Economy Jeff Ernsthausen Jesse Eisinger Paul Kiel Politics

Democratic Senators Call for Investigation of Tax Avoidance by the Ultrawealthy

Calling ProPublica’s Secret IRS Files series a “bombshell,” Sens. Elizabeth Warren and Sheldon Whitehouse demanded an investigation into how the rich use “legal tax loopholes to avoid paying their fair share of income taxes.”
The U.S. Capitol building in Washington, D.C.
The U.S. Capitol building in Washington, D.C. (Martin Falbisoner / Wikimedia Commons)

By Jesse Eisinger, Paul Kiel and Jeff Ernsthausen / ProPublica

This story was originally published by ProPublica

ProPublica is a Pulitzer Prize-winning investigative newsroom. Sign up for The Big Story newsletter to receive stories like this one in your inbox.Series: The Secret IRS Files Inside the Tax Records of the .001%

Two prominent members of the Senate Finance Committee are calling for an investigation into tax avoidance by the ultrawealthy, citing ProPublica’s Secret IRS Files series.

In a letter sent today, Elizabeth Warren (D-Mass.) and Sheldon Whitehouse (D-R.I.) wrote to the committee’s chairman, Ron Wyden (D-Ore.), that the “bombshell” and “deeply troubling” report requires an investigation into “how the nation’s wealthiest individuals are using a series of legal tax loopholes to avoid paying their fair share of income taxes.” The senators also requested that the Senate hold hearings and develop legislation to address the loopholes’ “impact on the nation’s finances and ability to pay for investments in infrastructure, health care, the economy, and the environment.”

Last month ProPublica began publishing a series of stories about tax avoidance among the ultrawealthy, based on a vast trove of tax data concerning thousands of the wealthiest American taxpayers and covering more than 15 years. ProPublica conducted an unprecedented analysis that compared the ultrawealthy’s taxes to the growth in their fortunes, calculating that the 25 richest Americans pay a “true tax rate” of just 3.4%.

The wealthy pay so little in taxes primarily because they keep their incomes low, the article explained, often borrowing against their fortunes to fund their lifestyles. Amazon’s Jeff Bezos, Tesla’s Elon Musk, Bloomberg L.P.’s Michael Bloomberg and other billionaires have each paid no federal income taxes in one or more recent years. The tax avoidance techniques described in “The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Taxes” are legal, and routine among the ultrawealthy.

In a subsequent article, ProPublica highlighted how some rich people, such as Peter Thiel, have been able to use Roth individual retirement accounts, intended as vehicles to bolster middle-class savings, to create vast untaxed fortunes. A third article showed how billionaires use a provision in the tax code to reduce their taxes after buying sports teams.

Banks and financial institutions are lending more to the rich than ever, according to a story in The Wall Street Journal last week. The senators called for an investigation of banks and wealth management firms to understand the techniques, strategies and products offered to the wealthy that enable them to avoid paying taxes. Morgan Stanley’s wealth management clients have $68 billion worth of loans backed by securities and other investments, more than double the amount they had five years ago, and Bank of America has loans worth over $62 billion, the Journal reported.

In March, Warren introduced a bill, co-sponsored by Whitehouse, that would create a tax on the wealth of the richest Americans. Most Republicans and some Democrats oppose such a measure.

3 comments

  1. Empirical evidence of why this inequality will continue to exist is provided by Professor Peter Phillips:

  2. Investigation into the Ultra-wealthy for tax avoidance….

    Snowballs chance in hell, is the term that comes to mind. The Ultra-wealth OWN this country and if your not aware of it by now you should really ask yourself why. After all the evidence is all there….mountains and mountains of evidence…..

  3. I am surprised Scheerpost has fallen for this. Congress has access to all tax returns and they know exactly how the ultrabilionaires make a living and how they pay taxes. Clownish Warren and White Supremacist Club Member Whitehouse are feigning outrage and are bamboozling the public. Congress has shifted the tax burden onto low and middleclass earners years ago and the US stands alone on relying on income taxation than any other country. Congress is the gift that keeps on giving to the uber rich — no matter which party runs the government.

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