Last week’s New Yorker includes an article describing how the Rich & Famous avoid taxes. It was timely indeed as I approach the horrors of filing with the IRS for 2022.
The trick is to place all your securities in a Trust, borrow against that Trust to cover your living expenses, that vacation on the Riviera, and the new Gulfstream to fly there. You can claim zero taxable income (no W-2’s, no withholding, minimal FICA or Medicare payments) and the gains on your Trust Fund are not taxable until you die and not even then if you bequeath it to your heirs.
Of course, not all of the 1% care much about their kids. When J. Paul Getty’s grandson was kidnapped , J. Paul refused to pay the ransom. “I’ve got seventeen grandchildren. If I pay this, they’ll all get kidnapped.” The kidnappers proved they were serious by mailing J. Paul one of his grandson’s ears with the threat to continue sending him body parts until he paid up.
J. Paul paid the $7 million ransom then. People were boycotting Getty Oil with all the bad publicity. Dick that he was, J. Paul “loaned” his grandson $5 million of the $7 million at 4% interest. The other $2 million was from the grandson’s liquidated trust.
To finalize my parents’ estate when my father died, Aunt Linda and I had to arrange for a Pennsylvania Revenue Department agent to be present when we opened their safe deposit box. Possibly, my parents who never earned more than $10 K per year had stashed away millions in securities supporting their Jet Set lifestyle . The safety deposit box (free of charge from the bank if you opened an account) contained the deed to our house and report cards (K thru 12) for Aunt Linda and me. We were not eligible for Estate Taxes although those report cards were impressive.
Thanks to Donald Trump, pretty much everyone else avoids Estate Taxes nowadays, too. Trump’s Tax Cut included so many loopholes to avoid Estate Taxes that only 1,200 households nationwide paid it in 2020. About 139,000 households did in 1976. The Treasury lost about $100 billion in Estate Tax revenue over that span.
Republicans justified this by re-naming it The Death Tax. “Family farms cannot be passed to your children! You will have to go into debt to pay the Death Tax!” Actually, the Koch brothers, Gallo Wine, Campbell’s Soup (all family-owned) were the prime movers behind this.
After passage of the bill, Trump crowed “Only morons pay the Estate Tax”.
I guess that Ivanka, Don, Jr., Eric, Tiffany, and Barron won’t have to wait for a Revenue Dept agent to show up before they can divvy up Donnie’s billions.
By Ed Dufton