Outrageous! Tax-Cheating Tycoons (page 2 of 2)

• Michael Crowley
• Your Tax Dollars
• Money

Shirking Responsibility

It's not terribly hard for rich guys to shift the tax load onto the rest of us. After all, the government knows what most of us owe, thanks to what's called third-party reporting: W-2 and 1099 forms that go straight to the IRS, making wages and interest income impossible to hide from Uncle Sam. It's much harder to track income from complex real estate or business deals because the government doesn't get automatic reports of these transactions. If profits are parked in offshore accounts that don't get reported to the government, which is flat-out fraud, then it can be virtually impossible for the IRS to keep tabs on the earnings.

Hiding money in offshore accounts is not the only ripoff ploy used. Another complex tax-shelter technique was marketed by Quellos Group, a Seattle-based securities firm. Five clients, including billionaires Robert Wood Johnson IV, owner of the New York Jets, and television mogul Haim Saban, creator of the Mighty Morphin Power Rangers and other hit shows, benefited from a ruse that faked capital losses to erase more than $2 billion in taxable gains. That allowed them to avoid around $300 million in taxes, or enough to give a $10,000 bonus to 30,000 of our best public schoolteachers.

Johnson and Saban both testified to the Senate that they had been advised by lawyers that the transactions were legal. For his part, the CEO of Quellos, Jeffrey Greenstein, told the Senators that "leading tax lawyers ... gave tax opinions approving the transactions" and that, in any case, his firm no longer provides that "tax-advantaged strategy."

Everyone wants to shirk responsibility for tax evasion, and Congress will keep letting it happen if they don't speed up legislative reforms.

Two Senators, however, have reached across the aisle to target the problem seriously. Democrat Carl Levin of Michigan and Republican Norm Coleman of Minnesota have proposed applying financial sanctions to nations with tax laws that encourage fraud in the United States, and requiring American financial institutions to automatically file 1099 reports to the IRS if they know the owner is a U.S. taxpayer.

Now that we have a new Congress pledging an ethics crackdown, we should hold them to it -- and put fat-cat tax dodgers high on the docket.

From Reader's Digest - April 2007

 

• Outrageous! You Sow, They Reap
• Why are your tax dollars lining the pockets of wealthy farm owners?
• 
• Outrageous! Real Estate Ripoff
• You could save big selling your home -- if only the brokers would let you.
• 
• Sexual Predators Being Allowed to Teach
• How is it that sexual predators are getting a free pass in our children's schools?
• 
• Diplomatic Immunity Going Too Far
• Diplomatic immunity affords foreign diplomats in America a blank check for bad behavior. Unpaid bills, drunk driving, sex crimes and even slavery - what's the recourse?
•