamination of our tax code itself?

Joining us now, Jesse Eisinger, senior reporter and editor at ProPublica. Hi, Jesse, welcome back to WNYC. Thank you for doing this with us.

Jesse Eisinger: Hey, Brian. Happy to be back.

Brian Lehrer: Listeners, we'll open up the phones right away. Did you catch the ProPublica report already? What were your thoughts and reactions? Maybe we have some CPAs or tax lawyers listening. Should the Biden administration re-address the current US tax code? What would you suggest they change to address inequality within the system at this level? 646-435-7280. Maybe you've been thinking about this just recently with the late tax filing deadline this year of May 15th, so just a few weeks in the rearview mirror. 646-435-7280 with stories or questions.

So, Jesse, you and your co-authors compare how much the ultra-wealthy pay in taxes, comparing that to their gain in wealth. Why do you use that measure instead of just simply looking at income and rates?

Jesse Eisinger: Right, it's a good question. The conventional way to do this would be to measure taxes compared to income, and in fact, we do do this in a companion team, and we show that billionaires have a much lower effective tax rate in the conventional way than wealthy people or even a single person making $45,000 a year. That itself is a blockbuster finding and very interesting, but we thought that it was much more interesting that in fact, the data demonstrates that the ultra-wealthy are outside of the taxes system, almost entirely.

That we have a system where people make money, they get salaries and the taxes get extracted from their salaries, and the wealthy don't. Their income is essentially optional. It's voluntary. They decide when to take it and how much to take, and then they reduce the taxes on that small amount of income, but they're really outside of the system, and so we thought that the better measure was taxes compared to their wealth growth.

Brian Lehrer: Their income is optional, you said. They decide what to take of the money that they're actually taking, or not, for tax purposes. The strategy that some of these ultra-wealthy folks use is framed in your piece as Buy, Borrow, and Die. Can you break down each one of those?

Jesse Eisinger: Yes, sure, happy to. It's weird, it's hard to get your mind around it if you're a normal human being, as I say, who's in the tax system has to work to live as I do, as you do, as most listeners do. Buy, Borrow, Die is the way that some super-wealthy approach their wealth and how they live. What it is, is that you buy or build or inherit your assets, so you're either Elon Musk or Jeff Bezos, or you're somebody like, I don't know, Jamie Diamond, who hasn't built JP Morgan but inherits the position and comes in. Or, you literally inherit like the Waltons or the Mars family, and you've got a great fortune.

Then what you do instead of selling your stock or selling your assets and getting money from that sale, you can borrow against the assets. Why would you borrow against the assets? Well, if you sell, you have to pay some capital gains tax. Or, if you got the equivalent amount in salary, you'd have to pay a top marginal rate of 37% today. Instead, you're borrowing its single-digit rates, so it's a much better deal for you. Plus you get to hold on to your company this whole time, hold on to control, and you can keep rolling and rolling and rolling over the debt for a very long time. You defer any sale and you increase your wealth, and it compounds. Especially if the company is growing like Amazon or Tesla.

Then, by the end of your life, there are a bunch of advantages that you can take to avoid or reduce estate taxes. Estate tax is the last kind of licks that the US Government has on you, and you're supposed to be taxed at 40%. In fact, tax avoidance strategies for the estate tax, after death, and even right before death, are myriad and available for the ultra-wealthy and so they're really not touched in substantial ways by the estate tax. You can get through having an enormous fortune that basically never is taxed.

Brian Lehrer: According to the article, no one among the 25 wealthiest avoided as much tax as Warren Buffett, the grandfatherly centibillionaire. Now that's a word many people have never heard before. What's a centibillionaire?

Jesse Eisinger: Yes, it's a word that we haven't had much in society because we haven't had these kinds of fortunes before, but that somebody was worth over $100 million. Excuse me, a $100 billion, with a B. I actually was-- someone corrected my grammar there that I should've said 'hecto-billionaire', that we use the greek for-

Brian Lehrer: For 100.

Jesse Eisinger: -for 100 in that situation, but I like the sound of centibillionaire. The point with Buffett is that no one takes as little income relative to his wealth and his wealth growth as Warren Buffett. He takes very, very little income, and then he's taxed relatively low rates on that very small income. Well, it's very enormous income for you and me, but it's relatively small for a person of his means and wealth. He has talked rather famously about having a low tax rate compared to the average person, compared to his secretary.

