I should start out saying that I generally like ProPublica.  It’s investigative journalism is generally above par- sometimes even top notch. 

But, on occasion, the bias of the author renders the material presented facile, duplicitous, or simply wrong.  As I noted years ago about their article on dialysis.  (I do not believe the US system for dialysis is superb- but neither was it as crass as the article purported.)

So, what set me off on edge this time?

Well, ProPublica managed to get the financial records for some 25 of the richest folks in America.   And, if you’ve been reading my blog over the years (What?  You haven’t?  Shame on you!), then you know that the American tax system taxes individuals based upon current income.  Not wealth.  Or, even borrowed funds.

As a matter of fact, we’ve talked about some changes President Biden wants to make to the tax system so that wealth is no longer sheltered from generation to generation.   As described in that blog, President Biden wants to eradicate the ‘Angel of Death’ loophole.   You see, many rich folks NEVER sell their assets, letting them appreciate over the years. (Actually, they borrow against them- letting the loans accumulate, only to be settled once they are dead and the inheritees obtain a stepped up basis in the asset.) So, a stock they bought for $ 1000 in 1950 (and now worth $ 1,000,000)- under the current tax law- would transfer to their heirs, but instead of having a basis of $ 1000 (as when they bought it), the kids and other inheritees enjoy the stepped up basis of $ 1 KK.  So, if they sold that stock now (let’s say it’s worth $1.1K,  they would only owe capital gains taxes on $ 100,000- not the $1.09KK that the stock really appreciated since it was bought.

With that introduction, you can begin to see the duplicitous nature of the ProPublica article.  The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax (authors:   Jesse Eisinger, Jeff Ernsthausen and Paul Kiel ) exclaims how much wealth these folks accumulated- and how little taxes they paid.  The chart below- for the four richest folks in America- depicts their basic analysis.

As you can easily see, the tax rate the authors choose is based upon wealth accumulation- which is exactly NOT how we Americans are taxed.  Yes, it’s appalling how much wealth these folks accumulated over four years.  But, that has no bearing on the taxes they may owe.   (I do adhere to Joe’s idea- and we will tax that wealth accumulation when the heirs- or the taxpayers- sell their assets.  Based upon the basis at which they acquired those assets!)

Instead we should examine the income these folks accumulated.  And, now, using the same numbers these authors describe, you can see that the tax rate is much more reasonable.  With the exception of Michael Bloomberg’s taxes.  I admit to be highly curious how Michael Bloomberg managed to glom a tax rate under $3% on $ 10 billion in income.  And, yes, I know that at the levels of income these folks accumulated, the tax rate should be about 30%, but I’m also guessing that most of their income was from capital gains, which is taxed at lower rates than conventional taxes.)

So, before one goes off half-cocked at the claims ProPublica makes, let’s consider the facts first.

Oh, and also call your Senators and Congresspersons demanding that they cleave to President Biden’s tax idea of terminating the Angel of Death provisions- so the Treasury CAN tax the real accumulated wealth.  And, not lose those tax dollars forever.

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