Tiger Woods’ charities raised $50 million. What now?
December 23rd, 2009, 5:00 am · Post a Comment · posted by Teri Sforza, Register staff writer
Say what you will about Tiger Woods and his latest antics.
The golf star’s OC-based nonprofit foundations raised more than $50 million and spent more than $40 million last year, and got high marks from charity watchdogs (despite criticism that glitzy golf tournaments with millions in prize booty aren’t traditional nonprofit endeavors).
Executive Greg McLaughlin’s compensation totaled $503,138, which eclipses than the average charity CEO compensation of $150,000 - but is not necessarily out of line for this sort of operation. (The No. 2 guy at the National Boy Scout Council, for example, made more than $722,000 last year.)
There are actually three nonprofits bearing Woods’ name, as far as the Internal Revenue Service is concerned, though they are perceived as one by the masses. Two have piled up assets worth more than $70 million - far exceeding what they spend in a year - but officials say there are good reasons for piling up cash, including the requirements of repaying tax-exempt bonds.
See detailed charts of finances (and copies of tax returns) below. And, without further ado, let us introduce you to:
Nonprofit No. 1: The Tiger Woods Charity Event Corp. It’s not the one you’ve heard of, but it’s the Iron Giant that raises (and spends) the most money on those glitzy events that cost tens of millions to mount. In 2008, revenues were $36.2 million, and it spent $32.7 million mounting the star-studded AT&T National Golf Tournament, Chevron World Challenge Golf Tournament, Tiger Jam Benefit Concert and Tiger Woods Learning Center Block Party. At first glance, things look good: 95 percent of spending was on programs - considered the charity’s core mission - far more than the 75 percent charity watchdogs look for here. But that’s because the cost of throwing these expensive events were counted as core program spending - part of the charity’s main mission - and there are critics of that approach.
In 2008, Tiger’s events cost $31.2 million to mount (including millions in purses for the winning golfers), and brought in $34.9 million - leaving about $3.5 million for good works. “You can certainly question the validity of calling something a charitable event when so much money goes to individuals,” Sandra Miniutti of nonprofit watchdog Charity Navigator told The Washington Post when Tiger’s tour went to Bethesda in 2007.
Foundation executive McLaughlin responded thusly: “It’s a very expensive business. If you don’t put on a nice event, you don’t get the people to come back. The goal is to run a great experience . . . and raise as much money for charity as possible.” (Peruse a tax return: tiger-woods-events-08)
Nonprofit No. 2: The Tiger Woods Foundation. This is the one you hear about, which gives out grants and scholarships seeking “to empower young people to reach their highest potential by initiating and supporting community-based programs that promote the health, education and welfare of all of America’s children,” say its tax returns.
It reported revenues of $10.6 million in 2008; expenses of $6 million; and has a nice cushy nest egg of - get this! - $45.5 million. Eighty-two percent of spending was programs, and it gets four of four possible stars from Charity Navigator. (Peruse a tax return: tw-foundation-08)
Nonprofit No. 3: The Tiger Woods Learning Center. “The proudest moment in Foundation history took place on February 10, 2006, as Tiger Woods was joined by former President Bill Clinton, First Lady of California Maria Shriver, and Southern California students, teachers and community leaders for the dedication of the Tiger Woods Learning Center (TWLC), an innovative youth-education facility located in Anaheim, California,” says the organization’s tax returns. “The much anticipated event served as the culmination of a four-year, $25 million campaign to transform Woods’ dream of creating an educational center to inspire and support the career exploration of young people.” Revenues in 2008 were $4.4 million, expenses were $3.9 million, and net assets were $25 million. It funneled 86 percent of spending into programs. (Peruse a tax return: tw-learning-center-08pdf)
Tiger Woods Foundation spokesperson Rachel Rees told us in an email that, although there are three nonprofit organizations, they are all considered support organizations of the Tiger Woods Foundation and viewed as one entity.
By the foundation’s own computations, 88 percent, 92 percent and 92 percent of spending went directly to charity over the past three fiscal years. ”To put that in perspective .92 of every $1.00 we spent went to programs,” the email says. “We are proud of the Foundation’s accomplishments and our ability to provide support to our programs through fundraising efforts. Our programs have allowed us to positively impact the lives of more than 10 million young people.”
One of the reasons net assets are so high - more than $70 million - is due to the value of hard assets (such as buildings) and cash that must be set aside as a condition of borrowing. When the Tiger Woods Learning Center was built, the Foundation sold $11 million in tax exempt bonds. As a result of covenants associated with these bonds, they are required to maintain net assets of at least $12.5 million. The rest represents event profits, short & longer term investments and future pledges. All of these funds are directed for the long-term growth of the foundation and its programs, according to McLaughlin.
And those who would quarrel with McLaughlin’s compensation, the Foundation says this: It relies on competitive market data when determining compensation for all of its employees. “We are extremely proud of all of our staff members and their commitment to furthering our mission to provide educational opportunities to youth worldwide,” the email said.
Woods announced last week that he would temporarily step away from his duties with the foundations. A message on his web site said, “Since my Dad and I created the Foundation, this work has been extremely important to me. I started the organization because I sincerely believe in giving back. There are millions of young people who have truly changed their lives through the Foundation’s programs, and millions more still counting on us for help. I am committed to them and to the Foundation’s excellent work, and I know my staff will continue these efforts during my absence.”
Wednesday, December 23, 2009
Saturday, December 19, 2009
Family Foundation Trick
According to "How Tiger Protected His Image " by By REED ALBERGOTTI, VANESSA O'CONNELL and RUSSELL ADAMS in Wall Street Journal, under Golf Digest's contract with Mr. Woods, the monthly, which is owned by Condé Nast Publications Inc., spent as much as $1 million annually on donations to the Tiger Woods Foundation, printing the charity's annual report and sponsoring many of Mr. Woods's preferred tournaments, according to a person familiar with the terms. In return, Mr. Woods agreed to contribute monthly articles on golf techniques and limit his appearances in competing publications.
The question is whether it was taxed as ordinary income as to this monetary compensation. My guess is that it is tax deductable for the both parties. Conde Nast could deduct this payment as the donation. The Foundation is probably non-profit and required to spend about 5% of the total asset on charitable activities. That 5% may count the expenses incurred in the foundation. For instance, if the foundation owns the private jet How do they distinguish such the expenses between private and non-profit purpose uses in such the small organization where probably the key employees are the family members. By the way, their salary and benefits are probably counted as that part of 5%.
If so, what about people who goes to work everyday and make themselves available to work 24/7? Those who are on the payroll and making more than $400K are payting the tax at 35% while someone like Tiger or the former president of the U.S. Bill Clinton are flying on the jet possibly owned by their own founation??? I don't know for sure whether it is true. I am a bit on the hypothetical term since I do not know and will personally not know.
But the trick could be ordinary for those super-stars. After all, how can we believe that those people are really intending to give back their success to the society???
The following is a brief explanation about private family foundation according to Save Wealth Estate:
A Private Family Foundation (PFF) is a separate entity, privately funded by you. It is created with the specific purpose of contributing to various charitable causes.
As a distinct, legal entity, The Private Family Foundation:
1. Contributes to a charitable cause and takes a tax deduction, while relinquishing personal control over your gift.
2. Minimizes your estate tax liability.
3. Avoids capital gains tax on the sale of appreciated property contributed to the charity of your choice.
4. Provides continuing employment and activity for your family members.
5. Identifies and preserves your family name for years to come.
Special Tax Advantages
Private Family Foundations have special tax advantages, because they are considered "charitable organizations" themselves. Because of this classification, any earnings on Foundation assets are tax-exempt, and can be distribute to the charities you choose.
If established properly, a private family foundation can often avoid capital gains taxes on highly-appreciated assets (see below). In addition, interest and investment earnings that are not slapped with an income tax can instead be used to help the charities or causes you support.
Immediate Tax Benefits for You
If you have highly-appreciated assets that you're holding to avoid steep capital gains taxes, a Private Family Foundation could help. Any appreciated assets that you transfer to a Private Family Foundation can be sold by the Foundation with no capital gains taxes. This is because of the Foundation's charitable status.
Second, you can get an immediate tax deduction for any money or property to grant to the Foundation. This deduction can equal up to 30% of your adjusted gross income (20% for appreciated property). Any income tax deduction not used in your contribution year may be carried forward over the next five years.
The valuation of these deductions depends on a number of things, including original cost and the type of property being transferred. (For more information on valuation, please request the PFF Special Report.)
Estate Tax Benefits
Every dollar that you contribute to your Private Family Foundation means one less dollar that is included in your estate. Gifts that are regularly made to charities can instead be used to fund your PFF. And if you are in a higher tax bracket, that could ultimately save up to 46% in estate taxes.
Best of all, you can make such contributions to a Private Family Foundation without affecting the $12,000 annual gift tax exclusion or the current $1 million Gift Tax Credit .
Required Distributions to Charities
Private Family Foundations have certain laws they must abide by, because they are a legal entity. For instance, by law, a Private Family Foundation must distribute at least five percent (5%) of its assets each year to public charities.
Let's suppose you leave $2,000,000 to your Private Family Foundation. The IRS says you must distribute at least $100,000 (or 5%) to recognized charities in order for the Foundation to qualify for its special tax advantages. Of course, you can select a higher payout if you choose. But five percent is the absolute minimum.
The annual payout is established when you first sit down with a qualified estate attorney who has experience working with large estates. And the difference between what the assets earn (e.g. 6% per year) and the mandatory payout can be put back into the Foundation.
Employment for the Family
You may arrange for your heirs and descendants to receive salaries as "employees" of your Foundation. Simply name family members as replacement trustees to succeed you after death or resignation.
Many Foundations pay their directors using the difference between their required distributions and their annual income. If your Foundation is earning 10% annually on its assets, but only paying 5% annually to charities, the difference can be distribute for legitimate expenses, including salaries for the directors of the Foundation.
Ensuring Kids Don't Lose Out
While charities will definitely benefit from your Foundation, your children are deprived of the donated assets, after estate taxes are accounted for. To remedy this situation, some individuals also choose to establish a generation-skipping dynasty trust (like The Legacy Trust) to avoid estate taxes for up to three generations.
The Legacy Trust, which is an advanced type of dynasty trust, also acts as a shield for assets (subject to variations in state law). When properly drafted and implemented, the Legacy Trust can also help place assets outside your estate, outside the reach of creditors, judgments, malpractice and divorce.
The Legacy Trust can also provide a substantial benefit for your heirs, particularly through the use of cash-rich life insurance. After funding The Legacy Trust with annual gifts, it can purchase insurance payable to your heirs (as beneficiaries of The Legacy Trust). The children would then receive a lump-sum when you pass away, or you could have The Legacy Trust support grandchildren (or even great-grandchildren). All of these benefits are usually 100% estate tax- and income tax-free if structured properly.
Foundations and Charitable Trusts
Private Family Foundations can also be combined with Charitable Remainder and Charitable Lead Trusts. By doing so, you may able to draw a significant income for your lifetimes and earn significant tax savings, while still maintaining a large degree of control of your assets.
The question is whether it was taxed as ordinary income as to this monetary compensation. My guess is that it is tax deductable for the both parties. Conde Nast could deduct this payment as the donation. The Foundation is probably non-profit and required to spend about 5% of the total asset on charitable activities. That 5% may count the expenses incurred in the foundation. For instance, if the foundation owns the private jet How do they distinguish such the expenses between private and non-profit purpose uses in such the small organization where probably the key employees are the family members. By the way, their salary and benefits are probably counted as that part of 5%.
If so, what about people who goes to work everyday and make themselves available to work 24/7? Those who are on the payroll and making more than $400K are payting the tax at 35% while someone like Tiger or the former president of the U.S. Bill Clinton are flying on the jet possibly owned by their own founation??? I don't know for sure whether it is true. I am a bit on the hypothetical term since I do not know and will personally not know.
But the trick could be ordinary for those super-stars. After all, how can we believe that those people are really intending to give back their success to the society???
The following is a brief explanation about private family foundation according to Save Wealth Estate:
A Private Family Foundation (PFF) is a separate entity, privately funded by you. It is created with the specific purpose of contributing to various charitable causes.
As a distinct, legal entity, The Private Family Foundation:
1. Contributes to a charitable cause and takes a tax deduction, while relinquishing personal control over your gift.
2. Minimizes your estate tax liability.
3. Avoids capital gains tax on the sale of appreciated property contributed to the charity of your choice.
4. Provides continuing employment and activity for your family members.
5. Identifies and preserves your family name for years to come.
Special Tax Advantages
Private Family Foundations have special tax advantages, because they are considered "charitable organizations" themselves. Because of this classification, any earnings on Foundation assets are tax-exempt, and can be distribute to the charities you choose.
If established properly, a private family foundation can often avoid capital gains taxes on highly-appreciated assets (see below). In addition, interest and investment earnings that are not slapped with an income tax can instead be used to help the charities or causes you support.
Immediate Tax Benefits for You
If you have highly-appreciated assets that you're holding to avoid steep capital gains taxes, a Private Family Foundation could help. Any appreciated assets that you transfer to a Private Family Foundation can be sold by the Foundation with no capital gains taxes. This is because of the Foundation's charitable status.
Second, you can get an immediate tax deduction for any money or property to grant to the Foundation. This deduction can equal up to 30% of your adjusted gross income (20% for appreciated property). Any income tax deduction not used in your contribution year may be carried forward over the next five years.
The valuation of these deductions depends on a number of things, including original cost and the type of property being transferred. (For more information on valuation, please request the PFF Special Report.)
Estate Tax Benefits
Every dollar that you contribute to your Private Family Foundation means one less dollar that is included in your estate. Gifts that are regularly made to charities can instead be used to fund your PFF. And if you are in a higher tax bracket, that could ultimately save up to 46% in estate taxes.
Best of all, you can make such contributions to a Private Family Foundation without affecting the $12,000 annual gift tax exclusion or the current $1 million Gift Tax Credit .
Required Distributions to Charities
Private Family Foundations have certain laws they must abide by, because they are a legal entity. For instance, by law, a Private Family Foundation must distribute at least five percent (5%) of its assets each year to public charities.
Let's suppose you leave $2,000,000 to your Private Family Foundation. The IRS says you must distribute at least $100,000 (or 5%) to recognized charities in order for the Foundation to qualify for its special tax advantages. Of course, you can select a higher payout if you choose. But five percent is the absolute minimum.
The annual payout is established when you first sit down with a qualified estate attorney who has experience working with large estates. And the difference between what the assets earn (e.g. 6% per year) and the mandatory payout can be put back into the Foundation.
Employment for the Family
You may arrange for your heirs and descendants to receive salaries as "employees" of your Foundation. Simply name family members as replacement trustees to succeed you after death or resignation.
Many Foundations pay their directors using the difference between their required distributions and their annual income. If your Foundation is earning 10% annually on its assets, but only paying 5% annually to charities, the difference can be distribute for legitimate expenses, including salaries for the directors of the Foundation.
