Opinion: America’s super-rich are hiding trillions of dollars in plain sight - marketwatch

America’s super-rich are hiding their wealth from taxes quite legally here in the U.S., without having to send it to Panama, or the British Virgin Islands, or any other sunny place for shady people.

The big news this week in finance has been the so-called “Panama Papers,” the massive leak of documents from dubious Panamanian law firm Mossack Fonseca, an expert in offshore shell companies and tax-avoidance maneuvers. All sorts of famous foreign names have been caught up in the ongoing dump of documents online. British, Russian and Chinese politicians have been named. The prime minister of Iceland has resigned. Police have launched investigations in multiple countries.  But if you’re American, it’s all a distraction.

A country’s laws express its values. Our tax laws place people who work for a living at the bottom of the pile — and those who inherit money at the top.

Here in the U.S., the oligarchs are hiding trillions of dollars in plain sight, and it can hardly be touched — thanks to the generous provisions of the U.S. tax code.

Say what you like about our Congress, but it’s the best legislature money can buy.

Say what you like about our Congress, but it’s the best legislature money can buy.

The furor over the Panama Papers is obscuring this much greater scandal.  In a nutshell: Working stiffs are actually taxed, proportionately, much more heavily than the super-rich.

Income is taxed, but wealth isn’t. Someone earning $50,000 a year must pay payroll, state and federal taxes. Someone with $10 billion in assets needn’t pay any taxes at all. Indeed, many of the super-rich successfully tap into their wealth tax-free by just borrowing against it.

Even if they decide to cash in some of their capital gains, the tax rates are generous. The top rate of long-term capital gains is 20%. Meanwhile, a kid busing tables on minimum wage is paying at least that in payroll, state and federal income taxes. (Payroll taxes are 15.3%, but they hide half of it from the wage earner by saying the “employer” pays it — which is like saying we’re only draining that water from the other end of the swimming pool.)

The rich can shelter fortunes by making “charitable donations” to their own foundations.

The most obscene of our onshore Panama-style capers, of course, is the “carried interest” loophole. Someone makes $10 million a year running a hedge fund or private equity fund, you’d think he’d pay 39.6% in income tax, right? Wrong. He pays nothing, so long as the salary is paid into the fund he’s running. And he can roll that up, year after year, like a massive, free 401(k). And when he cashes it out, eventually, he doesn’t pay 39.6% either. He pays 20% because it’s not “income”; it’s “capital gains.” - Read More

America’s super-rich are hiding trillions of dollars in plain sight