In fact, when he talks about that, he's talking about his income tax rates. The income tax rates, both capital gains rates and salary rates, the top marginal rate, are basically irrelevant for him. He's talking about something that even if those rates were to go up, it would be essentially a rounding error for him. What we wanted to bring home is that discussion of tax rates in the current tax structure are almost irrelevant for the ultra ultra-wealthy.

Brian Lehrer: In the case of Warren Buffett, when you mentioned him and his secretary, it probably reminds a lot of people that, "Wait, isn't Warren Buffett considered a progressive on these issues?" Because he's out there, with things like the Buffett Rule and saying, "It's not fair that I would pay a lower income tax rate than my secretary."

Jesse Eisinger: Yes, it's a very complicated picture with Buffett. It's to his credit that he's raised these questions and complaints about our tax system. One of the things that he points out is that taxes on capital, like when you sell a stock, you get a capital gain and that's taxed, and that has favorable tax status compared to salaries. Those of us who don't have capital gains are in the salary structure, we're paying higher rates than the people who sell.

What we wanted to point out, and my colleagues, Paul Kiel and Jeff Ernsthausen worked on this story with me and extraordinary reporters. What we wanted to point out is somebody like Warren Buffet, he talks about his rates on taxable income and the taxable income that he has are minuscule compared to his overall wealth. When you talk about his overall wealth, what he's really doing is he's paying, now compare this to an average person, a typical person making $60,000 or $70,000, they're paying $14 of that to the government in federal income taxes.

When you talk about, Warren Buffett compared to his wealth growth, it's a different comparison but it's effectively what his income is, his wealth growth for the ultra-wealthy, wealth growth is like income. He's paying 10 cents for every $100. $14 to $100 and Buffet has 10 cents for $100.

Brian Lehrer: I think we have a CPA calling in, so let's take his call first. David, you're on WNYC with Jesse Eisinger from ProPublica. Hi, David.

David: Hey, Jesse. Hey, everyone. I just wanted to provide one snippet of information. The reporting is fantastic but it is only one page of a book in terms of their overall life and tax strategies. It worries me that narrative of the conversation, just looking at one year when there's a lot more that may go on, and Jesse's also making fantastic points. I think touching the recognition of income and wealth is wrought with a lot of difficulty, but that capture on death and estate tax is really what needs to be addressed. Because I don't believe billionaire make great wealth, but as children and offspring, do they really create wealth, and what are the rights around somebody inheriting without having moving dirt and doing work on that?

Brian Lehrer: David, thank you. All right. Let's take the estate tax piece of this, you want to give us a little deeper dive, Jesse?

Jesse Eisinger: Yes, sure. He's absolutely right that the estate tax is a big part of it, what we wanted to show was that these great fortunes can compound and grow extraordinary amounts in life itself and that current tax reform discussions of taxing the wealthy don't touch people in life. The estate tax is avoided in a few ways. The basic structure is that, well, there are two things that are going on. One is that if you have capital gains, the moment you die, those are ignored for the purposes of taxes. If you have have a stock and you bought it at $10 and it goes up to $110, you've got $100 of gain.

Brian Lehrer: Untaxed.

Jesse Eisinger: If you sold that today-- Excuse me?

Brian Lehrer: I'm sorry, go ahead.

Jesse Eisinger: $100 of gain and that gets taxed at $20. $20 gets taken out. Then if you die tomorrow and you give that to your children, they pay zero capital gains tax on that. They get it at $110 and the gain is wiped out and taxpayers lose out on that tax, so that's one thing, that's called the step-up in basis. Then the second thing is that you have an estate tax and the state should be taxed on that, but there are lots and lots of ways to reduce that. Charitable giving, you wipe out your debt. All that borrowing that we talked about before, borrowing to fund your lifestyle and borrowing to fund your business, that actually helps you in the estate tax because it takes away from the amount that's leftover to get taxed.