Ensuring Kids Don't Lose Out
While charities will definitely benefit from your Foundation, your children are deprived of the donated assets, after estate taxes are accounted for. To remedy this situation, some individuals also choose to establish a generation-skipping dynasty trust (like The Legacy Trust) to avoid estate taxes for up to three generations.
The Legacy Trust, which is an advanced type of dynasty trust, also acts as a shield for assets (subject to variations in state law). When properly drafted and implemented, the Legacy Trust can also help place assets outside your estate, outside the reach of creditors, judgments, malpractice and divorce.
The Legacy Trust can also provide a substantial benefit for your heirs, particularly through the use of cash-rich life insurance. After funding The Legacy Trust with annual gifts, it can purchase insurance payable to your heirs (as beneficiaries of The Legacy Trust). The children would then receive a lump-sum when you pass away, or you could have The Legacy Trust support grandchildren (or even great-grandchildren). All of these benefits are usually 100% estate tax- and income tax-free if structured properly.
Foundations and Charitable Trusts
Private Family Foundations can also be combined with Charitable Remainder and Charitable Lead Trusts. By doing so, you may able to draw a significant income for your lifetimes and earn significant tax savings, while still maintaining a large degree of control of your assets.
Friday, December 18, 2009
Celebrity's no taxable lavish lifestyle.
Gwyneth Paltrow is on the news.
I do not have any personal connection with her. But, I hate that spoiled brat.
According to the news "Gwyneth Paltrow: Will the FTC Call About Her 'Ridiculously Lavish' Vacation?" by JEFF BERCOVICI, Goop, Paltrow's lifestyle newsletter, lavishly praises the newly-reopened La Mamounia Hotel in Marrakech, Morocco. "The Jacques Garcia designed interiors are splendid to say the least, and the hotel's gardens are out of this world, almost from a fairy tale," she writes. "The food and drinks here are elegant and delicious and with all the choices, it's easy to stay in the hotel for an entire weekend of relaxation."
Paltrow apparently acquired her familiarity with La Mamounia over Thanksgiving weekend, when she was one of several celebrity VIPs in attendance at the hotel's grand reopening festivities. (Jennifer Aniston, Salma Hayek, and Orlando Bloom were also there.)
Do Celebrities Pay?
A hotel representative declined to comment on the arrangements it made for the celebrity guests, and Paltrow's spokesman did not respond to requests for comment. But celebrity wranglers and publicists who work with A-list Hollywood talent say it's inconceivable that stars of Paltrow and Aniston's magnitude would have paid their own way on such an excursion.
"Not a chance in hell," says one booker, who asked not to be identified. "I'm sure they were comped the entire thing. If you're going to go on a holiday over Thanksgiving, you don't go somewhere you know there are going to be photographers if you're paying."
In fact, the booker adds, the real question is whether Paltrow and her friends were paid in cash, or merely received free luxury accommodations, travel, and services, such as the daily hammam treatment Paltrow enjoyed "5 minutes in a steam room, a full-body lather in Black Soap, an exfoliating rub down, a Ghassoul (Moroccan clay) body masque, and then a warm shower...Ridiculously lavish!"
Rooms at La Mamounia reportedly start at $800 per night. It's a safe bet Paltrow's room didn't overlook the parking lot.
Potential Violations
Here's the problem. Under the guidelines published last month by the FTC, a celebrity who endorses a product or service has to disclose any "material connection" to the provider -- a designation that covers not only cash compensation but also free merchandise or services. The new rules specifically target new media like e-newsletters and websites, the two formats in which Goop is published.
The guidelines read: "Although disclosure of compensation may not be required when a celebrity or expert appears in a conventional television advertisement, endorsements by these individuals in other media might warrant such disclosure."
Under the strictest reading of the new rules, bloggers or celebrities who make endorsements without disclosing material compensation are subject to fines of up to $11,000. FTC officials, however, have made it clear that such fines would be targeted mainly at advertisers and would be levied only in serious cases.
This is the example that I cannot stand celebrities especially when they do not only endorse products but also send the message and image that they care about all those little people!
Once the former president, Bill Clinton, spoke in DNC that when we become successfule and make more money, why don't we pay more tax. Yeah, President, it is easy to say that when you make millions just by engaing speeches for a few hours at a time. It is a different success story from making just hundred thousands dollar before tax by working like dogs for 24 hours and 7 days being treated not as VIP but as everybody else.
While those top of the cream don't mind raising tax on people who make just more than $350K per year, there is no talk of creating more tax brackets beyond $350K.
People who make 1 million and people who make just over $350K pay the same tax rate.
For instance, I overheard that Anderson Cooper in CNN who are definetely on the little people's sides from this public image make about $4 million per year over the contract with CNN.
What does the contract mean???
The contract means to create a company where he can expense the part of his lifesytle like those A-list celebrities???
I personally like Anderson. However, the government is about increasing tax on our household income of a few hundred thousands by working 24/7 like dogs as ordinary citizens. Meanwhile, those celebrities being treated as VIP and making not only millions but also shelting their income from tax by incorporating themselves loudly speak to support for paying more tax.
Those celeblities pretend as if they care about those little people. However, I do not feel in that way. Maybe the fastest to help those poor people might be for those top of the cream to give up their wealth to those under-priveledge??? Instead, in order to avoid paying their really equal share, they propose to increase tax on those who make just more than $350K. Those who make more than $350K and just below that amount are spending their most time at work. They might go vacation. But, they pay their vacation on their own after they pay tax.
I am also talking about those charitable foundation pretending that they are giving back to the society by expensing their lavish lifestyle as the part of tax deduction.
Here is the story I would love to distribute to as many people as we can as to this charitable trust.
This story was reported by Globe Spotlight Team reporters Beth Healy, Francie Latour, Sacha Pfeiffer, and Michael Rezendes, and editor Walter V. Robinson. It was written by Healy. Second in a series of occasional articles.
It looked like a high-end corporate jet, the luxurious, long-range Bombardier that landed at the Lynchburg, Va., airport on a sunny Thursday afternoon in September. But no corporate executive disembarked.
Instead, out stepped Nancy
Leigh DeMoss. She is a trustee of the Arthur S. DeMoss Foundation, a private charitable foundation whose mission is to support Christian organizations. The Globe Spotlight Team determined the foundation spent $36 million in 2001 to buy the 12-seat, transoceanic jet -- and millions more over the last two decades to own and operate two prior jets. It is the kind of extravagance that has infuriated shareholders of public companies during the corporate scandals of the past two years. Yet private planes and other big-ticket expenses go virtually unnoticed in the world of philanthropy, even though foundations are publicly subsidized through huge tax breaks for the wealthy donors who set them up. A Globe review of foundation tax returns revealed numerous instances of money earmarked for charity being used to fund travel and lavish perks for foundation trustees -- the people charged with protecting foundation assets.
In Dallas, two officers of the Carl B. and Florence E. King Foundation, established by a Texas oil man to fund educational programs, used foundation credit cards to pay for family vacations to Australia and at least six European countries.
In New York, 14 part-time paid trustees of the Herman Goldman Foundation stand to collect a total of $1.8 million in retirement benefits, thanks to a 1993 vote by the board. And at the largest foundation in Oklahoma, a $5.7 million jet has been used to ferry trustees to meetings and to shuttle a part-time consultant 43 times in the last two years from Athens, Ga., to foundation headquarters.
Larry A. Pulliam, executive vice president of the $900 million Samuel Roberts Noble Foundation in Ardmore, Okla., mused during an interview, ``Maybe the homeless people in Dallas need their soup more than our trustees need their plane.'' But, he added, ``I don't think it's valid.''
Beyond the enormous paychecks some foundation trustees take, excesses documented in a Spotlight report last month, the Globe has uncovered evidence of charitable assets being used to pay rent for plush office space and health club dues and to buy luxury cars, Persian rugs, and fine art.
Some examples:
At the King Foundation, president Carl L. Yeckel arranged for himself and his top aide to receive pensions totaling more than $1 million a year, creating an unfunded future liability that experts say could drive the $41 million foundation into insolvency, according to lawyers involved in a lawsuit against the foundation.
Oklahoma City's Kerr Foundation, established to fund local social and cultural causes, bought a $44,000 Jaguar for the personal use of foundation officials. The $28 million foundation, which also spent $616,000 to buy a headquarters building, spends twice as much money on salaries and expenses as it donates to charities.
The John & Mary R. Markle Foundation paid $837,291 in rent last year for offices at Rockefeller Plaza in midtown Manhattan, where it funds research on health care and national security. And the $53 million Pollock-Krasner Foundation, started by the widow of artist Jackson Pollock to support artists, bought a $2.3 million co-op apartment on Park Avenue in New York's exclusive upper East Side for its office.
In an interview, Pollock Foundation chairman Charles C. Bergman said the co-op purchase was a bargain compared to the $156,000 in annual rent the foundation had been paying. The foundation also spent $187,000 to renovate the new office, according to its tax returns.
At the Markle Foundation, spokesman Todd Glass said the board is looking to reduce the rent by subletting some space to other nonprofits. ``We expect to cut our rent by 50 percent in the next six months,'' he said.
Extravagant spending
Although extravagant spending is not uncommon, the vast majority of private foundations do not drain their assets this way, the Globe review found. Similarly, most foundations do not overpay trustees and foundation managers.
The exceptions, however, are many and striking. Last month, the Globe disclosed cases in which foundation executives who claimed to be working full time were taking annual salaries approaching or exceeding $1 million, while many part-time trustees were being paid tens of thousands of dollars, and sometimes hundreds of thousands, for attending a handful of meetings each year.
After the report, attorneys general in California, New York, and Massachusetts opened inquiries into the apparent abuses. In the most egregious case reported by the Globe, Paul D. Cabot Jr. of Needham paid himself $1.4 million in 2001 and $1.3 million in 2002 for overseeing a family foundation whose assets have dwindled from $14 million in the mid-1990's to $4.9 million early this year. Cabot told the Globe he gave himself a $400,000 raise in 2001 to help defray the cost of a daughter's wedding.
In exchange for the tax breaks given to people who establish private philanthropies, the law requires foundations to donate at least five percent of their assets to charity each year. ``Reasonable'' expenses are allowed, and may be deducted from the mandated 5 percent.
Such expenses can put a considerable dent in what foundations give to charity. For example, at the Kerr Foundation, endowed by a former Oklahoma senator who made his fortune in oil, nearly half the 5 percent distribution in 2001 was eaten up by administrative expenses, travel, and salaries.
Alan L. Feld, A Boston University law professor and an expert in nonprofit law, said that the pattern of spending reported by the Globe goes ``way beyond what any reasonable person would think was appropriate.''
Said Feld: ``For foundation officials to behave as if a private foundation is another pocket of their own is wrong, and it deprives the intended beneficiaries of charities what they are entitled to.... This is part of a pattern where people are treating foundation assets as a pot of money they can dip into as they wish.''
Feld, in a view echoed by other experts, said that foundation spending now goes almost unregulated, with the Internal Revenue Service and state attorneys general providing little oversight. Each year the IRS audits only about 100 of the nation's 60,000 private foundations. State regulators complain that they don't have the budget or staff to audit foundation filings.
In the rare cases when they are discovered, abuses of foundation spending rules can result in stiff penalties. If the IRS finds that foundation executives are ``self dealing,'' or taking perks that ought to be counted as part of their personal compensation, those executives can be forced to repay the funds, plus a penalty that can range from 5 to 200 percent. Foundation managers or trustees who know of abuses can also be penalized. And, in egregious cases, foundations can lose their tax-exempt status.
Public perception
If Cabot represents the extreme in compensation, then the DeMoss Foundation's jet is its match in the perks category.
Bruce Hopkins, a lawyer at the Kansas City law firm Polsinelli Shalton & Welte and an expert on foundations, said he would advise his clients not to buy a jet because it is nearly impossible to justify the cost as reasonable under IRS rules.
``It just doesn't wash,'' Hopkins said of the DeMoss jet. ``I'm confident if the IRS or a court looked at this, it simply would not hold up.''
Often, however, the IRS has no way of knowing about such purchases. Foundation assets are supposed to be listed on a depreciation schedule included with each tax return, but the Globe found that many foundations do not file the schedules.
The $444 million DeMoss foundation did file its depreciation schedule, which shows that the Bombardier - nicknamed the ``Gold Star II'' - was purchased in 2001 to replace a more modest jet. The foundation spends more than $1.5 million a year to pay the salaries of two pilots and to operate and maintain the aircraft, which the manufacturer calls an ``ultra long-range, high-speed business jet.''
According to a former foundation pilot, who asked that he not be identified, the aircraft was purchased at the request of chairman Nancy S. DeMoss, the widow of Arthur S. DeMoss, who founded a Pennsylvania mail-order life insurance company. Mrs. DeMoss wanted to make flights to remote destinations in Asia and Africa, where the foundation supports missionary work, with fewer fuel stops, the pilot said.
Larry R. Nelson, the foundation's chief financial officer, sidestepped most of the Globe's questions about the jet. But in an e-mail, he said the foundation supports many causes and projects, ``most of which are overseas, many in the third world.'' The foundation's latest available tax filing, covering 2001, shows that two-thirds of its $36 million in grants went to domestic Christian ministries and churches.
Two former foundation executives said the foundation uses the jet mainly ``for charitable purposes.'' But not always: Since July, flight records tracked by the Globe show the DeMoss jet being flown routinely in and out of Palm Beach International Airport, near the foundation's headquarters, often to places where the foundation doesn't make grants. The jet has also flown to Washington, D.C., New York, Atlanta, and Scottsdale, Ariz., among other cities, and to Little Rock, where daughter Nancy Leigh DeMoss tapes a religious radio program.
In September, the daughter's trip to Lynchburg was for a speaking engagement. The jet picked her up that morning in South Bend, Ind., 20 miles from her home. In July, her mother took the jet to Orlando, Fla., a three-hour drive from her $10 million home in Palm Beach, to attend a friend's funeral. And the DeMoss grandchildren have occasionally flown on the jet, the former pilot said.
DeMoss family members - the mother and four others are trustees - refused to be interviewed for this story.
As for the Noble Foundation, Pulliam said it received an OK from its attorneys before buying its seven-seat Cessna Bravo jet. ``We talked about the public perception of this before we went ahead, that some people would say, `You're a charitable organization and you've got a plane,''' he said. ``It is a public relations issue.''
Pulliam said the foundation uses the plane to help Noble's scientists travel more efficiently from rural Ardmore to remote sites in Texas, Missouri, Kansas, and Colorado, where it funds agricultural and biotechnology programs.
After the Globe raised questions about the more than 40 flights back and forth to Athens, Ga., Pulliam said that a foundation consultant, Joe Bouton, a professor of crop and soil sciences at the University of Georgia, has been shuttling back and forth to Oklahoma on the jet twice a month over the last two years. Bouton, he said, plans to move to Oklahoma next spring.
