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How billionaires have sidestepped a tax aimed at the rich By Paul Kiel, ProPublica This story was originally published by ProPublica. ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox. Series: The Secret IRS Files: Inside the Tax Records of the .001% Fourteen years ago, Congress set out to remedy a basic unfairness in the tax code. The tax that funds Medicare, because it’s aimed mainly at wages, hits even the poorest American workers. But the wealthy could easily avoid paying their share. So lawmakers created a new type of Medicare tax to capture the kinds of income the rich often enjoy: interest, dividends and capital gains from investments. A host of billionaires — sports team owners, oil barons, Wall Street traders and others — have managed to avoid paying it, ProPublica found. To study who was actually paying the new tax, ProPublica analyzed its trove of IRS data containing information on thousands of the wealthiest Americans. We identified 17 people who, in the first six years of the law, 2013 through 2018, each shielded at least $1 billion in capital gains from the tax. Together, this small group, by collectively exempting more than $35 billion, saved about $1.3 billion in taxes. Most members of the group were able to sidestep the tax because of a huge gap written into the law, which allows owners to exempt gains from the sale of their businesses. They include Donald Sterling, the disgraced former NBA team owner who avoided the tax
Photo by Giorgio Trovato on Unsplash
when he sold the Los Angeles Clippers to Steve Ballmer for $2 billion in 2014. But others eluded the tax in ways that raise questions about how the law is being enforced. One clear target of the new tax was investment professionals who rack up capital gains. Yet ProPublica found examples in the IRS data of financiers who claimed outsize profits but did not pay the tax. Tax experts contacted by ProPublica said they couldn’t think of a legitimate reason why those individuals
were exempt. Lynn Tilton, a hard-charging private equity manager, who has been dubbed the “diva” of distressed asset investing, is one example. The biggest avoider of the new tax in the data was Jeff Yass, the Republican megadonor who sits atop one of the most profitable trading firms in the world. Both Medicare tax and its twin, the Net Investment Income Tax, as the new levy was called, are easily avoided See Tax records Page 04
by business owners. Earlier this month, ProPublica revealed how some of Wall Street’s most powerful people use a loophole to avoid paying Medicare tax on their share of their firms’ profits. Eliminating these ways around the taxes, as House Democrats proposed to do in a 2021 bill, would raise an estimated $250 billion over 10 years. Medicare, the federal program that provides health care for some 68 million seniors, is projected to run short of money in 2036. “It becomes a pretty glaring problem when you have ultra-rich individuals layering loopholes on top of loopholes to dodge both the NIIT and Medicare taxes,” said Sen. Ron Wyden, chair of the Senate Finance Committee, in a statement. “To the nurse or the janitor whose taxes come straight out of their paychecks, it’s ridiculous to see these examples of fabulously wealthy individuals enjoying huge windfalls and continuing to avoid paying a fair share.” The NIIT, together with its holes, entered the tax code as part of the Obama administration’s push to pass the Affordable Care Act. In need of ways to help pay for a major expansion of government health care subsidies, Democratic lawmakers embraced the idea of this new tax on investments. The aim was to level the playing field. All workers pay
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Lawmakers demand superintendent's resignation over transgender policies By City News Service
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wo Inland Empire lawmakers have called for the resignation of Riverside Unified School District's superintendent based on policies that the pair argue are hostile to girls by promoting transgender policies that favor biological males. "Riverside Unified has failed to protect young girls on campus, most recently at King High School in my district," Assemblyman Bill Essayli, R-Norco, said in a statement Dec. 19. "In their own words, young girls have repeatedly said they do not feel safe with boys in their locker rooms and bathrooms — and still nothing has been done." Essayli, a former federal prosecutor, was expected to join Assemblywoman Leticia Castillo, R-Corona, in addressing the RUSD Board of Education during its regular meeting Dec. 17, specifically demanding that Superintendent Renee Hill step down. "Recently, a female varsity cross-country co-captain was removed from the team so a trans athlete could compete in her place," Essayli said. "This is not the first time that See Superintendent Page 27
San Bernardino County board expands funding for homelessness programs By Staff
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he San Bernardino County Board of Supervisors last week OK'd approximately $1 million to expand programs that provide services for people experiencing homelessness. The largest portion of the outlay is $779,000 for the Housing Stability and Landlord Partnership Program, which incentivizes land owners to rent to individuals and families experiencing or at risk of homelessness, according to a county statement. The program enables landlords to offer prospective qualified tenants financial assistance and support services. Supervisors also approved $50,000 for the Transportation Initiative, "which connects individuals experiencing homelessness with essential resources," officials said. The resources include housing agencies, shelter locations, See Homelessness Page 28