Then there are arcane sorts of complicated trusts that you can put money into to avoid gift and estate tax. Somebody like Sheldon Adelson, the late casino magnate, he put in billions and billions of dollars into these trusts. They're like loopholes, but they're legal loopholes aggressive that are ways to avoid the estate tax. It is evaded. The issue is that we don't really know how much is evaded or avoided from the estate tax because there's so little data on it. The IRS has very little data on it, scholars have struggled to estimate it, and so that's really one of the black holes of the entire tax world.

Brian Lehrer: The part of that that you just said that was new to me and so it might be new to a lot of people is, even though we know this estate tax debate goes on in politics all the time, and the one side mostly represented by Republicans says, wait, I have this money and I die, I can't just leave my money to my kids without the government taking a bite out of it? I already paid whatever taxes I legally owed, presumably, during the course of my lifetime, so why can't I just pass my money to my kids or whoever when I die? That's the one side of the argument.

The other side of the argument is, it's new income for the kids or whoever else the heirs are, then they should be taxed on it as new income. That's the usual debate. What you just revealed is that capital gains, which you're not taxed on until you take them out, take those gains out of the stock, for example, not taxed during your lifetime, then they never get taxed because they get passed onto your heirs under the estate tax laws without the tax being taken out. Did I understand you about that? Because that's, really dramatic.

Jesse Eisinger: That's exactly right. That's exactly right and actually, the Biden administration has proposed closing this. it's called step-up in basis or stepped-up basis. It's widely regarded as a flaw and an unintended consequence of the tax code. It's about 100 years old and it was a law designed for a different solution in different regime and not anticipated to be used this way. There are a lot of critics of this and but it is a cherished giant loophole that is very, very valuable for a select few people. You can imagine that there's going to be an extraordinary fight if the Biden administration presses forward with trying to actually get it rescinded.

Brian Lehrer: Even if the heirs after having inherited those stocks, let's say, with capital gains, if they then take the capital gains to spend that money, they're not taxed on it because it passed tax-free in that respect?

Jesse Eisinger: If they sold it right there, in my example, at $110, they wouldn't have any gain on it because it transferred to them at $110. If it went up to $115, they would have to pay capital gains on the new $5 of gains. What they do is it gets to be counted as if they bought it at the new existing level and everything else, all the past, all the history is wiped out.

Brian Lehrer: My guest if you're just joining us is Jesse Eisinger, Senior Reporter and Editor at ProPublica. Their groundbreaking investigation released in the last few days, The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Taxes. Eric in Red Bank, you're on WNYC with Jesse Eisinger. Hi, Eric.

Eric: Good morning, Brian, and good morning, Jesse. Thanks so much for doing this reporting. I was fascinated to read at least part one of it last week. I was hoping you could clarify something and see if I've got it right, and it has to do with that revolving line of credit that a lot of the ultra-wealthy use to fund their lifestyle. If they don't want to draw a salary and pay taxes on that, if they don't want to sell assets and pay capital gains on that, they can just get a line of credit from a creditor.

My question is, how then does that credit ever come due, and when it does come due, do they then have to sell an asset or draw a salary and then pay that tax amount in order to pay back the creditors? Or, and I think this is what you were saying before, do they simply continue to roll it over, roll it over, roll it over, and when they die, it becomes like a loss and then it actually offsets any tax liability they would have after death? Is that right? I'll take my answer off the air.

Jesse Eisinger: It's a good question. There's a variety of techniques, so there's not just one technique, and not all ultra-wealthy people borrow, and not all ultra-wealthy people borrow in the same way. You can borrow both to fund your lifestyle. Larry Ellison has disclosed that he's had a $10 billion credit line at one point and of course, he's had many, many houses and mansions, and he's got a giant estate that's designed like a Japanese feudal medieval village, and he has an entire Hawaiian island.

Then Jeff Bezos is building a half a billion-dollar yacht. Then there are other people like Carl Icahn who borrows and it's actually part of his business and it amplifies his investing returns and then he writes off the interest costs on his taxes, where essentially taxpayers are supplementing his speculation and his improved returns. The question is then what happens to the borrowing?