``Using commercial airlines, it takes Dr. Bouton about 8 hours to get to Ardmore from Athens,'' including two hours driving time on each end of the trip, plus waiting time in airports, Pulliam wrote in an e-mail to the Globe. ``Using our aircraft, it takes less than three hours.''
Pulliam said buying the jet, with its annual operating costs of about $600,000, was the brainchild of the foundation's trustees. Nine of the 15 trustees are descendants of Oklahoma oil man Lloyd Noble, who started the foundation in 1945. Pulliam said the trustees, especially those who live in Atlanta, use the jet to travel to Oklahoma for trustee meetings and to monitor the foundation's farflung projects.
The use of the aircraft, both for Bouton's commuting and the trustees' flights, is ``quite appropriate,'' Pulliam said. He said the plane has never been used for nonfoundation business.
Nonetheless, in the post-Enron era, corporate executives have found it increasingly difficult to justify the purchase of aircraft, much less long-range jets like the DeMoss Bombardier, according to people who sell and lease business jets
``A big piece of owning a jet is ego,'' said Mark Stone, chief executive of Sentient Jet Inc., a Norwell company that leases jets to customers on short notice. ``A lot of corporations have sold their aircraft, because they just didn't feel that it was giving the right image to their shareholders.'' At many other foundations, executives are given luxury cars for their use. When the president of the M. B. and Edna Zale Foundation in Dallas was ready to retire in 2001, the foundation let him keep his company vehicle - a 1999 Lexus.
The sedan was part of a $325,000 retirement package given to Michael Romaine, who worked for the Zale family's jewelry company before heading their foundation, according to the foundation's current president, Leonard Krasnow. With Romaine driving off in the Lexus, the foundation bought Krasnow a 2001 Infiniti.
Reached at his retirement home in North Carolina, Romaine, 64, at first said he bought the Lexus from the foundation for $24,000. But when told what Krasnow had said, Romaine asked, ``Did they give it to me? I'd have to look it up. ... I can't remember if I bought it or not.''
The foundation's original purchase of the Lexus for him was justified, Romaine said, calling it ``a very basic car.''
A lawsuit in Texas
At the King Foundation in Dallas, Yeckel, 67, and his deputy, Thomas W. Vett, used foundation credit cards to take at least one foreign vacation a year. But it took years for anyone to discover the excessive spending. In early 2002, Yeckel's sister, Dorothy Yeckel, became suspicious of her brother's lifestyle, including his $1.5 million home and the exotic vacations he took.
Todd Amacher, the sister's lawyer, looked over the foundation's tax returns and alerted the Texas attorney general to the $1 million in compensation Yeckel was taking. Assistant Attorney General John Vinson filed suit, and ultimately a new board took control of the foundation. The suit became public last year, but the details of Yeckel and Vett's free-spending ways had not been disclosed.
During an October 24 deposition, Vett testified that he and Yeckel each used King Foundation credit cards to travel with their wives and other family members to England, Scotland, Australia, Russia, the Czech Republic, Germany, and Italy. There were also numerous trips to San Francisco and New York, according to a lawyer familiar with Vett's testimony.
The globetrotting cost the foundation an estimated $200,000 over five years, according to one person who is involved in the case. That money came straight out of the pockets of charities the foundation might otherwise have funded, because the executives counted the travel on foundation tax returns as a charitable expense.
And their foundation-subsidized lifestyle went well beyond vacations. The foundation maintained three memberships at a private downtown Dallas dining club, at a cost of more than $5,000 a year. In 2001, according to the attorney's general's lawsuit, the foundation credit cards were billed for $6,442 for restaurant bills; $23,000 for purchases in retail stores and $6,531 for health-club memberships.
Yeckel, in a brief telephone interview, declined to answer questions. An attorney for Vett said he could not discuss his client's testimony.
In other cases, relatives of those who established foundations spend the assets as if they were their own personal funds. At the $43 million Roy F. & Joann Cole Mitte Foundation in Austin, Texas, Scott Mitte began to run up personal expenses almost as soon as he took the helm of the foundation his parents founded.
Since 1999, the foundation has purchased Tony Bennett concert tickets worth $4,003, a $4,037 custom tuxedo, and six doors totaling $6,090 that were delivered to Mitte's home, according to an audit of foundation expenses. During Mitte's tenure, the foundation's spending on travel and meetings rocketed from about $50 a year in the late 1990s to $183,000 in 2001, while his compensation also leapt from $31,000 in 1999 to $220,000 in 2001.
And it paid $368,000 in legal fees last year, up from $6,689 the year before, in part to cover a legal battle between the foundation and Roy Mitte's company. Also last year, the foundation footed the bill for an out-of-court settlement with a woman who sued Mitte for alleged sexual harrassment. The foundation disclosed a $139,000 ``legal settlement'' on its 2002 tax return.
The foundation's lawyer, Jeffrey T. Knebel, declined to discuss the settlement or answer questions about other foundation spending. Mitte resigned as executive director in August, 2002, when the harassment charge became public, but remains on the foundation's board of directors and serves as its senior vice president. He did not return calls from the Globe.
In a statement, the foundation said it believed its expenses were ``reasonable, appropriate, and have been greatly justified.''
Some large foundation expenses are tucked into a category on tax filings called, ``travel, conferences, and meetings.'' The IRS does not require detailed accounting for such costs. At several foundations, officials refused to provide the Globe with documentation to justify the costs, or declined to answer questions.
The $13.5 million Chiles Foundation of Portland, Ore., for example, reported spending $591,415 on travel, conferences, and meetings from 1998 through 2002, according to its tax returns. Another $128,115 was reported for ``autos and parking'' during that period, while the foundation paid $300,000 in rent for its offices. The largest beneficiary of the foundation is Boston University, where foundation chief Earle M. Chiles, 83, is a trustee.
Foundation officials turned aside Globe efforts to interview Chiles, the son of the founder. In a written note, the foundation attributed its spending to ``grant-related work'' and to periodic meetings with its investment advisers. One foundation official, Sharron D. Mathews, said in a brief telephone interview: ``If our spending is out of line, it is only the Internal Revenue Service we need to account to.''
I do not have any personal connection with her. But, I hate that spoiled brat.
According to the news "Gwyneth Paltrow: Will the FTC Call About Her 'Ridiculously Lavish' Vacation?" by JEFF BERCOVICI, Goop, Paltrow's lifestyle newsletter, lavishly praises the newly-reopened La Mamounia Hotel in Marrakech, Morocco. "The Jacques Garcia designed interiors are splendid to say the least, and the hotel's gardens are out of this world, almost from a fairy tale," she writes. "The food and drinks here are elegant and delicious and with all the choices, it's easy to stay in the hotel for an entire weekend of relaxation."
Paltrow apparently acquired her familiarity with La Mamounia over Thanksgiving weekend, when she was one of several celebrity VIPs in attendance at the hotel's grand reopening festivities. (Jennifer Aniston, Salma Hayek, and Orlando Bloom were also there.)
Do Celebrities Pay?
A hotel representative declined to comment on the arrangements it made for the celebrity guests, and Paltrow's spokesman did not respond to requests for comment. But celebrity wranglers and publicists who work with A-list Hollywood talent say it's inconceivable that stars of Paltrow and Aniston's magnitude would have paid their own way on such an excursion.
"Not a chance in hell," says one booker, who asked not to be identified. "I'm sure they were comped the entire thing. If you're going to go on a holiday over Thanksgiving, you don't go somewhere you know there are going to be photographers if you're paying."
In fact, the booker adds, the real question is whether Paltrow and her friends were paid in cash, or merely received free luxury accommodations, travel, and services, such as the daily hammam treatment Paltrow enjoyed "5 minutes in a steam room, a full-body lather in Black Soap, an exfoliating rub down, a Ghassoul (Moroccan clay) body masque, and then a warm shower...Ridiculously lavish!"
Rooms at La Mamounia reportedly start at $800 per night. It's a safe bet Paltrow's room didn't overlook the parking lot.
Potential Violations
Here's the problem. Under the guidelines published last month by the FTC, a celebrity who endorses a product or service has to disclose any "material connection" to the provider -- a designation that covers not only cash compensation but also free merchandise or services. The new rules specifically target new media like e-newsletters and websites, the two formats in which Goop is published.
The guidelines read: "Although disclosure of compensation may not be required when a celebrity or expert appears in a conventional television advertisement, endorsements by these individuals in other media might warrant such disclosure."
Under the strictest reading of the new rules, bloggers or celebrities who make endorsements without disclosing material compensation are subject to fines of up to $11,000. FTC officials, however, have made it clear that such fines would be targeted mainly at advertisers and would be levied only in serious cases.
This is the example that I cannot stand celebrities especially when they do not only endorse products but also send the message and image that they care about all those little people!
Once the former president, Bill Clinton, spoke in DNC that when we become successfule and make more money, why don't we pay more tax. Yeah, President, it is easy to say that when you make millions just by engaing speeches for a few hours at a time. It is a different success story from making just hundred thousands dollar before tax by working like dogs for 24 hours and 7 days being treated not as VIP but as everybody else.
While those top of the cream don't mind raising tax on people who make just more than $350K per year, there is no talk of creating more tax brackets beyond $350K.
People who make 1 million and people who make just over $350K pay the same tax rate.
For instance, I overheard that Anderson Cooper in CNN who are definetely on the little people's sides from this public image make about $4 million per year over the contract with CNN.
What does the contract mean???
The contract means to create a company where he can expense the part of his lifesytle like those A-list celebrities???
I personally like Anderson. However, the government is about increasing tax on our household income of a few hundred thousands by working 24/7 like dogs as ordinary citizens. Meanwhile, those celebrities being treated as VIP and making not only millions but also shelting their income from tax by incorporating themselves loudly speak to support for paying more tax.
Those celeblities pretend as if they care about those little people. However, I do not feel in that way. Maybe the fastest to help those poor people might be for those top of the cream to give up their wealth to those under-priveledge??? Instead, in order to avoid paying their really equal share, they propose to increase tax on those who make just more than $350K. Those who make more than $350K and just below that amount are spending their most time at work. They might go vacation. But, they pay their vacation on their own after they pay tax.
I am also talking about those charitable foundation pretending that they are giving back to the society by expensing their lavish lifestyle as the part of tax deduction.
Here is the story I would love to distribute to as many people as we can as to this charitable trust.
This story was reported by Globe Spotlight Team reporters Beth Healy, Francie Latour, Sacha Pfeiffer, and Michael Rezendes, and editor Walter V. Robinson. It was written by Healy. Second in a series of occasional articles.
It looked like a high-end corporate jet, the luxurious, long-range Bombardier that landed at the Lynchburg, Va., airport on a sunny Thursday afternoon in September. But no corporate executive disembarked.
Instead, out stepped Nancy
Leigh DeMoss. She is a trustee of the Arthur S. DeMoss Foundation, a private charitable foundation whose mission is to support Christian organizations. The Globe Spotlight Team determined the foundation spent $36 million in 2001 to buy the 12-seat, transoceanic jet -- and millions more over the last two decades to own and operate two prior jets. It is the kind of extravagance that has infuriated shareholders of public companies during the corporate scandals of the past two years. Yet private planes and other big-ticket expenses go virtually unnoticed in the world of philanthropy, even though foundations are publicly subsidized through huge tax breaks for the wealthy donors who set them up. A Globe review of foundation tax returns revealed numerous instances of money earmarked for charity being used to fund travel and lavish perks for foundation trustees -- the people charged with protecting foundation assets.
In Dallas, two officers of the Carl B. and Florence E. King Foundation, established by a Texas oil man to fund educational programs, used foundation credit cards to pay for family vacations to Australia and at least six European countries.
In New York, 14 part-time paid trustees of the Herman Goldman Foundation stand to collect a total of $1.8 million in retirement benefits, thanks to a 1993 vote by the board. And at the largest foundation in Oklahoma, a $5.7 million jet has been used to ferry trustees to meetings and to shuttle a part-time consultant 43 times in the last two years from Athens, Ga., to foundation headquarters.
Larry A. Pulliam, executive vice president of the $900 million Samuel Roberts Noble Foundation in Ardmore, Okla., mused during an interview, ``Maybe the homeless people in Dallas need their soup more than our trustees need their plane.'' But, he added, ``I don't think it's valid.''
Beyond the enormous paychecks some foundation trustees take, excesses documented in a Spotlight report last month, the Globe has uncovered evidence of charitable assets being used to pay rent for plush office space and health club dues and to buy luxury cars, Persian rugs, and fine art.
Some examples:
At the King Foundation, president Carl L. Yeckel arranged for himself and his top aide to receive pensions totaling more than $1 million a year, creating an unfunded future liability that experts say could drive the $41 million foundation into insolvency, according to lawyers involved in a lawsuit against the foundation.
Oklahoma City's Kerr Foundation, established to fund local social and cultural causes, bought a $44,000 Jaguar for the personal use of foundation officials. The $28 million foundation, which also spent $616,000 to buy a headquarters building, spends twice as much money on salaries and expenses as it donates to charities.
The John & Mary R. Markle Foundation paid $837,291 in rent last year for offices at Rockefeller Plaza in midtown Manhattan, where it funds research on health care and national security. And the $53 million Pollock-Krasner Foundation, started by the widow of artist Jackson Pollock to support artists, bought a $2.3 million co-op apartment on Park Avenue in New York's exclusive upper East Side for its office.
In an interview, Pollock Foundation chairman Charles C. Bergman said the co-op purchase was a bargain compared to the $156,000 in annual rent the foundation had been paying. The foundation also spent $187,000 to renovate the new office, according to its tax returns.
At the Markle Foundation, spokesman Todd Glass said the board is looking to reduce the rent by subletting some space to other nonprofits. ``We expect to cut our rent by 50 percent in the next six months,'' he said.
Extravagant spending
Although extravagant spending is not uncommon, the vast majority of private foundations do not drain their assets this way, the Globe review found. Similarly, most foundations do not overpay trustees and foundation managers.
The exceptions, however, are many and striking. Last month, the Globe disclosed cases in which foundation executives who claimed to be working full time were taking annual salaries approaching or exceeding $1 million, while many part-time trustees were being paid tens of thousands of dollars, and sometimes hundreds of thousands, for attending a handful of meetings each year.
After the report, attorneys general in California, New York, and Massachusetts opened inquiries into the apparent abuses. In the most egregious case reported by the Globe, Paul D. Cabot Jr. of Needham paid himself $1.4 million in 2001 and $1.3 million in 2002 for overseeing a family foundation whose assets have dwindled from $14 million in the mid-1990's to $4.9 million early this year. Cabot told the Globe he gave himself a $400,000 raise in 2001 to help defray the cost of a daughter's wedding.
In exchange for the tax breaks given to people who establish private philanthropies, the law requires foundations to donate at least five percent of their assets to charity each year. ``Reasonable'' expenses are allowed, and may be deducted from the mandated 5 percent.
Such expenses can put a considerable dent in what foundations give to charity. For example, at the Kerr Foundation, endowed by a former Oklahoma senator who made his fortune in oil, nearly half the 5 percent distribution in 2001 was eaten up by administrative expenses, travel, and salaries.
