Outrageous! Tax-Cheating Tycoons

Fat cats are hiding billions from Uncle Sam, leaving the rest of us to pay.

By Michael Crowley

From Reader's Digest

Images from this article

Illustrated by Lou Beach

The tax cheaters' practice of stashing assets in secret offshore accounts may cost the Treasury up to $70 billion in unpaid taxes per year.

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Illustrated by Lou Beach

The tax cheaters' practice of stashing assets in secret offshore accounts may cost the Treasury up to $70 billion in unpaid taxes per year.

You have people making billions of dollars who ought to be paying many hundreds of millions in taxes but aren't paying anything. That money has to be made up somewhere else, and it's the average working guy who has to do it

Sleazy Tax Gimmicks

Anderson was a Washington-based telecommunications entrepreneur and for years was among the country's richest men. According to the Department of Justice, between 1995 and 1999 alone, he made at least $450 million buying and selling telecom companies. America was very good to him. In return, he paid virtually no taxes on his earnings.

Anderson used his riches to buy exotic paintings by artists like Salvador Dali, a 19,000-square-foot mansion in Madrid and a $21 million private jet. He even invested in a private group seeking to lease Russia's troubled Mir space station. But at the same time, he hid his wealth from the IRS.

Anderson paid a mere $495 in taxes one year on a reported income of $67,939, yet he'd actually raked in more than $126 million.

Anderson cheated the country through a web of tax gimmicks as complex as they were sleazy. In one scheme, according to the Justice Department, Anderson concealed millions in profits by transferring his holdings to offshore shell companies in Panama and the Virgin Islands. Because he hid his ownership of these companies, the feds didn't know about the massive profits that were loaded into his pockets. In addition, Anderson set up offshore bank accounts that he kept hidden from the IRS in order to dodge taxes.

Fortunately, after years of operating his businesses under false names, Anderson was finally nabbed by the Justice Department at Washington's Dulles Airport, fresh off a flight from London. He later pleaded guilty to tax evasion charges and faces up to ten years in prison.

For every Walter Anderson who gets caught, however, plenty of other moguls are getting off scot-free. They enjoy all the benefits of being American citizens -- like the protection of our military and police, public education, and other social services -- without paying for them.

And the lost tax revenue isn't exactly chump change. According to a Senate report released last August, the cheaters' practice of stashing assets in secret offshore accounts may cost the Treasury up to $70 billion in unpaid taxes per year.

Seventy billion bucks. That's more than 11 times the annual budget for the National Cancer Institute. Or enough money to repair New Orleans's levees and rebuild much of the city. "You have people making billions of dollars who ought to be paying many hundreds of millions in taxes but aren't paying anything. That money has to be made up somewhere else, and it's the average working guy who has to do it," says Bob McIntyre of Citizens for Tax Justice.

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