In A Word: Tax Shelter – While the wealthy get wealthier the poor get letters, fined and penalized.
Gerald Eisman
August 07, 2006
Tax Shelter: A financial operation, such as the use of special depletion allowances, which reduces taxes on current earnings.
Lucy R. recently received a letter from the Internal Revenue Service disallowing her health deduction, claiming it was excessive and not documented. It went on to say that she owed the government $375 dollars plus penalty and interest. Lucy, 67 years of age, suffering from a chronic disease and forced to work due to an inadequate monthly Social Security check, was beside herself with grief and worry. She has no other income and no relatives to whom she may turn for help.
Jerry E. received a letter from the IRS Informing him of a $7000 dollar shortfall in paying his taxes as he'd received several distributions from various investments in his lifetime that went unreported as income. That despite the letter he'd sent explaining he reinvested the distributions before the legal deadline to do so. It took months and a great deal of correspondence to finally clear up the situation and he still was obliged to pay several hundreds of dollars to the government.
Sound preposterous? Well, it happens all too often year after year, but almost always to the poor, hard-working citizens without the means to pay the tab, the fines, and interest, nor a person to represent them before the IRS. And if that isn't bad enough, the following may help put the picture into painfully clear focus.
Recently a Senate committee criticized a multimillion dollar tax-avoidance scheme which several rather prominent citizens used to protect their financial gains. The committee concluded the practice represents a more than $40 billion dollar a year drain on the federal revenues by offshore tax scams.
In a 370 page report, the committee details how wealthy, politically connected individuals manage to avoid paying hundreds of millions of tax dollars to the IRS (Internal Revenue Service.) The method these wealthy individuals used to save tax dollars was to use secret corporations and trusts on the Isle of Man. The report named four prominent billionaires including R. W. Johnson IV, owner of the New York Jets, Sam and Charles J Wyly Jr., longtime Republican donors and supporters of G. W. Bush, and Haim Saban, Democratic fundraiser.
Senator Carl M. Levin (D-Mich.) said, "I hope the report will blow the lid off schemes that use shell-corporations, sham trusts, and fake transactions to avoid paying taxes." Levin's staff conducted 80 in-depth interviews and read their way through approximately 2 million documents during their year-long probe. The schemes came to light during an investigation of Enron, the corporation that used hundreds of overseas dummy corporations.
The report names names and uncovers numerous examples of chicanery and financial prestidigitation geared toward making money disappear. Saban and Johnson, a big Bush contributor, were able to purchase, for a small fee, approximately $2 billion in capital losses. These were used to eliminate (negate) taxable gains they made in stock market sales. According to the report, the IRS lost almost $300 million dollars in revenue due to such manipulations.
The ersatz losses were created by a string of transactions that Levin said looked like a bowl of spaghetti. The basic idea is to have two companies set up on the Isle of Man, and begin trading paper each to the other. Such trading gave the appearance of selling a portfolio of stocks that had lost value equal to the profit Saban and Johnson wanted to make disappear. With the profits equalized there could be no tax event. The men didn't even pay $375. plus penalties and interest.
The Wylys used an entirely different scheme to make their profits disappear. They sheltered their profits, over $700 million dollars in ten years, by employing a series of trusts on the Isle of Man.
The Wylys attorney, William A Brewer III asserts the Wylys "continue to believe that their actions were entirely proper under law and believe they have paid all taxes due.' The Wylys assert they acted on the advice of "Qualified professionals."
Senator Levin set an intention to press for changes in the laws that will make it harder for tax sheltering to spread through the wealthy community. Levin wants to allow the IRS to assume such money from trusts and corporations in tax-havens to be taxable and place the burden of proof that it is not square on the shoulders of the wealthy taxpayers.
When you do the numbers, it would take over 800,000 letters to widows and pensioners collecting social security checks to match the losses of one individual like Johnson. And that's without considering the cost of postage, paper and handling. Perhaps if the IRS would make a concentrated effort to curb the major tax cheats and collect the funds they squirrel away, there might be enough revenue garnered to begin paying down the monstrous national debt run up by politicians.