Alan L. Feld, A Boston University law professor and an expert in nonprofit law, said that the pattern of spending reported by the Globe goes ``way beyond what any reasonable person would think was appropriate.''
Said Feld: ``For foundation officials to behave as if a private foundation is another pocket of their own is wrong, and it deprives the intended beneficiaries of charities what they are entitled to.... This is part of a pattern where people are treating foundation assets as a pot of money they can dip into as they wish.''
Feld, in a view echoed by other experts, said that foundation spending now goes almost unregulated, with the Internal Revenue Service and state attorneys general providing little oversight. Each year the IRS audits only about 100 of the nation's 60,000 private foundations. State regulators complain that they don't have the budget or staff to audit foundation filings.
In the rare cases when they are discovered, abuses of foundation spending rules can result in stiff penalties. If the IRS finds that foundation executives are ``self dealing,'' or taking perks that ought to be counted as part of their personal compensation, those executives can be forced to repay the funds, plus a penalty that can range from 5 to 200 percent. Foundation managers or trustees who know of abuses can also be penalized. And, in egregious cases, foundations can lose their tax-exempt status.
Public perception
If Cabot represents the extreme in compensation, then the DeMoss Foundation's jet is its match in the perks category.
Bruce Hopkins, a lawyer at the Kansas City law firm Polsinelli Shalton & Welte and an expert on foundations, said he would advise his clients not to buy a jet because it is nearly impossible to justify the cost as reasonable under IRS rules.
``It just doesn't wash,'' Hopkins said of the DeMoss jet. ``I'm confident if the IRS or a court looked at this, it simply would not hold up.''
Often, however, the IRS has no way of knowing about such purchases. Foundation assets are supposed to be listed on a depreciation schedule included with each tax return, but the Globe found that many foundations do not file the schedules.
The $444 million DeMoss foundation did file its depreciation schedule, which shows that the Bombardier - nicknamed the ``Gold Star II'' - was purchased in 2001 to replace a more modest jet. The foundation spends more than $1.5 million a year to pay the salaries of two pilots and to operate and maintain the aircraft, which the manufacturer calls an ``ultra long-range, high-speed business jet.''
According to a former foundation pilot, who asked that he not be identified, the aircraft was purchased at the request of chairman Nancy S. DeMoss, the widow of Arthur S. DeMoss, who founded a Pennsylvania mail-order life insurance company. Mrs. DeMoss wanted to make flights to remote destinations in Asia and Africa, where the foundation supports missionary work, with fewer fuel stops, the pilot said.
Larry R. Nelson, the foundation's chief financial officer, sidestepped most of the Globe's questions about the jet. But in an e-mail, he said the foundation supports many causes and projects, ``most of which are overseas, many in the third world.'' The foundation's latest available tax filing, covering 2001, shows that two-thirds of its $36 million in grants went to domestic Christian ministries and churches.
Two former foundation executives said the foundation uses the jet mainly ``for charitable purposes.'' But not always: Since July, flight records tracked by the Globe show the DeMoss jet being flown routinely in and out of Palm Beach International Airport, near the foundation's headquarters, often to places where the foundation doesn't make grants. The jet has also flown to Washington, D.C., New York, Atlanta, and Scottsdale, Ariz., among other cities, and to Little Rock, where daughter Nancy Leigh DeMoss tapes a religious radio program.
In September, the daughter's trip to Lynchburg was for a speaking engagement. The jet picked her up that morning in South Bend, Ind., 20 miles from her home. In July, her mother took the jet to Orlando, Fla., a three-hour drive from her $10 million home in Palm Beach, to attend a friend's funeral. And the DeMoss grandchildren have occasionally flown on the jet, the former pilot said.
DeMoss family members - the mother and four others are trustees - refused to be interviewed for this story.
As for the Noble Foundation, Pulliam said it received an OK from its attorneys before buying its seven-seat Cessna Bravo jet. ``We talked about the public perception of this before we went ahead, that some people would say, `You're a charitable organization and you've got a plane,''' he said. ``It is a public relations issue.''
Pulliam said the foundation uses the plane to help Noble's scientists travel more efficiently from rural Ardmore to remote sites in Texas, Missouri, Kansas, and Colorado, where it funds agricultural and biotechnology programs.
After the Globe raised questions about the more than 40 flights back and forth to Athens, Ga., Pulliam said that a foundation consultant, Joe Bouton, a professor of crop and soil sciences at the University of Georgia, has been shuttling back and forth to Oklahoma on the jet twice a month over the last two years. Bouton, he said, plans to move to Oklahoma next spring.
``Using commercial airlines, it takes Dr. Bouton about 8 hours to get to Ardmore from Athens,'' including two hours driving time on each end of the trip, plus waiting time in airports, Pulliam wrote in an e-mail to the Globe. ``Using our aircraft, it takes less than three hours.''
Pulliam said buying the jet, with its annual operating costs of about $600,000, was the brainchild of the foundation's trustees. Nine of the 15 trustees are descendants of Oklahoma oil man Lloyd Noble, who started the foundation in 1945. Pulliam said the trustees, especially those who live in Atlanta, use the jet to travel to Oklahoma for trustee meetings and to monitor the foundation's farflung projects.
The use of the aircraft, both for Bouton's commuting and the trustees' flights, is ``quite appropriate,'' Pulliam said. He said the plane has never been used for nonfoundation business.
Nonetheless, in the post-Enron era, corporate executives have found it increasingly difficult to justify the purchase of aircraft, much less long-range jets like the DeMoss Bombardier, according to people who sell and lease business jets
``A big piece of owning a jet is ego,'' said Mark Stone, chief executive of Sentient Jet Inc., a Norwell company that leases jets to customers on short notice. ``A lot of corporations have sold their aircraft, because they just didn't feel that it was giving the right image to their shareholders.'' At many other foundations, executives are given luxury cars for their use. When the president of the M. B. and Edna Zale Foundation in Dallas was ready to retire in 2001, the foundation let him keep his company vehicle - a 1999 Lexus.
The sedan was part of a $325,000 retirement package given to Michael Romaine, who worked for the Zale family's jewelry company before heading their foundation, according to the foundation's current president, Leonard Krasnow. With Romaine driving off in the Lexus, the foundation bought Krasnow a 2001 Infiniti.
Reached at his retirement home in North Carolina, Romaine, 64, at first said he bought the Lexus from the foundation for $24,000. But when told what Krasnow had said, Romaine asked, ``Did they give it to me? I'd have to look it up. ... I can't remember if I bought it or not.''
The foundation's original purchase of the Lexus for him was justified, Romaine said, calling it ``a very basic car.''
A lawsuit in Texas
At the King Foundation in Dallas, Yeckel, 67, and his deputy, Thomas W. Vett, used foundation credit cards to take at least one foreign vacation a year. But it took years for anyone to discover the excessive spending. In early 2002, Yeckel's sister, Dorothy Yeckel, became suspicious of her brother's lifestyle, including his $1.5 million home and the exotic vacations he took.
Todd Amacher, the sister's lawyer, looked over the foundation's tax returns and alerted the Texas attorney general to the $1 million in compensation Yeckel was taking. Assistant Attorney General John Vinson filed suit, and ultimately a new board took control of the foundation. The suit became public last year, but the details of Yeckel and Vett's free-spending ways had not been disclosed.
During an October 24 deposition, Vett testified that he and Yeckel each used King Foundation credit cards to travel with their wives and other family members to England, Scotland, Australia, Russia, the Czech Republic, Germany, and Italy. There were also numerous trips to San Francisco and New York, according to a lawyer familiar with Vett's testimony.
The globetrotting cost the foundation an estimated $200,000 over five years, according to one person who is involved in the case. That money came straight out of the pockets of charities the foundation might otherwise have funded, because the executives counted the travel on foundation tax returns as a charitable expense.
And their foundation-subsidized lifestyle went well beyond vacations. The foundation maintained three memberships at a private downtown Dallas dining club, at a cost of more than $5,000 a year. In 2001, according to the attorney's general's lawsuit, the foundation credit cards were billed for $6,442 for restaurant bills; $23,000 for purchases in retail stores and $6,531 for health-club memberships.
Yeckel, in a brief telephone interview, declined to answer questions. An attorney for Vett said he could not discuss his client's testimony.
In other cases, relatives of those who established foundations spend the assets as if they were their own personal funds. At the $43 million Roy F. & Joann Cole Mitte Foundation in Austin, Texas, Scott Mitte began to run up personal expenses almost as soon as he took the helm of the foundation his parents founded.
Since 1999, the foundation has purchased Tony Bennett concert tickets worth $4,003, a $4,037 custom tuxedo, and six doors totaling $6,090 that were delivered to Mitte's home, according to an audit of foundation expenses. During Mitte's tenure, the foundation's spending on travel and meetings rocketed from about $50 a year in the late 1990s to $183,000 in 2001, while his compensation also leapt from $31,000 in 1999 to $220,000 in 2001.
And it paid $368,000 in legal fees last year, up from $6,689 the year before, in part to cover a legal battle between the foundation and Roy Mitte's company. Also last year, the foundation footed the bill for an out-of-court settlement with a woman who sued Mitte for alleged sexual harrassment. The foundation disclosed a $139,000 ``legal settlement'' on its 2002 tax return.
The foundation's lawyer, Jeffrey T. Knebel, declined to discuss the settlement or answer questions about other foundation spending. Mitte resigned as executive director in August, 2002, when the harassment charge became public, but remains on the foundation's board of directors and serves as its senior vice president. He did not return calls from the Globe.
In a statement, the foundation said it believed its expenses were ``reasonable, appropriate, and have been greatly justified.''
Some large foundation expenses are tucked into a category on tax filings called, ``travel, conferences, and meetings.'' The IRS does not require detailed accounting for such costs. At several foundations, officials refused to provide the Globe with documentation to justify the costs, or declined to answer questions.
The $13.5 million Chiles Foundation of Portland, Ore., for example, reported spending $591,415 on travel, conferences, and meetings from 1998 through 2002, according to its tax returns. Another $128,115 was reported for ``autos and parking'' during that period, while the foundation paid $300,000 in rent for its offices. The largest beneficiary of the foundation is Boston University, where foundation chief Earle M. Chiles, 83, is a trustee.
Foundation officials turned aside Globe efforts to interview Chiles, the son of the founder. In a written note, the foundation attributed its spending to ``grant-related work'' and to periodic meetings with its investment advisers. One foundation official, Sharron D. Mathews, said in a brief telephone interview: ``If our spending is out of line, it is only the Internal Revenue Service we need to account to.''
Monday, March 30, 2009
We do not tax enough on those extremely wealthy.
Although the Treasury Department has barred GM from paying severance to Wagoner or any other senior executive, Wagoner is eligible to collect millions in retirement benefits from his former employer, according to the documents reviewed by ABC News.
Under Wagoner's leadership, GM lost tens of billions of dollars, took billions in taxpayer-financed aid, and announced plans to cut 47,000 employees by the end of 2009.
Those executive compensations may cause another public scrutiny. However, somehow those public scrutiny ends up wringling the upper middle class people rather than those who are the frost on the cake. The good example is to raise tax on earned income more than 250K. Those who make just over $250K are not vacationing on the yatch with champagne and hanging out with the former presidents and celebrities. Those are working round the clock days and nights sacrificing their family time and the entitled vacation. People we think rich do not have to earn the income but they sit on the inheritance and investment particularly tax free municipal bonds (Do you know how much Ruth Madoff have in the municipal bonds? Supposedly $45 million).
Some peopole argue for the incentives for those wealthy to invest in the government bonds. However, even if it tax a bit, as long as it does not tax as much on other inverstment. Those greedy rich will invest in the government bond. Maybe we can raise tax on those non government investment return on those extremely wealthy. Let's say people who makes millions or with the asset of multi-millions.
Under Wagoner's leadership, GM lost tens of billions of dollars, took billions in taxpayer-financed aid, and announced plans to cut 47,000 employees by the end of 2009.
Those executive compensations may cause another public scrutiny. However, somehow those public scrutiny ends up wringling the upper middle class people rather than those who are the frost on the cake. The good example is to raise tax on earned income more than 250K. Those who make just over $250K are not vacationing on the yatch with champagne and hanging out with the former presidents and celebrities. Those are working round the clock days and nights sacrificing their family time and the entitled vacation. People we think rich do not have to earn the income but they sit on the inheritance and investment particularly tax free municipal bonds (Do you know how much Ruth Madoff have in the municipal bonds? Supposedly $45 million).
Some peopole argue for the incentives for those wealthy to invest in the government bonds. However, even if it tax a bit, as long as it does not tax as much on other inverstment. Those greedy rich will invest in the government bond. Maybe we can raise tax on those non government investment return on those extremely wealthy. Let's say people who makes millions or with the asset of multi-millions.
Tuesday, March 24, 2009
Why it’s a bit rich of tax-haven Bono to ask us to give to poor
Why it’s a bit rich of tax-haven Bono to ask us to give to poor
By Sharon OwensWednesday, 4 March 2009
While Bono continues to jet around the world making friends with popes and presidents and urging the little people to dig deep for Africa. To be fair to the rest of the band they’ve always been pretty quiet on the subject of charity. But I fear Bono will be wasting his time in the future, urging us to give our loose change to the starving. There won’t be any loose change, Bono. We’ll all need that to buy bread and milk for our children.
Journalists frequently ask me why I didn’t skip across the border when I became a published novelist, in order to take advantage of the Republic’s generous tax breaks for artists, writers and musicians. I understand that most artistes didn’t have to pay any tax at all in the years before the €250,000 limit came into being. Which means that the super-rich became even richer and you couldn’t throw a stone in Dublin without hitting a wealthy writer on the forehead. Fair enough, you might say, and there’s always the ‘trickle-down’ effect. But I didn’t move south for three reasons. Firstly, I was very sentimentally attached to Belfast by the time success came. Secondly, I don’t have any expensive tastes whatsoever. In fact, I’m almost religiously determined not to go down the road of fawning over some overpriced frock or piece of furniture. And thirdly, I believe very strongly in paying my way in this life. My daughter is at school here, my husband and I both got our degrees without having to pay tuition fees, and one or two members of my family have had quite a lot of medical treatment over the years. And somebody has to pay for it all so why should I get off lightly? My job is a lot more enjoyable than, say, cleaning public toilets. So why should a humble lavatory cleaner pay tax while I get a generous tax-break to sit on my backside and daydream?
Yes, it sickens me when the Government squanders our hard-earned money on red tape, pointless wars, and MPs’ travel expenses and second homes. Yes, it disgusts me when people like Fred ‘The Shred’ Goodwin can retire at 50 with almost £700,000 pension-a-year for life, as a reward for dumping more than £300bn worth of ‘toxic’ debt onto the taxpayer. Not to mention the thousands of workers he sacked along the way to gain his notorious nickname. Yes, it almost leads me to despair to think that every Press release at Stormont could pay for a couple of trainee landscape gardeners to clean up my entire neighbourhood.
