Editorial of the “World”. Bad times for tax optimization. A few days after the belated but salutary initiative of the G7 countries to try to establish a fairer tax on the profits of multinationals worldwide, the disclosure of the tax returns of the first twenty-five American billionaires relaunches the debate on the taxation of richer in the United States.
ProPublica, an association specializing in investigative journalism in the public interest had access to these official documents, which show that these ultrariches, including Jeff Bezos (Amazon), Michael Bloomberg (Bloomberg) and Elon Musk (Tesla), have paid proportionately little, if at all, income tax between 2014 and 2018. The average rate applied to them is 15.8%, while the marginal rate in the United States is 37%. The documents, theoretically inaccessible to the public, their disclosure potentially constituting a criminal offense, reveal the unfairness of the US tax system.
These billionaires, who can take pride in building successful businesses, are masters of the art of legal tax avoidance. The bulk of their fortune being made up of the shares of their companies, which are not considered as taxable income, they largely escape tax as long as these assets are not sold and a capital gain has been created. is not cashed.
A fool’s game
If we stick to the principles, this would not appear shocking, since it indeed seems difficult to tax a person on a gain which has not yet been realized. But in reality, it is indeed a fool’s game. These billionaires do not live on love and fresh water: they have recourse to loans involving enormous amounts, which are themselves guaranteed on the value of their heritage. These loans are not taxed and the interest they generate may be deductible from income tax, in fine, it turns out to be derisory compared to the size of their fortune.
As for dividends and capital gains, they are only taxed at 20%. The low tax rates encourage the better-off to transform labor income into capital income by forming companies, trusts and other foundations, which largely evade progressive income tax. A translation that remains impossible for the common workforce. Finally, remember that inheritances benefit from full exemption below $ 22 million for a couple.
The main stakeholders and the Republican minority in Congress, which opposes any increase in the tax rate, have every difficulty in hiding their embarrassment over these revelations, and highlight the illegal nature of their publication. The debate cannot be limited to this legal quibble. The work of ProPublica only emphasizes the obvious: the principle of “equal income, equal tax” has become a pipe dream in the United States.
The abolition of tax optimization would not resolve the issue of fiscal deficits, say opponents of reform. But the essential is not there. The US tax system has fueled a dangerous drift in inequality, fueling a sense of injustice. The richest four hundred Americans enjoy a lower tax rate than that applied to other categories of taxpayers. Joe Biden is up against the wall to fundamentally reform a tax system that undermines the cohesion of American society and weakens the functioning of the economy.
