Today’s NYT article on how the Estée Lauder heir Ronald S. Lauder uses tax shelters to protect his billions reminded me of An Investment Manager's View on the Top 1%:
A highly complex set of laws and exemptions from laws and taxes has been put in place by those in the uppermost reaches of the U.S. financial system. It allows them to protect and increase their wealth and significantly affect the U.S. political and legislative processes. They have real power and real wealth. Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%. Moreover, those at the very top have no incentive whatsoever for revealing or changing the rules. I am not optimistic.
(Incidentally, there’s some other interesting stuff there, including a rich-person’s view of why the 99.5% and up are so different from the bottom half of the top 1% (ie. 99.0 – 99.5). That group is mostly very successful professionals who find their retirement prospects to be better than most, but still less certain than they would like. The top 0.5%, on the other hand, the writer says, are or were in finance.)
While it would be good to do some serious reform of the tax system, the vested interests are in fact all pushing hard the other way (e.g. the quiet concerted action to destroy the inheritance tax).
Perhaps, therefore, as a first step we could require that anyone who uses a tax credit or deduction that saves them more than, say, $250,000 in tax liability, must disclose what tax credit/deduction they used, how much they saved and have it recorded along with their names on a registry published online, in a nice searchable format, by the IRS. There is a long tradition of having tax returns private, but perhaps for this we should change it: if you want to keep your privacy, don’t take the tax shelter. Note that my proposal does not require that the taxpayer disclose either income or total tax liability, just the size of the savings and its source.
As I’ve said before, I’m not at all a tax lawyer. I invite people who know more about tax law to explain why this idea is unworkable, pointless, or fattening.