But will I be running away to Donegal to batten down the hatches with my wee (five-figure) salary clutched to my chest in a locked tin box? No, I won’t. Because whatever sort of a society is left after the City boys and the Cabinet have finished playing with it, is the society that my child will have to live in. And I don’t want to be part of the reason it all fell apart, if indeed it does.
They were talking on Radio 4 last week about ‘financial Armageddon’. That is, when the UK Government (and possibly many others around the world) will be unable to borrow enough money to pay public sector workers, support the health service and the various social security agencies. Purely because so much of the income of the nation will have to go to service the toxic debts that the current property boom has engendered. So it’ll be bye-bye to that disability car, that Housing Executive flat, those NHS specs and possibly even a large percentage of nursing and teaching jobs.
People are already finding it hard to borrow money, hard to re-pay huge mortgages, hard to afford holidays abroad or new clothes or meals out. And so the domino effect begins. It’s already kicked off with a cluster of luxury restaurants going to the wall. Next will be designer clothes, middle-priced restaurants, DIY stores, small businesses, the car industry and well, the list is endless. Apparently the only things we buy more of in a recession are chocolate and cut-price paperbacks. (Even sales of hardbacks have slumped.)
And when people are cutting back on basic grocery spending to be able to afford home heating oil, they’ll have no option but to turn their heads away from TV pictures of African children dying of hunger and thirst and the lack of a mosquito net that costs £3. And they’ll probably have little time for super-rich celebrities and their luxury villas in the south of France and their Maserati sportscars and their various lectures on how important it is to give money to charity. I suspect the entire charity ball circuit will collapse as will the gossip magazine industry. Expensive resorts such as Monte Carlo and Cannes could become ghost towns. We’ll all be spending our weekends growing carrots and cabbages in the back garden instead of lapping up the outrageous extravagances of our favourite stars. Even the Oscars have allegedly done away with their six-figure goody bags.
Oh dear, Bono, if things get any worse there’ll simply be no use in letting your stubble grow, donning that sexy black waistcoat and biker boots, and begging the little people to give their money to charity. For, as the man says, charity begins at home.
By Sharon OwensWednesday, 4 March 2009
While Bono continues to jet around the world making friends with popes and presidents and urging the little people to dig deep for Africa. To be fair to the rest of the band they’ve always been pretty quiet on the subject of charity. But I fear Bono will be wasting his time in the future, urging us to give our loose change to the starving. There won’t be any loose change, Bono. We’ll all need that to buy bread and milk for our children.
Journalists frequently ask me why I didn’t skip across the border when I became a published novelist, in order to take advantage of the Republic’s generous tax breaks for artists, writers and musicians. I understand that most artistes didn’t have to pay any tax at all in the years before the €250,000 limit came into being. Which means that the super-rich became even richer and you couldn’t throw a stone in Dublin without hitting a wealthy writer on the forehead. Fair enough, you might say, and there’s always the ‘trickle-down’ effect. But I didn’t move south for three reasons. Firstly, I was very sentimentally attached to Belfast by the time success came. Secondly, I don’t have any expensive tastes whatsoever. In fact, I’m almost religiously determined not to go down the road of fawning over some overpriced frock or piece of furniture. And thirdly, I believe very strongly in paying my way in this life. My daughter is at school here, my husband and I both got our degrees without having to pay tuition fees, and one or two members of my family have had quite a lot of medical treatment over the years. And somebody has to pay for it all so why should I get off lightly? My job is a lot more enjoyable than, say, cleaning public toilets. So why should a humble lavatory cleaner pay tax while I get a generous tax-break to sit on my backside and daydream?
Yes, it sickens me when the Government squanders our hard-earned money on red tape, pointless wars, and MPs’ travel expenses and second homes. Yes, it disgusts me when people like Fred ‘The Shred’ Goodwin can retire at 50 with almost £700,000 pension-a-year for life, as a reward for dumping more than £300bn worth of ‘toxic’ debt onto the taxpayer. Not to mention the thousands of workers he sacked along the way to gain his notorious nickname. Yes, it almost leads me to despair to think that every Press release at Stormont could pay for a couple of trainee landscape gardeners to clean up my entire neighbourhood.
But will I be running away to Donegal to batten down the hatches with my wee (five-figure) salary clutched to my chest in a locked tin box? No, I won’t. Because whatever sort of a society is left after the City boys and the Cabinet have finished playing with it, is the society that my child will have to live in. And I don’t want to be part of the reason it all fell apart, if indeed it does.
They were talking on Radio 4 last week about ‘financial Armageddon’. That is, when the UK Government (and possibly many others around the world) will be unable to borrow enough money to pay public sector workers, support the health service and the various social security agencies. Purely because so much of the income of the nation will have to go to service the toxic debts that the current property boom has engendered. So it’ll be bye-bye to that disability car, that Housing Executive flat, those NHS specs and possibly even a large percentage of nursing and teaching jobs.
People are already finding it hard to borrow money, hard to re-pay huge mortgages, hard to afford holidays abroad or new clothes or meals out. And so the domino effect begins. It’s already kicked off with a cluster of luxury restaurants going to the wall. Next will be designer clothes, middle-priced restaurants, DIY stores, small businesses, the car industry and well, the list is endless. Apparently the only things we buy more of in a recession are chocolate and cut-price paperbacks. (Even sales of hardbacks have slumped.)
And when people are cutting back on basic grocery spending to be able to afford home heating oil, they’ll have no option but to turn their heads away from TV pictures of African children dying of hunger and thirst and the lack of a mosquito net that costs £3. And they’ll probably have little time for super-rich celebrities and their luxury villas in the south of France and their Maserati sportscars and their various lectures on how important it is to give money to charity. I suspect the entire charity ball circuit will collapse as will the gossip magazine industry. Expensive resorts such as Monte Carlo and Cannes could become ghost towns. We’ll all be spending our weekends growing carrots and cabbages in the back garden instead of lapping up the outrageous extravagances of our favourite stars. Even the Oscars have allegedly done away with their six-figure goody bags.
Oh dear, Bono, if things get any worse there’ll simply be no use in letting your stubble grow, donning that sexy black waistcoat and biker boots, and begging the little people to give their money to charity. For, as the man says, charity begins at home.
adding new marginal tax brackets above the current top level ($357k)
Yglesias proposes adding new marginal tax brackets above the current top level ($357k). While he minimizes the potential for raising significant revenue this way, Nate Silver starts the math and finds otherwise:
What the discussion over the top marginal tax rate ignores, however (and what Ygelsias picks up upon) is that this rate has been assessed at very different thresholds of income. In 1940, for example, the top marginal tax rate was 81.1 percent -- but this rate only kicked in once you made $5,000,000 or more in income, which is equivalent to about $75,000,000 in today's dollars.
But today, the threshold where the top tax bracket kicks in isn't $75 million, or $5 million, or even $1 million ... it's a mere $357,700. The progressivity of the tax code stops there....
The question, of course, is why there isn't a millionaires tax bracket now ... or even a multi-millionaires tax bracket. I haven't run the numbers, but I'm guessing that if you established a new tax bracket at, say, 40.5 percent, that started at incomes of $1,000,000 or more, this would bring in as much revenue to the government as restoring the $250K tax bracket (which is really $360K now given indexing to inflation) to 39.6 percent, as it was under Clinton.
Clive Crook gives the rationale for creating new upper-level brackets -- though he himself favors the regressive but broader-based VAT:
Not everybody would regard two-earner households with an income of $250,000 a year as rich; and many of the taxpayers in question have seen their retirement savings, college funds and housing equity destroyed. The scandal of widening inequality that still animates the Democrats' thinking is a story about the top fraction of one per cent of the income distribution, not the top end of the middle class.
What the discussion over the top marginal tax rate ignores, however (and what Ygelsias picks up upon) is that this rate has been assessed at very different thresholds of income. In 1940, for example, the top marginal tax rate was 81.1 percent -- but this rate only kicked in once you made $5,000,000 or more in income, which is equivalent to about $75,000,000 in today's dollars.
But today, the threshold where the top tax bracket kicks in isn't $75 million, or $5 million, or even $1 million ... it's a mere $357,700. The progressivity of the tax code stops there....
The question, of course, is why there isn't a millionaires tax bracket now ... or even a multi-millionaires tax bracket. I haven't run the numbers, but I'm guessing that if you established a new tax bracket at, say, 40.5 percent, that started at incomes of $1,000,000 or more, this would bring in as much revenue to the government as restoring the $250K tax bracket (which is really $360K now given indexing to inflation) to 39.6 percent, as it was under Clinton.
Clive Crook gives the rationale for creating new upper-level brackets -- though he himself favors the regressive but broader-based VAT:
Not everybody would regard two-earner households with an income of $250,000 a year as rich; and many of the taxpayers in question have seen their retirement savings, college funds and housing equity destroyed. The scandal of widening inequality that still animates the Democrats' thinking is a story about the top fraction of one per cent of the income distribution, not the top end of the middle class.
AIG is chump change -- let's find corporate America's hidden billions
AIG is chump change -- let's find corporate America's hidden billions
It's time to reform offshore banking, and see what untaxed wealth big business is hiding in overseas tax shelters.
By Joe Conason
From the jaded perspective of the financiers, the uproar over the AIG bonuses may provide a welcome distraction from far more important (and lucrative) abuses in the world's offshore tax havens.
So rather than continue arguing over chump change, it is long past time for the United States, with its international friends and allies, to demand accountability from the long list of tiny countries and principalities, from Andorra and the Cayman Islands to Singapore and Switzerland, where corporations, wealthy clients and unrepentant evildoers hide their assets.
The big claw-back will reach into quaint islands and mountainous principalities, because the same banks, hedge funds and private equity firms responsible for the world financial meltdown keep their profits in those "secrecy spaces" -- alongside the ill-gotten gains of numerous drug dealers, dictators and delinquents of every description.
According to the Government Accountability Office, nearly all of America's top 100 corporations maintain subsidiaries in countries identified as tax havens. As the GAO notes, there could be reasons other than avoiding the IRS to set up branches in places such as Singapore, Luxembourg and Switzerland, where taxes are light or nonexistent and keeping clients' illicit secrets is considered a matter of national pride.
But what reason other than evasion could there be for Goldman Sachs Group to set up three subsidiaries in Bermuda, five in Mauritius, and 15 in the Cayman Islands? Why did Countrywide Financial need two subsidiaries in Guernsey? Why did Wachovia need 18 subsidiaries in Bermuda, three in the British Virgin Islands, and 16 in the Caymans? Why did Lehman Brothers need 31 subsidiaries in the Caymans? What do Bank of America's 59 subsidiaries in the Caymans actually do? Why does Citigroup need 427 separate subsidiaries in tax havens, including 12 in the Channel Islands, 21 in Jersey, 91 in Luxembourg, 19 in Bermuda and 90 in the Caymans? What exactly is going on at Morgan Stanley's 19 subs in Jersey, 29 subs in Luxembourg, 14 subs in the Marshall Islands, and its amazing 158 subs in the Caymans? And speaking of AIG, why does it have 18 subs in tax-haven countries? (Don't expect to find out from Fox News Channel or the New York Post, because News Corp. has its own constellation of strange subsidiaries, including 33 in the Caymans alone.)
When the cost of these shenanigans was last estimated two years ago, the U.S. government's annual loss in revenue due to tax avoidance by major corporations and super-rich individuals was pegged at about $100 billion -- considerably more than a rounding error, even today. But of course that is only a rough assessment, as is the estimate of $12 trillion in untaxed assets hidden around the world. Nobody will know for certain until the books are opened and transparency is established.
Whatever the accurate accounting proves to be, it is certain to exceed hundreds of billions annually worldwide. That is money every country will need badly for years, to repay debt, finance reconstruction, and fund services, as the world economy struggles to revive itself. Even in the developing countries, where incomes are much lower and billionaires tend to be scarce, the annual revenue loss could be as much as $50 billion -- enough to meet the U.N.'s Millennium Development Goals (if only the money were not stolen by local elites and wired away to numbered accounts in tax havens).
None of these tax havens could exist without the connivance or at least the cooperation of the world's most powerful governments, which remain dominated by financial industry lobbyists even now. The Organization for Economic Cooperation and Development has sought greater transparency from the tax havens for years, hearing promises from most and defiance from a few.
But in reality almost nothing was accomplished until last year, when U.S. law enforcement authorities began to pursue Union Bank of Switzerland (UBS) executives with criminal indictments. The UBS probe led to a settlement last month that included a fine of $780 million and an agreement to provide information about tens of thousands of American clients maintaining secret accounts at that huge bank.
Over the past several years, however, the trend has gone the other way, with abuse of bank secrecy and the expatriation of investment and profits growing rapidly. On the tiny island of Jersey in the English Channel, for instance, the authorities responded to political pressure from hedge funds, which have placed more than $80 billion in deposits there, by establishing a "zero regulation regime" last year that literally removed all restrictions and reporting on financial transactions. Jersey's counterparts in Guernsey and the Cayman Islands responded by assuring the hedge funds that they, too, would consider abolishing all regulation.
Perhaps the UBS case indicates a change in that unwholesome trend and a renewed willingness on the part of American authorities to crack the tax havens -- which was not a priority, to put it mildly, of the Bush administration. As a senator, Barack Obama supported legislation to break open the secret financial regimes, by retaliating against countries and principalities that refuse to cooperate. Now Congress and the White House should pass such legislation and make breaking the tax havens a high priority in partnership with the European Union, the OECD and World Bank. They could start by threatening to outlaw transactions between American banks and financial institutions in any country that rejects new rules for transparency and reciprocal information.
If Americans want to make the authors of our misery pay up, then the auditors must go where the money is, as Willie Sutton might have explained -- and take hundreds of billions back.
From the jaded perspective of the financiers, the uproar over the AIG bonuses may provide a welcome distraction from far more important (and lucrative) abuses in the world's offshore tax havens.
So rather than continue arguing over chump change, it is long past time for the United States, with its international friends and allies, to demand accountability from the long list of tiny countries and principalities, from Andorra and the Cayman Islands to Singapore and Switzerland, where corporations, wealthy clients and unrepentant evildoers hide their assets.
The big claw-back will reach into quaint islands and mountainous principalities, because the same banks, hedge funds and private equity firms responsible for the world financial meltdown keep their profits in those "secrecy spaces" -- alongside the ill-gotten gains of numerous drug dealers, dictators and delinquents of every description.
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According to the Government Accountability Office, nearly all of America's top 100 corporations maintain subsidiaries in countries identified as tax havens. As the GAO notes, there could be reasons other than avoiding the IRS to set up branches in places such as Singapore, Luxembourg and Switzerland, where taxes are light or nonexistent and keeping clients' illicit secrets is considered a matter of national pride.