Many times you can keep rolling it, rolling it, rolling it over, paying minor small parts of interests, sometimes not even interest at all. The interest gets rolled into the amount and then often, it gets settled up at death, after death in the estate. There's really often no paying back, but sometimes you can pay it back. If you paid it back late in life or after a few years, you've gotten the benefit of all that deferred accumulation of wealth, all that compounding that's worked for you. It's enormously advantageous even if you pay it back after a few years.

Brian Lehrer: Jesse, people must be reading your Secret IRS Files article because our phones are jammed. We'll continue in a minute with more callers and a question from Twitter, somebody wrote, "Regarding the ProPublica study, how does the US tax code compare to other countries? Are we an anomaly?" We'll answer that in more when we continue

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Brian Lehrer: We continue with Jesse Eisinger from ProPublica on their series, The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Taxes. I mentioned that tweet, Jesse, that came in. Listener David writes, "Regarding the ProPublica study, how does the US tax code compare to other countries? Are we an anomaly?" I think a caller, Marty in Yorkville, wants to elaborate on that question. Marty, you're on WNYC. Thank you for calling in.

Marty: Good morning, Brian, and good morning to your guest. What I want to say that all the country has the same issue. No country I know, at least part of the OACD, that taxes unrealized profit. There is absolutely no solution. The only thing that the US government can do which all of them do is tax long-term and short-term profit at the same rate. That means that give little incentive for someone to leave their profit going on and on and on forever. Because one day we're going to have a real sustainability.

Brian Lehrer: Marty, thank you very much. I think we're not ready to accept his conclusion that there is no solution, but how would you compare the US to other countries in these respects, Jesse?

Jesse Eisinger: Well, it's funny, there is a country, a well-developed Western country, and most people in the country who have wealth, are-- and it's illiquid wealth, so they can't really trade it very easily. It's hard to assess from a day-to-day basis what it is and it's taxed. This is the form of wealth that most people in this country have and it's taxed. The country that I'm talking about is called the United States and what I'm talking about is property taxes. In fact, the vast majority of Americans, if they have wealth at all, they have wealth in their homes and their homes actually are taxed on an annual basis at the local level. These are, as I say, illiquid assets and hard-to-value assets, but they're assessed. The existence of wealth tax basically exists in this country.

Now, the other thing I would say is that there are wealth taxes in other countries. Wealth taxes have not been particularly successful for a wide variety of reasons. France abandoned one relatively recently. Switzerland actually has a wealth tax and it works pretty well. It's pretty modest and they don't have capital gains taxes. There aren't tax regimes that focus solely on unrealized gains, but the United States has a lot of influence, a lot of power and it could do these things. It's not like taxing unrealized gains was prohibited by the Constitution. It was not sent down written in stone from Mount Sinai. It's only about 100 years old, our tax regime and there's nothing fixed about it.

Brian Lehrer: It's interesting that you bring up property taxes, which of course are local, not federal. I have said before that if I could propose one progressive amendment to the United States Constitution, it might be that no state shall use property taxes as the determination of education funding. Because we see the inequality in that all over the place. If you're wealthy and you live in a wealthy neighborhood and therefore you can contribute a lot in property taxes without dinging your lifestyle too much, then your local school system is flush.

If you're a lower-income person living among other lower-income people and school funding is based on property taxes, which it is in so, so many places around the country, then there's that inequality in education funding. Then yes, states do different things to try to compensate for it and all of that, but it starts with this fundamental inequality almost everywhere, and property taxes are outside the federal system, so they don't get the kind of scrutiny, even though everybody in local elections like in New Jersey, for example, are always complaining about property taxes, but not much ever seems to get done.

Jesse Eisinger: I agree that there are a lot of inherent flaws in the existing property tech system and you could allocate money for education in a much different way or solve for desegregation and inequities in the education system in some other way. I was just making one point about property taxes, which is that they're the equivalent of a wealth tax for the average person while the ultra-wealthy do not have either really effective income taxes or any wealth tax to speak of.

Brian Lehrer: Exactly, and if you're not going to fund education, to my point, with property taxes primarily, then you need to have more of an income tax space in each state in order to do that with sufficient funding. Then you get back to the influence of wealthier people who try to keep their income tax rates down, et cetera, et cetera, et cetera, down that rabbit hole. Brad in Gramercy Park, you're on WNYC. Hi, Brad.

