On Tuesday, ProPublica broke the story that several of the richest people in the world, including the two current richest, Jeff Bezos and Elon Musk paid little or no income taxes for several years. Also mentioned on the list of tax avoiders are multi-billionaires Michael Bloomberg, Carl Icahn, George Soros and Warren Buffet.
ProPublica was able to write the story thanks to an anonymous leak of a vast trove of Internal Revenue
But should our tax returns, or at least the amount we pay in income taxes, be such a closely guarded secret? Other taxes we pay are a public record. If you want to know how much someone is paying in property tax, that's an easy thing to find. We can also find out what taxes businesses are paying. But when it comes to Americans' personal incomes, we treat even the total taxes paid as a state secret.
That didn't used to be the case. When the income tax was first adopted, how much people owed in those taxes was a public record. Newspapers would publish the names of individuals and how much of their income they were to fork over in taxes. Rich people hated this practice and they got their politician friends to make the information confidential with severe penalties associated with any unapproved disclosure.
A commentator on the cable shows says the leak didn't offer anything newsworthy. He declared the fact that the uber rich were paying little or no income taxes for many years was well-known. I don't buy that. While we all knew tax avoidance was going on, the ProPublica story publicizes how extensive and successful those efforts have been. Cloaking income tax records in such secrecy has slowed efforts at reforming the system. ProPublica not only provides information about the extent of tax avoidance, it provides a point of emphasis as to how the super rich aren't paying taxes while working stiffs are.
Not only should we re-consider the confidentiality of tax returns. we need to reconsider the definition of "income" used to calculate the tax. The super wealthy identified in the ProPublica story didn't do anything illegal. They just took advantage of the fact that you only pay taxes on what is defined as "income." Under that definition you only pay tax on gains that are realized. Until stocks are sold, there is no gain realized and no income tax. Likewise, until real estate is sold, there is no income tax.
The definition of income allows the uber rich to substantially increase their wealth without paying a literal dime in income taxes. Maybe it is time we rethink the definition of income.