But what reason other than evasion could there be for Goldman Sachs Group to set up three subsidiaries in Bermuda, five in Mauritius, and 15 in the Cayman Islands? Why did Countrywide Financial need two subsidiaries in Guernsey? Why did Wachovia need 18 subsidiaries in Bermuda, three in the British Virgin Islands, and 16 in the Caymans? Why did Lehman Brothers need 31 subsidiaries in the Caymans? What do Bank of America's 59 subsidiaries in the Caymans actually do? Why does Citigroup need 427 separate subsidiaries in tax havens, including 12 in the Channel Islands, 21 in Jersey, 91 in Luxembourg, 19 in Bermuda and 90 in the Caymans? What exactly is going on at Morgan Stanley's 19 subs in Jersey, 29 subs in Luxembourg, 14 subs in the Marshall Islands, and its amazing 158 subs in the Caymans? And speaking of AIG, why does it have 18 subs in tax-haven countries? (Don't expect to find out from Fox News Channel or the New York Post, because News Corp. has its own constellation of strange subsidiaries, including 33 in the Caymans alone.)
When the cost of these shenanigans was last estimated two years ago, the U.S. government's annual loss in revenue due to tax avoidance by major corporations and super-rich individuals was pegged at about $100 billion -- considerably more than a rounding error, even today. But of course that is only a rough assessment, as is the estimate of $12 trillion in untaxed assets hidden around the world. Nobody will know for certain until the books are opened and transparency is established.
Whatever the accurate accounting proves to be, it is certain to exceed hundreds of billions annually worldwide. That is money every country will need badly for years, to repay debt, finance reconstruction, and fund services, as the world economy struggles to revive itself. Even in the developing countries, where incomes are much lower and billionaires tend to be scarce, the annual revenue loss could be as much as $50 billion -- enough to meet the U.N.'s Millennium Development Goals (if only the money were not stolen by local elites and wired away to numbered accounts in tax havens).
None of these tax havens could exist without the connivance or at least the cooperation of the world's most powerful governments, which remain dominated by financial industry lobbyists even now. The Organization for Economic Cooperation and Development has sought greater transparency from the tax havens for years, hearing promises from most and defiance from a few.
But in reality almost nothing was accomplished until last year, when U.S. law enforcement authorities began to pursue Union Bank of Switzerland (UBS) executives with criminal indictments. The UBS probe led to a settlement last month that included a fine of $780 million and an agreement to provide information about tens of thousands of American clients maintaining secret accounts at that huge bank.
Over the past several years, however, the trend has gone the other way, with abuse of bank secrecy and the expatriation of investment and profits growing rapidly. On the tiny island of Jersey in the English Channel, for instance, the authorities responded to political pressure from hedge funds, which have placed more than $80 billion in deposits there, by establishing a "zero regulation regime" last year that literally removed all restrictions and reporting on financial transactions. Jersey's counterparts in Guernsey and the Cayman Islands responded by assuring the hedge funds that they, too, would consider abolishing all regulation.
Perhaps the UBS case indicates a change in that unwholesome trend and a renewed willingness on the part of American authorities to crack the tax havens -- which was not a priority, to put it mildly, of the Bush administration. As a senator, Barack Obama supported legislation to break open the secret financial regimes, by retaliating against countries and principalities that refuse to cooperate. Now Congress and the White House should pass such legislation and make breaking the tax havens a high priority in partnership with the European Union, the OECD and World Bank. They could start by threatening to outlaw transactions between American banks and financial institutions in any country that rejects new rules for transparency and reciprocal information.
If Americans want to make the authors of our misery pay up, then the auditors must go where the money is, as Willie Sutton might have explained -- and take hundreds of billions back.
From the jaded perspective of the financiers, the uproar over the AIG bonuses may provide a welcome distraction from far more important (and lucrative) abuses in the world's offshore tax havens.
So rather than continue arguing over chump change, it is long past time for the United States, with its international friends and allies, to demand accountability from the long list of tiny countries and principalities, from Andorra and the Cayman Islands to Singapore and Switzerland, where corporations, wealthy clients and unrepentant evildoers hide their assets.
The big claw-back will reach into quaint islands and mountainous principalities, because the same banks, hedge funds and private equity firms responsible for the world financial meltdown keep their profits in those "secrecy spaces" -- alongside the ill-gotten gains of numerous drug dealers, dictators and delinquents of every description.
According to the Government Accountability Office, nearly all of America's top 100 corporations maintain subsidiaries in countries identified as tax havens. As the GAO notes, there could be reasons other than avoiding the IRS to set up branches in places such as Singapore, Luxembourg and Switzerland, where taxes are light or nonexistent and keeping clients' illicit secrets is considered a matter of national pride.
But what reason other than evasion could there be for Goldman Sachs Group to set up three subsidiaries in Bermuda, five in Mauritius, and 15 in the Cayman Islands? Why did Countrywide Financial need two subsidiaries in Guernsey? Why did Wachovia need 18 subsidiaries in Bermuda, three in the British Virgin Islands, and 16 in the Caymans? Why did Lehman Brothers need 31 subsidiaries in the Caymans? What do Bank of America's 59 subsidiaries in the Caymans actually do? Why does Citigroup need 427 separate subsidiaries in tax havens, including 12 in the Channel Islands, 21 in Jersey, 91 in Luxembourg, 19 in Bermuda and 90 in the Caymans? What exactly is going on at Morgan Stanley's 19 subs in Jersey, 29 subs in Luxembourg, 14 subs in the Marshall Islands, and its amazing 158 subs in the Caymans? And speaking of AIG, why does it have 18 subs in tax-haven countries? (Don't expect to find out from Fox News Channel or the New York Post, because News Corp. has its own constellation of strange subsidiaries, including 33 in the Caymans alone.)
When the cost of these shenanigans was last estimated two years ago, the U.S. government's annual loss in revenue due to tax avoidance by major corporations and super-rich individuals was pegged at about $100 billion -- considerably more than a rounding error, even today. But of course that is only a rough assessment, as is the estimate of $12 trillion in untaxed assets hidden around the world. Nobody will know for certain until the books are opened and transparency is established.
Whatever the accurate accounting proves to be, it is certain to exceed hundreds of billions annually worldwide. That is money every country will need badly for years, to repay debt, finance reconstruction, and fund services, as the world economy struggles to revive itself. Even in the developing countries, where incomes are much lower and billionaires tend to be scarce, the annual revenue loss could be as much as $50 billion -- enough to meet the U.N.'s Millennium Development Goals (if only the money were not stolen by local elites and wired away to numbered accounts in tax havens).
None of these tax havens could exist without the connivance or at least the cooperation of the world's most powerful governments, which remain dominated by financial industry lobbyists even now. The Organization for Economic Cooperation and Development has sought greater transparency from the tax havens for years, hearing promises from most and defiance from a few.
But in reality almost nothing was accomplished until last year, when U.S. law enforcement authorities began to pursue Union Bank of Switzerland (UBS) executives with criminal indictments. The UBS probe led to a settlement last month that included a fine of $780 million and an agreement to provide information about tens of thousands of American clients maintaining secret accounts at that huge bank.
Over the past several years, however, the trend has gone the other way, with abuse of bank secrecy and the expatriation of investment and profits growing rapidly. On the tiny island of Jersey in the English Channel, for instance, the authorities responded to political pressure from hedge funds, which have placed more than $80 billion in deposits there, by establishing a "zero regulation regime" last year that literally removed all restrictions and reporting on financial transactions. Jersey's counterparts in Guernsey and the Cayman Islands responded by assuring the hedge funds that they, too, would consider abolishing all regulation.
Perhaps the UBS case indicates a change in that unwholesome trend and a renewed willingness on the part of American authorities to crack the tax havens -- which was not a priority, to put it mildly, of the Bush administration. As a senator, Barack Obama supported legislation to break open the secret financial regimes, by retaliating against countries and principalities that refuse to cooperate. Now Congress and the White House should pass such legislation and make breaking the tax havens a high priority in partnership with the European Union, the OECD and World Bank. They could start by threatening to outlaw transactions between American banks and financial institutions in any country that rejects new rules for transparency and reciprocal information.
If Americans want to make the authors of our misery pay up, then the auditors must go where the money is, as Willie Sutton might have explained -- and take hundreds of billions back.
It's time to reform offshore banking, and see what untaxed wealth big business is hiding in overseas tax shelters.
By Joe Conason
From the jaded perspective of the financiers, the uproar over the AIG bonuses may provide a welcome distraction from far more important (and lucrative) abuses in the world's offshore tax havens.
So rather than continue arguing over chump change, it is long past time for the United States, with its international friends and allies, to demand accountability from the long list of tiny countries and principalities, from Andorra and the Cayman Islands to Singapore and Switzerland, where corporations, wealthy clients and unrepentant evildoers hide their assets.
The big claw-back will reach into quaint islands and mountainous principalities, because the same banks, hedge funds and private equity firms responsible for the world financial meltdown keep their profits in those "secrecy spaces" -- alongside the ill-gotten gains of numerous drug dealers, dictators and delinquents of every description.
According to the Government Accountability Office, nearly all of America's top 100 corporations maintain subsidiaries in countries identified as tax havens. As the GAO notes, there could be reasons other than avoiding the IRS to set up branches in places such as Singapore, Luxembourg and Switzerland, where taxes are light or nonexistent and keeping clients' illicit secrets is considered a matter of national pride.
But what reason other than evasion could there be for Goldman Sachs Group to set up three subsidiaries in Bermuda, five in Mauritius, and 15 in the Cayman Islands? Why did Countrywide Financial need two subsidiaries in Guernsey? Why did Wachovia need 18 subsidiaries in Bermuda, three in the British Virgin Islands, and 16 in the Caymans? Why did Lehman Brothers need 31 subsidiaries in the Caymans? What do Bank of America's 59 subsidiaries in the Caymans actually do? Why does Citigroup need 427 separate subsidiaries in tax havens, including 12 in the Channel Islands, 21 in Jersey, 91 in Luxembourg, 19 in Bermuda and 90 in the Caymans? What exactly is going on at Morgan Stanley's 19 subs in Jersey, 29 subs in Luxembourg, 14 subs in the Marshall Islands, and its amazing 158 subs in the Caymans? And speaking of AIG, why does it have 18 subs in tax-haven countries? (Don't expect to find out from Fox News Channel or the New York Post, because News Corp. has its own constellation of strange subsidiaries, including 33 in the Caymans alone.)
When the cost of these shenanigans was last estimated two years ago, the U.S. government's annual loss in revenue due to tax avoidance by major corporations and super-rich individuals was pegged at about $100 billion -- considerably more than a rounding error, even today. But of course that is only a rough assessment, as is the estimate of $12 trillion in untaxed assets hidden around the world. Nobody will know for certain until the books are opened and transparency is established.
Whatever the accurate accounting proves to be, it is certain to exceed hundreds of billions annually worldwide. That is money every country will need badly for years, to repay debt, finance reconstruction, and fund services, as the world economy struggles to revive itself. Even in the developing countries, where incomes are much lower and billionaires tend to be scarce, the annual revenue loss could be as much as $50 billion -- enough to meet the U.N.'s Millennium Development Goals (if only the money were not stolen by local elites and wired away to numbered accounts in tax havens).
None of these tax havens could exist without the connivance or at least the cooperation of the world's most powerful governments, which remain dominated by financial industry lobbyists even now. The Organization for Economic Cooperation and Development has sought greater transparency from the tax havens for years, hearing promises from most and defiance from a few.
But in reality almost nothing was accomplished until last year, when U.S. law enforcement authorities began to pursue Union Bank of Switzerland (UBS) executives with criminal indictments. The UBS probe led to a settlement last month that included a fine of $780 million and an agreement to provide information about tens of thousands of American clients maintaining secret accounts at that huge bank.
Over the past several years, however, the trend has gone the other way, with abuse of bank secrecy and the expatriation of investment and profits growing rapidly. On the tiny island of Jersey in the English Channel, for instance, the authorities responded to political pressure from hedge funds, which have placed more than $80 billion in deposits there, by establishing a "zero regulation regime" last year that literally removed all restrictions and reporting on financial transactions. Jersey's counterparts in Guernsey and the Cayman Islands responded by assuring the hedge funds that they, too, would consider abolishing all regulation.
Perhaps the UBS case indicates a change in that unwholesome trend and a renewed willingness on the part of American authorities to crack the tax havens -- which was not a priority, to put it mildly, of the Bush administration. As a senator, Barack Obama supported legislation to break open the secret financial regimes, by retaliating against countries and principalities that refuse to cooperate. Now Congress and the White House should pass such legislation and make breaking the tax havens a high priority in partnership with the European Union, the OECD and World Bank. They could start by threatening to outlaw transactions between American banks and financial institutions in any country that rejects new rules for transparency and reciprocal information.
If Americans want to make the authors of our misery pay up, then the auditors must go where the money is, as Willie Sutton might have explained -- and take hundreds of billions back.
From the jaded perspective of the financiers, the uproar over the AIG bonuses may provide a welcome distraction from far more important (and lucrative) abuses in the world's offshore tax havens.
So rather than continue arguing over chump change, it is long past time for the United States, with its international friends and allies, to demand accountability from the long list of tiny countries and principalities, from Andorra and the Cayman Islands to Singapore and Switzerland, where corporations, wealthy clients and unrepentant evildoers hide their assets.
The big claw-back will reach into quaint islands and mountainous principalities, because the same banks, hedge funds and private equity firms responsible for the world financial meltdown keep their profits in those "secrecy spaces" -- alongside the ill-gotten gains of numerous drug dealers, dictators and delinquents of every description.
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According to the Government Accountability Office, nearly all of America's top 100 corporations maintain subsidiaries in countries identified as tax havens. As the GAO notes, there could be reasons other than avoiding the IRS to set up branches in places such as Singapore, Luxembourg and Switzerland, where taxes are light or nonexistent and keeping clients' illicit secrets is considered a matter of national pride.
But what reason other than evasion could there be for Goldman Sachs Group to set up three subsidiaries in Bermuda, five in Mauritius, and 15 in the Cayman Islands? Why did Countrywide Financial need two subsidiaries in Guernsey? Why did Wachovia need 18 subsidiaries in Bermuda, three in the British Virgin Islands, and 16 in the Caymans? Why did Lehman Brothers need 31 subsidiaries in the Caymans? What do Bank of America's 59 subsidiaries in the Caymans actually do? Why does Citigroup need 427 separate subsidiaries in tax havens, including 12 in the Channel Islands, 21 in Jersey, 91 in Luxembourg, 19 in Bermuda and 90 in the Caymans? What exactly is going on at Morgan Stanley's 19 subs in Jersey, 29 subs in Luxembourg, 14 subs in the Marshall Islands, and its amazing 158 subs in the Caymans? And speaking of AIG, why does it have 18 subs in tax-haven countries? (Don't expect to find out from Fox News Channel or the New York Post, because News Corp. has its own constellation of strange subsidiaries, including 33 in the Caymans alone.)
When the cost of these shenanigans was last estimated two years ago, the U.S. government's annual loss in revenue due to tax avoidance by major corporations and super-rich individuals was pegged at about $100 billion -- considerably more than a rounding error, even today. But of course that is only a rough assessment, as is the estimate of $12 trillion in untaxed assets hidden around the world. Nobody will know for certain until the books are opened and transparency is established.