Brad: Hi, guys. I think the biggest flaw in the tax system right now is the fact that when there are six tax brackets between $1 when it comes to couples, and $629,000. Above $629,000, there's one tax bracket that's 37% whether you make $1 million, $100 million, or $1 billion. Why don't people speak more about more tax brackets above the 37% bracket of $629,000 on a married couple?

Brian Lehrer: Do you know the answer to that one, Jesse?

Jesse Eisinger: Well, what we were trying to point out with our story is that discussion of tax brackets, which really dominates our political conversation, and you almost hear that to the exclusion of everything else, Biden is proposing increase of the top marginal tax rate from 37% to 39.6%. Sometimes people talk about capital gains rates as well. What we are trying to say is that because these people are outside of the tax system, the ultra-wealthy are outside of the tax system so completely that top marginal tax rates are basically irrelevant for them. Jeff Bezos earns an $80,000 middle-class salary as the CEO of Amazon. The [unintelligible 00:29:08] page [inaudible 00:29:09]

Brian Lehrer: Really $80,000? That's his official salary? What a sham.

Jesse Eisinger: I'm sure you've heard of CEOs taking a $1 salary, Steve Jobs, Larry Page, Mark Zuckerberg, Sergey Brin, they ostentatiously do that. This isn't the self-sacrifice that it seems, or shared solidarity with their workers, it's because salaries are taxed at the highest marginal rates for those guys because they'd be making so much money and so they avoid that tax by getting very little in salary.

You could reform the system. There are people who make a million dollars. The top 001% starts at about $70 million. You could taxed that more. There are people who have high income and some hedge fund managers and Michael Bloomberg. Michael Bloomberg makes $2 billion a year but they have other tax avoidance, tax minimization strategies to play with so that you don't need to pity them for having to pay a lot of taxes. The top marginal tax rate is not particularly relevant for the ultra-wealthy.

Brian Lehrer: I'm so glad you pointed that out and you brought that up twice now in this conversation because it is so much of what we hear in the news coverage of the tax debate in Washington, it's should the top rate be 37%? Should it be 31% similar with the corporate income tax, and yet it misses these gigantic loopholes that aren't even in that system.

One example from your article. I'll just read from your article, and people may have their eyes bug out at this one. "In 2011, a year in which his wealth held roughly steady at $18 billion, Jeff Bezos filed a tax return reporting that he lost money. His income that year was more than offset by investment losses. What's more, because according to the tax law, he made so little, he even claimed and received a $4,000 tax credit for his children." Wow.

Jesse Eisinger: [laughs] Every little bit helps, Brian.

Brian Lehrer: Dean in Manhattan, you're on WNYC. Hi, Dean.

Dean: Yes, thank you, Brian, for a wonderful program. I listen to you every day.

Brian Lehrer: Thank you.

Dean: I just have a pretty general question on reading the Times article that somebody who made $25,000 could be audited and that was more likely than the wealthy would be audited. I guess they're very underfunded, but I wonder if your guest has any solution at all, any past to correcting this when people really get a sense of how much injustice is in play here.

Brian Lehrer: Dean, thank you very much. On that question of who gets audited, this whole investigation of yours, Jesse, at ProPublica that we're talking about, I know grew out of your previous investigation that was called Gutting the IRS, right?

Jesse Eisinger: Yes, exactly. In fact, that was our article, Paul Kiel and my article about how you were more likely to be audited if you are a working poor person in America than you were making $400,000 or $500,000 a year. That's because we audit, in this country, people getting the earned income tax credit at higher rates than we do the affluent. The ultra-wealthy are still audited a little bit higher, but those rates have been collapsing and we've been stripping the IRS's budget for about a decade now and tens of thousands of employees have left and we have fewer auditors now. Actually, the actual amount of auditors are fewer than they were at any time since the 1950s when the economy was a seventh of the size it is today.

That is an extraordinary problem is that we don't have tax police on the job anymore. The Biden administration has proposed a substantial increase for the IRS and an increase for the kinds of things that they would need to do, the specialty jobs that they would need to have to audit the super-wealthy because the super-wealthy have much, much more complicated taxes than the rest of us. This is a reclamation project that can't be done in a year, can't be done in two years, and can't be done with a modest amount of money. It's tens of billions of dollars I think, and it would take many, many years. We'll see if that also can get passed. People don't want to give the IRS more power, especially Republicans.

