Taxing the Uber-Rich

Fig Tree Arch in Tanzania - photo by JoAnn Sturman

Scott Sturman
fliesinyoureyes.com

Tax revenue is collected with a sleight of hand which is the envy of the most masterful magician. At least tax rates are easy to understand and clear for all to see, but the tomes of exemptions, credits, and special circumstances are accessible to only the well connected who probably wrote them.

The wealth distribution of the country is increasingly skewed toward the very rich, and it is no coincidence the tax code is more complicated than ever. Should a hedge fund manager be able to treat short term profits as long term capital gains rather than ordinary income? Should real estate developers be able to defer profits and retain equity without tax penalties through the 1031 exchange program? Should alpaca farms be granted special tax credits or farmers paid not to grow?

Tax withholding makes collecting taxes less painful than it should be and breeds too much complacency. Consider for a moment that income taxes are not withheld, but the tax bill still comes due each April 15th. There is another difference, however; the IRS and state tax agencies do not accept checks or credit cards. The taxpayer must appear in person and pay cash. Taxation is transformed from a series of numbers on a monthly pay statement to cold, hard money. Imagine peeling off $100 bills and handing them to the IRS agent, then walking down the street to the state tax offices to repeat the process. If this was not bad enough, one might be surprised to find only half of the neighborhood participating, since barely 50% of Americans currently pay income tax. Suddenly, the tax payer is not so ambivalent about those who capitalize on obscure rules to avoid paying Uncle Sam.

What would be particularly galling is not seeing the likes of mega billionaire Warren Buffet, who once boasted his secretary paid more income tax than he, waiting in line to make his contribution. Certainly the representatives of many major corporations would not be in the queue, since their companies’ enormous profits are somehow largely exempt from the tax burden.

Who are these rich people who operate outside the norms of society? Contrary to the view of the President, $250,000 annual income is not uber wealthy. Most earners at this level such as professionals, two income families, and small business owners could not maintain their current lifestyle if they were to quit work. The uber wealthy have no such constraints as life continues unchanged and independent of working status.


In May of 2010 the New Yorker Magazine published a story “The Influencer” about Haim Saban, a Hollywood billionaire, major donor to the Democratic Party, and confidant of the Clintons. The article highlights an interesting life and the opportunities available to those who have political connections at the presidential level. In fact Mr. Saban stated there are three ways to influence American politics: donate to political parties, establish think tanks, and control media outlets. All of which he has fulfilled.

In 2000 Saban and his partner Rupert Murdoch sold Fox Family Worldwide to Disney, yielding Saban a $1.5 billion profit. His capital gain tax consequences to the federal and state governments were 27% or $405 million. After reading the article it is clear that the super rich who have access to accounts, lawyers, politicians, and government officials, pay taxes under a different and negotiable set of rules. The maneuvers described in the story should provoke an outcry from those who are footing America’s bills to demand tax reform - no more shelters, deductions, allowances, deferrals, or special write offs, just a simple and fair flat tax.