Whatever the accurate accounting proves to be, it is certain to exceed hundreds of billions annually worldwide. That is money every country will need badly for years, to repay debt, finance reconstruction, and fund services, as the world economy struggles to revive itself. Even in the developing countries, where incomes are much lower and billionaires tend to be scarce, the annual revenue loss could be as much as $50 billion -- enough to meet the U.N.'s Millennium Development Goals (if only the money were not stolen by local elites and wired away to numbered accounts in tax havens).
None of these tax havens could exist without the connivance or at least the cooperation of the world's most powerful governments, which remain dominated by financial industry lobbyists even now. The Organization for Economic Cooperation and Development has sought greater transparency from the tax havens for years, hearing promises from most and defiance from a few.
But in reality almost nothing was accomplished until last year, when U.S. law enforcement authorities began to pursue Union Bank of Switzerland (UBS) executives with criminal indictments. The UBS probe led to a settlement last month that included a fine of $780 million and an agreement to provide information about tens of thousands of American clients maintaining secret accounts at that huge bank.
Over the past several years, however, the trend has gone the other way, with abuse of bank secrecy and the expatriation of investment and profits growing rapidly. On the tiny island of Jersey in the English Channel, for instance, the authorities responded to political pressure from hedge funds, which have placed more than $80 billion in deposits there, by establishing a "zero regulation regime" last year that literally removed all restrictions and reporting on financial transactions. Jersey's counterparts in Guernsey and the Cayman Islands responded by assuring the hedge funds that they, too, would consider abolishing all regulation.
Perhaps the UBS case indicates a change in that unwholesome trend and a renewed willingness on the part of American authorities to crack the tax havens -- which was not a priority, to put it mildly, of the Bush administration. As a senator, Barack Obama supported legislation to break open the secret financial regimes, by retaliating against countries and principalities that refuse to cooperate. Now Congress and the White House should pass such legislation and make breaking the tax havens a high priority in partnership with the European Union, the OECD and World Bank. They could start by threatening to outlaw transactions between American banks and financial institutions in any country that rejects new rules for transparency and reciprocal information.
If Americans want to make the authors of our misery pay up, then the auditors must go where the money is, as Willie Sutton might have explained -- and take hundreds of billions back.
From the jaded perspective of the financiers, the uproar over the AIG bonuses may provide a welcome distraction from far more important (and lucrative) abuses in the world's offshore tax havens.
So rather than continue arguing over chump change, it is long past time for the United States, with its international friends and allies, to demand accountability from the long list of tiny countries and principalities, from Andorra and the Cayman Islands to Singapore and Switzerland, where corporations, wealthy clients and unrepentant evildoers hide their assets.
The big claw-back will reach into quaint islands and mountainous principalities, because the same banks, hedge funds and private equity firms responsible for the world financial meltdown keep their profits in those "secrecy spaces" -- alongside the ill-gotten gains of numerous drug dealers, dictators and delinquents of every description.
According to the Government Accountability Office, nearly all of America's top 100 corporations maintain subsidiaries in countries identified as tax havens. As the GAO notes, there could be reasons other than avoiding the IRS to set up branches in places such as Singapore, Luxembourg and Switzerland, where taxes are light or nonexistent and keeping clients' illicit secrets is considered a matter of national pride.
But what reason other than evasion could there be for Goldman Sachs Group to set up three subsidiaries in Bermuda, five in Mauritius, and 15 in the Cayman Islands? Why did Countrywide Financial need two subsidiaries in Guernsey? Why did Wachovia need 18 subsidiaries in Bermuda, three in the British Virgin Islands, and 16 in the Caymans? Why did Lehman Brothers need 31 subsidiaries in the Caymans? What do Bank of America's 59 subsidiaries in the Caymans actually do? Why does Citigroup need 427 separate subsidiaries in tax havens, including 12 in the Channel Islands, 21 in Jersey, 91 in Luxembourg, 19 in Bermuda and 90 in the Caymans? What exactly is going on at Morgan Stanley's 19 subs in Jersey, 29 subs in Luxembourg, 14 subs in the Marshall Islands, and its amazing 158 subs in the Caymans? And speaking of AIG, why does it have 18 subs in tax-haven countries? (Don't expect to find out from Fox News Channel or the New York Post, because News Corp. has its own constellation of strange subsidiaries, including 33 in the Caymans alone.)
When the cost of these shenanigans was last estimated two years ago, the U.S. government's annual loss in revenue due to tax avoidance by major corporations and super-rich individuals was pegged at about $100 billion -- considerably more than a rounding error, even today. But of course that is only a rough assessment, as is the estimate of $12 trillion in untaxed assets hidden around the world. Nobody will know for certain until the books are opened and transparency is established.
Whatever the accurate accounting proves to be, it is certain to exceed hundreds of billions annually worldwide. That is money every country will need badly for years, to repay debt, finance reconstruction, and fund services, as the world economy struggles to revive itself. Even in the developing countries, where incomes are much lower and billionaires tend to be scarce, the annual revenue loss could be as much as $50 billion -- enough to meet the U.N.'s Millennium Development Goals (if only the money were not stolen by local elites and wired away to numbered accounts in tax havens).
None of these tax havens could exist without the connivance or at least the cooperation of the world's most powerful governments, which remain dominated by financial industry lobbyists even now. The Organization for Economic Cooperation and Development has sought greater transparency from the tax havens for years, hearing promises from most and defiance from a few.
But in reality almost nothing was accomplished until last year, when U.S. law enforcement authorities began to pursue Union Bank of Switzerland (UBS) executives with criminal indictments. The UBS probe led to a settlement last month that included a fine of $780 million and an agreement to provide information about tens of thousands of American clients maintaining secret accounts at that huge bank.
Over the past several years, however, the trend has gone the other way, with abuse of bank secrecy and the expatriation of investment and profits growing rapidly. On the tiny island of Jersey in the English Channel, for instance, the authorities responded to political pressure from hedge funds, which have placed more than $80 billion in deposits there, by establishing a "zero regulation regime" last year that literally removed all restrictions and reporting on financial transactions. Jersey's counterparts in Guernsey and the Cayman Islands responded by assuring the hedge funds that they, too, would consider abolishing all regulation.
Perhaps the UBS case indicates a change in that unwholesome trend and a renewed willingness on the part of American authorities to crack the tax havens -- which was not a priority, to put it mildly, of the Bush administration. As a senator, Barack Obama supported legislation to break open the secret financial regimes, by retaliating against countries and principalities that refuse to cooperate. Now Congress and the White House should pass such legislation and make breaking the tax havens a high priority in partnership with the European Union, the OECD and World Bank. They could start by threatening to outlaw transactions between American banks and financial institutions in any country that rejects new rules for transparency and reciprocal information.
If Americans want to make the authors of our misery pay up, then the auditors must go where the money is, as Willie Sutton might have explained -- and take hundreds of billions back.
Higher tax rates on high incomes aren't going to do what you think they'll do
Beware, America. Higher tax rates on high incomes aren't going to do what you think they'll do -- because the really rich have always known how to get around paying taxes.
"Obama’s 'tax the rich' scheme," former Reagan administration assistant treasury secretary Paul Craig Roberts argued last week, "will devastate the upper middle class and leave the super rich undamaged."
"Obama’s 'tax the rich' scheme," former Reagan administration assistant treasury secretary Paul Craig Roberts argued last week, "will devastate the upper middle class and leave the super rich undamaged."
taxing on more than $250K earners
Those being hit by the proposed tax hike are overwhelmingly hundreds of thousands of honest people whose success has been based on the foundations of hard work, skill and enterprise.
Overwhelmingly they have not spent their holidays on yachts with celebrities. Or
bought peerages or favours from the Government. Yet they are being hit.
Politicians are diverting criticism from super rich to upper middle class Americans working hard.
Overwhelmingly they have not spent their holidays on yachts with celebrities. Or
bought peerages or favours from the Government. Yet they are being hit.
Politicians are diverting criticism from super rich to upper middle class Americans working hard.
Tuesday, March 10, 2009
Judicial Watch Uncovers Documents Detailing Pelosi's Repeated Requests for Military Travel
House Speaker Issued Unprecedented Demands for Military Aircraft and Wasted Taxpayer Resources with Last Minute Cancellations
Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it has obtained documents from the Department of Defense (DOD) detailing House Speaker Nancy Pelosi's multiple requests for military air travel. The documents, obtained by Judicial Watch through the Freedom of Information Act (FOIA), include internal DOD email correspondence detailing attempts by DOD staff to accommodate Pelosi's numerous requests for military escorts and military aircraft as well as the speaker's last minute cancellations and changes. The following are a few highlights from the documents, which are linked in full below:
In response to a series of requests for military aircraft, one Defense Department official wrote, "Any chance of politely querying [Pelosi's team] if they really intend to do all of these or are they just picking every weekend?...[T]here's no need to block every weekend 'just in case'..." The email also notes that Pelosi's office had, "a history of canceling many of their past requests."
One DOD official complained about the "hidden costs" associated with the speaker's last minute changes and cancellations. "We have...folks prepping the jets and crews driving in (not a short drive for some), cooking meals and preflighting the jets etc."
The documents include a discussion of House Ethics rules and Defense Department policies as they apply to the speaker's requests for staff, spouses and extended family to accompany her on military aircraft. In May 2008, for example, Pelosi requested that her husband join her on a Congressional Delegation (CODEL) into Iraq. The DOD explained to Pelosi that the agency has a written policy prohibiting spouses from joining CODEL's into combat zones.
Documents obtained from the U.S. Army include correspondence from Speaker Pelosi's office requesting an Army escort and three military planes to transport Pelosi and other members of Congress to Cleveland, Ohio, for the funeral services of the late Rep. Stephanie Tubbs Jones. Pelosi noted in her letter of August 22, 2008, that such a request, labeled "Operation Tribute" was an "exception to standard policy."
The documents also detail correspondence from intermediaries for Speaker Pelosi issuing demands for certain aircraft and expressing outrage when requested military planes were not available. "It is my understanding there are no G5s available for the House during the Memorial Day recess. This is totally unacceptable...The speaker will want to know where the planes are..." wrote Kay King, Director of the House Office of Interparliamentary Affairs. In a separate email, when told a certain type of aircraft would not be available, King writes, "This is not good news, and we will have some very disappointed folks, as well as a very upset [s]peaker."
During another email exchange DOD staff advised Kay King that one Pelosi military aircraft request could not be met because of "crew rest requirements" and offered to help secure commercial travel. Kay King responded: "We appreciate the efforts to help the codel [sic] fly commercially but you know the problem that creates with spouses. If we can find another way to assist with military assets, we would like to do that."
Speaker Pelosi came under fire in 2007 for requesting a 42-seat Air Force carrier to ferry the Speaker and her staff back and forth between San Francisco, CA and Washington, DC. Former House Speaker Dennis Hastert was allowed access to a 12-seat commuter jet for security reasons after the events of 9/11.
"Taken together, these documents show that Speaker Pelosi treats the Air Force like her personal airline," said Judicial Watch President Tom Fitton. "Not only does Speaker Pelosi issue unreasonable requests for military travel, but her office seems unconcerned about wasting taxpayer money with last minute cancellations and other demands."
Judicial Watch, the public interest group that investigates and prosecutes government corruption, announced today that it has obtained documents from the Department of Defense (DOD) detailing House Speaker Nancy Pelosi's multiple requests for military air travel. The documents, obtained by Judicial Watch through the Freedom of Information Act (FOIA), include internal DOD email correspondence detailing attempts by DOD staff to accommodate Pelosi's numerous requests for military escorts and military aircraft as well as the speaker's last minute cancellations and changes. The following are a few highlights from the documents, which are linked in full below:
In response to a series of requests for military aircraft, one Defense Department official wrote, "Any chance of politely querying [Pelosi's team] if they really intend to do all of these or are they just picking every weekend?...[T]here's no need to block every weekend 'just in case'..." The email also notes that Pelosi's office had, "a history of canceling many of their past requests."
One DOD official complained about the "hidden costs" associated with the speaker's last minute changes and cancellations. "We have...folks prepping the jets and crews driving in (not a short drive for some), cooking meals and preflighting the jets etc."
The documents include a discussion of House Ethics rules and Defense Department policies as they apply to the speaker's requests for staff, spouses and extended family to accompany her on military aircraft. In May 2008, for example, Pelosi requested that her husband join her on a Congressional Delegation (CODEL) into Iraq. The DOD explained to Pelosi that the agency has a written policy prohibiting spouses from joining CODEL's into combat zones.
Documents obtained from the U.S. Army include correspondence from Speaker Pelosi's office requesting an Army escort and three military planes to transport Pelosi and other members of Congress to Cleveland, Ohio, for the funeral services of the late Rep. Stephanie Tubbs Jones. Pelosi noted in her letter of August 22, 2008, that such a request, labeled "Operation Tribute" was an "exception to standard policy."
The documents also detail correspondence from intermediaries for Speaker Pelosi issuing demands for certain aircraft and expressing outrage when requested military planes were not available. "It is my understanding there are no G5s available for the House during the Memorial Day recess. This is totally unacceptable...The speaker will want to know where the planes are..." wrote Kay King, Director of the House Office of Interparliamentary Affairs. In a separate email, when told a certain type of aircraft would not be available, King writes, "This is not good news, and we will have some very disappointed folks, as well as a very upset [s]peaker."
During another email exchange DOD staff advised Kay King that one Pelosi military aircraft request could not be met because of "crew rest requirements" and offered to help secure commercial travel. Kay King responded: "We appreciate the efforts to help the codel [sic] fly commercially but you know the problem that creates with spouses. If we can find another way to assist with military assets, we would like to do that."
Speaker Pelosi came under fire in 2007 for requesting a 42-seat Air Force carrier to ferry the Speaker and her staff back and forth between San Francisco, CA and Washington, DC. Former House Speaker Dennis Hastert was allowed access to a 12-seat commuter jet for security reasons after the events of 9/11.
"Taken together, these documents show that Speaker Pelosi treats the Air Force like her personal airline," said Judicial Watch President Tom Fitton. "Not only does Speaker Pelosi issue unreasonable requests for military travel, but her office seems unconcerned about wasting taxpayer money with last minute cancellations and other demands."
Warren Buffett and the myth of the Laissez Faire super rich
By Christopher Dowd
Boston Libertarian Examiner
No shibboleth is as central to American progressives as the notion that super rich corporate America embraces Laissez Faire economic policies and that free market ideology inhabits a central place in the hearts of the American uber wealthy. To a lesser degree some conservatives think this is true as well.
Nothing could be further from the truth. If anything, the history of the United States is a history of corporate power growing hand in glove alongside federal government power. The two are intertwined to the point now that they are all but indistinguishable. More corporate mercenaries have drawn paychecks in Iraq than have government troops. Some 70 percent of the CIA’s “de facto workforce” is private corporate contractors. Federal political hacks jump government job to corporate job to government job and back again. And our national corporate media? Honeycombed with federal political operatives throughout. In between federal government posts and need some dollars? Hey- just get your corporate buddies to hire you as a CNN or Fox News “consultant” or “special correspondent”. Great way to get the lowdown on what our government is doing- by hiring lifelong DC political hacks, apparatchiks, and Pentagon flunkies heavily invested in our "defense" establishment huh? Yeah- they are really impartial and without conflicts of interest.