Brian Lehrer: What are the main policy solutions to make sure that the wealthiest of the wealthy do actually get taxed on what is income even though it doesn't count under the income tax code?

Jesse Eisinger: Well, there aren't really solutions in the code today because as we are at pains to explain in the story, this is all entirely legal. They're outside of the system in an entirely legal and routine way. You'd have to pass new laws or have a completely new approach to taxation. As for avoidance techniques that are aggressive or evasion, you could ramp up both criminal enforcement and civil enforcement at the IRS. I mean, you'd need specialists, you'd need a huge recruiting effort, you'd need huge training, you'd need much more resources and budget to the IRS over years to do this and increase the audit rates.

There is the giant tax gap, which is when we talk about the tax gap, we're not talking about legal avoidance, we're talking about illegal avoidance, like people who owe lots and lots of money, over a million dollars to the IRS but they haven't filed their taxes. That turns out not to be legal, you're supposed to file your taxes, that might have occurred to you, but you could attempt to close that in gain and that's running roughly $600 billion to a trillion dollars a year. That could bring in a ton of money although it would also take a lot of effort.

Funding the IRS actually pays for itself. It's one of the few things that really is an extraordinary return on investment and so it should be a no-brainer, but of course, nothing in Washington is.

Brian Lehrer: Right, and just to get back to the legal side for a minute because I think that really is the bigger story. If there were one or two policies that could start taxing income that goes under the radar legally, what might they be?

Jesse Eisinger: Well, we're not policy advocates, we're just journalists, but there are [crosstalk]

Brian Lehrer: What do the sources tell you? [chuckles]

Jesse Eisinger: Well, Ron Wyden, the Senator from Oregon, has a proposal to tax unrealized gains. What that would be is a carefully designed policy there where you're essentially paying tax over the course of 10 years. If the gain disappears, one of the frequent arguments is, this isn't real wealth, it fluctuates, it goes down.

Brian Lehrer: Right, the stock could go down tomorrow.

Jesse Eisinger: Of course, the stock could go down tomorrow, and if it went down tomorrow, Jeff Bezos would still be worth $170 billion instead of $180 billion, so the wealth is a relatively permanent fixture at that level, at that nosebleed level but, yes, you could design an unrealized gain tax where it unfolds over the course of 10 years, and if you still have the gain, you still owe the money. That's one solution. Then the other solution is the IRS measures your wealth. This is what Warren and Sanders, the two senators who ran for president proposed where you have a wealth tax.

That's got some challenges but it's easier these days because one of the things that we have today is a very effective and intensive banking system. The banks estimate people's wealth all the time sometimes for the purposes of lending to them. They're not just measuring publicly-traded wealth like Bezos and Tesla's Musk, those guys have wealth that's relatively easy to measure because it's largely in publicly traded stock, but the Bloomberg's of the world, the Cokes of the world, they have private empires and those are harder to value but there are lots and lots of banks, investment bankers, and commercial bankers that understand the value of those assets very, very well, and you can actually value it pretty easily. It's not that complex. If those third parties reported to the IRS, a wealth tax would be much harder to evade or avoid.

One of the regimes that we have, the reason why the vast majority of Americans pay their taxes is that it's extracted from a third party. It's extracted through the paychecks, and so there's well over 90% compliance for average people because we have no choice in the matter. Our taxes are already out before we see a dollar and take-home pay, but for the ultra-wealthy, they get taxed in a completely different way, often through complex partnerships and things like that and so the compliance rates are really 50 cents on the dollar.

Brian Lehrer: Well, wealth inequality in addition to income inequality, one of the defining issues of our age, and helping us to understand a piece of it, Jesse Eisinger, Senior Reporter and Editor at ProPublica with two of his colleagues. He wrote the article, The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Taxes. Jesse, thanks so much and I look forward to the rest of the project.

Jesse Eisinger: Thank you for having me.

Brian Lehrer: Brian Lehrer on WNYC, much more to come.

 

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