Lucy R. recently received a letter from the Internal Revenue Service disallowing her health deduction, claiming it was excessive and not documented. It went on to say that she owed the government $375 dollars plus penalty and interest. Lucy, 67 years of age, suffering from a chronic disease and forced to work due to an inadequate monthly Social Security check, was beside herself with grief and worry. She has no other income and no relatives to whom she may turn for help.
Jerry E. received a letter from the IRS Informing him of a $7000 dollar shortfall in paying his taxes as he'd received several distributions from various investments in his lifetime that went unreported as income. That despite the letter he'd sent explaining he reinvested the distributions before the legal deadline to do so. It took months and a great deal of correspondence to finally clear up the situation and he still was obliged to pay several hundreds of dollars to the government.
Sound preposterous? Well, it happens all too often year after year, but almost always to the poor, hard-working citizens without the means to pay the tab, the fines, and interest, nor a person to represent them before the IRS. And if that isn't bad enough, the following may help put the picture into painfully clear focus.
Recently a Senate committee criticized a multimillion dollar tax-avoidance scheme which several rather prominent citizens used to protect their financial gains. The committee concluded the practice represents a more than $40 billion dollar a year drain on the federal revenues by offshore tax scams.
In a 370 page report, the committee details how wealthy, politically connected individuals manage to avoid paying hundreds of millions of tax dollars to the IRS (Internal Revenue Service.) The method these wealthy individuals used to save tax dollars was to use secret corporations and trusts on the Isle of Man. The report named four prominent billionaires including R. W. Johnson IV, owner of the New York Jets, Sam and Charles J Wyly Jr., longtime Republican donors and supporters of G. W. Bush, and Haim Saban, Democratic fundraiser.
Senator Carl M. Levin (D-Mich.) said, "I hope the report will blow the lid off schemes that use shell-corporations, sham trusts, and fake transactions to avoid paying taxes." Levin's staff conducted 80 in-depth interviews and read their way through approximately 2 million documents during their year-long probe. The schemes came to light during an investigation of Enron, the corporation that used hundreds of overseas dummy corporations.
The report names names and uncovers numerous examples of chicanery and financial prestidigitation geared toward making money disappear. Saban and Johnson, a big Bush contributor, were able to purchase, for a small fee, approximately $2 billion in capital losses. These were used to eliminate (negate) taxable gains they made in stock market sales. According to the report, the IRS lost almost $300 million dollars in revenue due to such manipulations.
The ersatz losses were created by a string of transactions that Levin said looked like a bowl of spaghetti. The basic idea is to have two companies set up on the Isle of Man, and begin trading paper each to the other. Such trading gave the appearance of selling a portfolio of stocks that had lost value equal to the profit Saban and Johnson wanted to make disappear. With the profits equalized there could be no tax event. The men didn't even pay $375. plus penalties and interest.
The Wylys used an entirely different scheme to make their profits disappear. They sheltered their profits, over $700 million dollars in ten years, by employing a series of trusts on the Isle of Man.
The Wylys attorney, William A Brewer III asserts the Wylys "continue to believe that their actions were entirely proper under law and believe they have paid all taxes due.' The Wylys assert they acted on the advice of "Qualified professionals."
Senator Levin set an intention to press for changes in the laws that will make it harder for tax sheltering to spread through the wealthy community. Levin wants to allow the IRS to assume such money from trusts and corporations in tax-havens to be taxable and place the burden of proof that it is not square on the shoulders of the wealthy taxpayers.
When you do the numbers, it would take over 800,000 letters to widows and pensioners collecting social security checks to match the losses of one individual like Johnson. And that's without considering the cost of postage, paper and handling. Perhaps if the IRS would make a concentrated effort to curb the major tax cheats and collect the funds they squirrel away, there might be enough revenue garnered to begin paying down the monstrous national debt run up by politicians.
Print
Email
