Thread by @doctorow

The @propublica #SecretIRSFiles is a large tranche of IRS leaks detailing the tax-structures of the super-wealthy, documenting the ways in which Leona Helmsley was perfectly correct to assert that "taxes are for the little people."

pluralistic.net/2021/06/15/gui…

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(If you'd like an unrolled version of this thread to read or share, here's a link to it on pluralistic.net, my surveillance-free, ad-free, tracker-free blog:)

pluralistic.net/2021/06/26/wax…

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The latest reporting examines the way that Peter Thiel and other billionaires are able to abuse the Roth IRA (a savings vehicle that is only supposed to be used by middle-class people to save modest sums for retirement) to evade taxes on billions..

propublica.org/article/lord-o…

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The Roth IRA is named for William Roth Jr, a Reaganite anti-tax-extremist GOP Delaware Senator who brokered a new retirement savings tool with the Clinton administration in 1997, a tool that was supposed to allow middle-class savings without giving tax-breaks to the wealthy.

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People with middle-class incomes can put away assets worth modest sums - $2000/year initially - in a savings account, pay tax on them at current their current value, and then park them until retirement, cashing them out tax-free.

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So you can put $2,000 after-tax dollars' worth of stocks in your IRA when you're 30, and then sell the stocks for $10,000 when you're 65 and avoid the 20% capital gains tax you'd normally owe on the $8,000 profit.

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The Roth IRA framework makes the whole thing sound like a middle-class affair. Medium-wage earners can salt away small-dollar bets on stocks, bonds and other assets, and avoid tax on successful bets when they're ready to retire.

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But the wealthy immediately discovered exploitable loopholes in these guard-rails. When Theil - already rich but not yet ultrawealthy - cofounded Paypal, he was able to draw only a nominal wage, while taking the bulk of his compensation in stock.

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Drawing a peppercorn wage made the millionaire hedge-fund manager Peter Thiel a "middle-class earner" for the purposes of the Roth IRA. That meant he could put away $2,000 worth of assets and pay no tax on their appreciation when he turned 65.

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The asset Thiel bought for $2,000 and stashed in his IRA? Paypal stock. A LOT of Paypal stock. Thiel and his partners declared Paypal's stock to be worth $0.001/share, which meant Thiel could shelter 1.7 MILLION SHARES in his Roth IRA.

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Today, those shares are worth $5 BILLION, and Thiel can draw them at 65 without paying any tax on them - neither the ~40% tax that he'd pay if they were income, nor the 20% sweetheart capital gains rate the IRS gives to people who earn money by gambling, not working.

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Defenders of the Roth IRA - and the tax-free lifestyles of US billionaires - insist that these tax "strategies" are available to rich and poor alike, but an examination of the Thiel story reveals a different system for the super rich, the merely rich, and the rest of us.

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Yes, it's true that on paper anyone in Thiel's positions could do what Thiel did. But as Anatole France said more than a century ago, "The law, in its majestic equality, forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread."

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Most of us can't found a company and not draw a salary while still paying our bills, taking stock-based compensation instead, thus receiving most of our income as tax-advantaged capital gains instead of wages.

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Even if you're in that lucky few, most of us can't afford to hire fixers who will - with a straight face - sign off on a valuation of the stock in a business that had already received large cash investments at $0.001 (Propublica's tax experts all but call this a fraud).

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Thiel was able to sell some of the Paypal shares in his Roth IRA and then use the money to buy sweetheart-priced shares in Facebook (on whose board he sits) as well as in Palantir, the human-rights-abuses-as-a-service company he founded.

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Thiel has been very public in his contempt for taxes, characterizing them as class warfare waged on the rich by unworthy governments. Thiel says his anti-tax extremism is just part of his deep ideological commitment to libertarianism, but that's a very selective commitment.

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What are we to make of a libertarian who founds a company to supply governments with secret surveillance tools, who secretly funds a pretextual lawsuit to bankrupt journalists who upset him, who says "competition is for losers," and women shouldn't be allowed to vote?

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While "the marketplace of ideas," universal self-determination and limits on coercive state power are not part of Thiel's libertarianism, avoiding taxes on the fortunes he makes are firmly within its remit.

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In this regard, Thiel is firmly aligned with other billionaires, including advocates for fairer taxes, like Warren Buffet. Indeed, @JustinElliott, @SheInvestigates and @bandler_james identify several billionaires who have evaded taxes on titanic sums by gaming the Roth IRA.

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One thing that distinguishes Thiel from other plutes, though, is his willingness to scold the rest of us, as he did when he told us mortals to "save, save, save...Forgo the new kitchen and sundeck...“Living modestly and saving well is better than dying broke."

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Image:
Joshua Doubek (modified)
commons.wikimedia.org/wiki/File:IRS_…

CC BY-SA:
creativecommons.org/licenses/by-sa…

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