But I digress . . .
From the age of the Robber Barons down to today- the federal government has been utilized by large corporate interests and the uber wealthy to protect their wealth, eliminate or severely handicap competition, and remove their actions from the review of local powers and agencies.
What progressives refuse to admit is that large corporate entities like federal government regulations. In fact- they are the ghost authors of many laws “regulating” their businesses. Corporations and the uber wealthy like concentrated power. The more concentrated the power- the fewer hands they have to grease and the fewer the probing eyes.
The North’s industrial class supported Lincoln’s war to “save the Union” not because it liked the black man and hated slavery. They supported him because they detested dispersed power. All those annoying state legislatures and grubby little people in their town and city governments affecting their bottom lines? No. They couldn’t have that. They much rather prefer to deal with one large centrally powerful government that huge mega wealthy interests can manipulate easily and efficiently.
And so it is with Warren Buffett. He is ostensibly the embodiment of the American Capitalist in our popular culture. But look at him here and here? Here is this “free marketer” equating a recession/depression with . . . a war. Why compare the economy to a war? Because in America wars have proven to justify ever more federal government power- and specifically executive power. Buffett is all but calling on Congress to shut its mouth in this “time of war” so our new Pharaoh Obama can wave his magic economy recovery wand. Oligarchs like Buffett cheer on and applaud our super Imperial Presidency. They want a rump, powerless, show pony Congress relegated to investigating tabloid issues. One point of power? One branch of government calling all the shots for all intent and purpose? That’s the dream of people like Buffett.
Warren Buffett has access to Obama. We don’t. Whose interests do you think will be protected? Buffett and those like him will always have access to the oval office no matter which of our two fraud parties inhabits the White House and they could care less which one it is- they own both of them. The American super rich embrace no “ism” or ideology in private- they are the ultimate pragmatists and will adopt whatever rhetoric or political position they need in order to defend what they have or to get more. In fact, the American super rich spend a great deal of time and money carefully attuning their images to be palpable to both sides of the political spectrum- funding left wing foundations and causes while publically supporting conservative positions is one of their old standard numbers.
Now I don’t want to be simplistic here (but I guess a certain amount of it is unavoidable). Not all super rich people in this country are like Buffett- users of government power to enhance and protect their own wealth. Buffett more than likely didn’t even start out that way. He isn’t a “bad man” but like most people he believes that what is good for him is good for everybody. Some of the super rich are born into being “political entrepreneurs” – those whose wealth is primarily made and maintained through political connections (see the House of Rockefeller)- but others are burned by government and resign themselves to play the game to protect and preserve what they have built. Bill Gates is one such member of the super rich. Just as Microsoft was reaching its unquestioned dominance in the computer industry Gates famously boasted that his one Washington lobbyist didn’t have anything to do and that DC was not on his radar screen. He paid dearly for this brash dismissal of weasel bureaucratic Washington. For soon after uttering that boast his company was slapped around by the Justice Department and nearly split in two at the urging of his far more DC connected competitors (Sun Microsystems and Oracle). Microsoft now employs dozens of well compensated lobbyists in our Mordor on the Potomac.
The super rich don’t mind paying higher taxes. At their level of the game taxes are not factors. Who gets the worst from this parasitical corporate/government relationship? The most innovative people of our society: the upper middle class and the middle class get the shaft. The guy with 4 million dollars scratched together over a lifetime of hard work, the medium sized business owner, the guy who owns 5 gas stations . . . those are the people who lose out the most to our thieving mercantilist federal government.
The guy who owns two car washes and a moving company isn’t going to get his emails read by Barak Obama. He isn’t going to be offered sweet heart deals to pump up the stock market. He isn’t invited to sit on foreign policy advisory boards or given high level security clearances or access to and influence within whole swaths of the federal government. He can’t get billions of dollars created out of thin air for his business with a phone call to his friends in the Treasury and the Federal Reserve. He won’t be laughing off higher tax rates. He’s the guy who embraces Laissez Faire economics. He’s the guy who believes in the free market . . . not the Warren Buffetts of the world.
Boston Libertarian Examiner
No shibboleth is as central to American progressives as the notion that super rich corporate America embraces Laissez Faire economic policies and that free market ideology inhabits a central place in the hearts of the American uber wealthy. To a lesser degree some conservatives think this is true as well.
Nothing could be further from the truth. If anything, the history of the United States is a history of corporate power growing hand in glove alongside federal government power. The two are intertwined to the point now that they are all but indistinguishable. More corporate mercenaries have drawn paychecks in Iraq than have government troops. Some 70 percent of the CIA’s “de facto workforce” is private corporate contractors. Federal political hacks jump government job to corporate job to government job and back again. And our national corporate media? Honeycombed with federal political operatives throughout. In between federal government posts and need some dollars? Hey- just get your corporate buddies to hire you as a CNN or Fox News “consultant” or “special correspondent”. Great way to get the lowdown on what our government is doing- by hiring lifelong DC political hacks, apparatchiks, and Pentagon flunkies heavily invested in our "defense" establishment huh? Yeah- they are really impartial and without conflicts of interest.
But I digress . . .
From the age of the Robber Barons down to today- the federal government has been utilized by large corporate interests and the uber wealthy to protect their wealth, eliminate or severely handicap competition, and remove their actions from the review of local powers and agencies.
What progressives refuse to admit is that large corporate entities like federal government regulations. In fact- they are the ghost authors of many laws “regulating” their businesses. Corporations and the uber wealthy like concentrated power. The more concentrated the power- the fewer hands they have to grease and the fewer the probing eyes.
The North’s industrial class supported Lincoln’s war to “save the Union” not because it liked the black man and hated slavery. They supported him because they detested dispersed power. All those annoying state legislatures and grubby little people in their town and city governments affecting their bottom lines? No. They couldn’t have that. They much rather prefer to deal with one large centrally powerful government that huge mega wealthy interests can manipulate easily and efficiently.
And so it is with Warren Buffett. He is ostensibly the embodiment of the American Capitalist in our popular culture. But look at him here and here? Here is this “free marketer” equating a recession/depression with . . . a war. Why compare the economy to a war? Because in America wars have proven to justify ever more federal government power- and specifically executive power. Buffett is all but calling on Congress to shut its mouth in this “time of war” so our new Pharaoh Obama can wave his magic economy recovery wand. Oligarchs like Buffett cheer on and applaud our super Imperial Presidency. They want a rump, powerless, show pony Congress relegated to investigating tabloid issues. One point of power? One branch of government calling all the shots for all intent and purpose? That’s the dream of people like Buffett.
Warren Buffett has access to Obama. We don’t. Whose interests do you think will be protected? Buffett and those like him will always have access to the oval office no matter which of our two fraud parties inhabits the White House and they could care less which one it is- they own both of them. The American super rich embrace no “ism” or ideology in private- they are the ultimate pragmatists and will adopt whatever rhetoric or political position they need in order to defend what they have or to get more. In fact, the American super rich spend a great deal of time and money carefully attuning their images to be palpable to both sides of the political spectrum- funding left wing foundations and causes while publically supporting conservative positions is one of their old standard numbers.
Now I don’t want to be simplistic here (but I guess a certain amount of it is unavoidable). Not all super rich people in this country are like Buffett- users of government power to enhance and protect their own wealth. Buffett more than likely didn’t even start out that way. He isn’t a “bad man” but like most people he believes that what is good for him is good for everybody. Some of the super rich are born into being “political entrepreneurs” – those whose wealth is primarily made and maintained through political connections (see the House of Rockefeller)- but others are burned by government and resign themselves to play the game to protect and preserve what they have built. Bill Gates is one such member of the super rich. Just as Microsoft was reaching its unquestioned dominance in the computer industry Gates famously boasted that his one Washington lobbyist didn’t have anything to do and that DC was not on his radar screen. He paid dearly for this brash dismissal of weasel bureaucratic Washington. For soon after uttering that boast his company was slapped around by the Justice Department and nearly split in two at the urging of his far more DC connected competitors (Sun Microsystems and Oracle). Microsoft now employs dozens of well compensated lobbyists in our Mordor on the Potomac.
The super rich don’t mind paying higher taxes. At their level of the game taxes are not factors. Who gets the worst from this parasitical corporate/government relationship? The most innovative people of our society: the upper middle class and the middle class get the shaft. The guy with 4 million dollars scratched together over a lifetime of hard work, the medium sized business owner, the guy who owns 5 gas stations . . . those are the people who lose out the most to our thieving mercantilist federal government.
The guy who owns two car washes and a moving company isn’t going to get his emails read by Barak Obama. He isn’t going to be offered sweet heart deals to pump up the stock market. He isn’t invited to sit on foreign policy advisory boards or given high level security clearances or access to and influence within whole swaths of the federal government. He can’t get billions of dollars created out of thin air for his business with a phone call to his friends in the Treasury and the Federal Reserve. He won’t be laughing off higher tax rates. He’s the guy who embraces Laissez Faire economics. He’s the guy who believes in the free market . . . not the Warren Buffetts of the world.
Tuesday, March 3, 2009
IRS has become a subsidy system for super-wealthy Americans
Stroke the rich
IRS has become a subsidy system for super-wealthy Americans IRS winks at rich deadbeats
David Cay Johnston
Sunday, April 11, 2004
The federal tax system that millions of Americans are forced to deal with before April 15 is not at all what you think it is. Congress has changed it in recent decades from a progressive system in which the more one earns the more one pays in income taxes. It has become a subsidy system for the super rich.
Through explicit policies, as well as tax laws never reported in the news, Congress now literally takes money from those making $30,000 to $500,000 per year and funnels it in subtle ways to the super rich -- the top 1/100th of 1 percent of Americans.
People making $60,000 paid a larger share of their 2001 income in federal income, Social Security and Medicare taxes than a family making $25 million, the latest Internal Revenue Service data show. And in income taxes alone, people making $400,000 paid a larger share of their incomes than the 7,000 households who made $10 million or more.
While millions of Americans in the last quarter-century debated about who shot J.R. and scurried for news about who would be Jennifer Lopez's next lover, Congress quietly passed tax laws that shift the tax burden from the 28,000 Americans in households with incomes of $8 million per year or more.
One 1985 law, promoted in the Senate as relieving middle class Americans, gave a huge tax break to corporate executives who make personal use of company jets. CEOs may now fly to vacations or Saturday golf outings in luxury for a penny a mile. Congress shifted the real cost of about $6 per mile to shareholders, who pay two-thirds, and to taxpayers who suffer the rest of the cost lost as a result of reduced corporate income taxes.
Since 1988, Congress has also cut in half the Internal Revenue Service's capacity to enforce tax laws, replacing it with extra effort to reduce audits of corporations and the rich.
On March 30, Congress was told that 78 percent of known tax cheats in investment partnerships are not even asked to pay because there are not enough tax collectors to go after them. Congress and the Bush administration rejected the request by the IRS Oversight Board, a citizen panel Congress created, for extra money to pursue some of these tax cheats and stop about 1 percent of the $311 billion in estimated annual tax cheating.
In the late '90s, a crooked banker gave the IRS records on 1,600 criminal tax cheats who used his Cayman Islands bank. The Justice Department prosecuted 49 of them, but the other 1,551 were not even asked to pay, lawyers for some of them say.
Two billionaires in New York, the art dealer Alec Wildenstein and his former wife, Jocelyn, testified under oath in their divorce that for 30 years they never filed a tax return. They have not been prosecuted.
There are now seminars that show business owners how to drop out of the tax system with virtually no risk of detection by the IRS, which relies on a computer system installed when John F. Kennedy was president.
As tax law enforcement has declined, illegal tax evasion has risen, especially among the rich and more recently among the young.
All of these actions reward cheats at the expense of honest taxpayers, but because "tax" is a four letter word in Washington, nothing is done. Those who support tax law enforcement are denounced on the campaign trail as advocates of higher taxes.
While letting rich tax cheats run wild, Congress did finance a crackdown on the poor. The working poor, most of whom make less than $16,000, are eight times more likely to be audited than millionaire investors in partnerships.
The audits of low-income taxpayers found little cheating. Two-thirds of the poor get either their full refund or more than they sought.
These and other unseen changes in the tax system are major factors in profound economic changes that have caused so many in America to lurch from job to job, a fourth of which pay less than $8 an hour, while helping a very few grow very rich.
Because the news media focus on what politicians say about the tax system, rather than how it actually operates, few Americans realize that:
-- Corporate income tax laws reward companies that move jobs offshore, allowing them to earn untaxed profits as long as the money stays offshore.
-- Widespread cuts in health insurance and pensions for the rank-and- file are driven by a special law that lets top executives defer paying taxes for years, in a way that adds 35 percent to the cost of their bloated pay.
-- The 2001 Bush tax cuts included a stealth tax increase on the middle class and upper-middle class that will cost them a half trillion dollars in the first 10 years and, for 35 million families, wiping out part or all of their Bush tax cuts.
-- The stealth tax boost on people making $30,000 to $500,000 was explicitly used to make sure that the super rich would get their entire Bush tax cuts.
-- A California couple who make $75,000 to $100,000 and have two children face a 97 percent chance of losing part of their Bush tax cuts to this stealth tax increase and overall will lose 42 percent of their Bush tax cuts by next year.
-- If your child becomes seriously ill, Congress, under this same law, will raise your income taxes if you spend more than 7.5 percent of your income trying to keep your child alive.
-- Since 1983, under a plan devised by Alan Greenspan, Americans have paid $1.8 trillion more in Social Security taxes than have been paid out in benefits, money that is used to finance tax cuts for the super rich while robbing the middle class of their capacity to save.
-- A family earning $50,000 this year will have about $1,500 of its money funneled to the super rich because of the Greenspan plan.
-- Since 1993, the income tax burden on the 400 highest-income Americans has been cut 40 percent when measured the way that President Bush prefers, which is by counting how many pennies out of each dollar go to income taxes. In 1993 the top 400 paid 30 cents out of each dollar in federal income taxes. By the end of the Clinton administration in 2000 they were down to 22 cents. Under Bush, their burden is less than 18 cents. Everyone else felt their tax bite rise to 15 cents on the dollar from an average of 13 cents.
Over time, the impact of tax relief for the super rich and more taxes for everyone else is profound. The rich can save and invest more and more, increasing their incomes and political power over time through the magic of compound interest, while everyone else has less of their money to spend or save and millions of people are mired in debt.
While wage earners have every dollar of income reported to the government, the super rich control what the IRS knows about their incomes. But the rich are rarely audited anymore. Congress also gives them many perfectly legal devices to defer reporting income for years or decades. That means that the real incomes of the super rich are much larger than the IRS data show and their tax burden is even lighter.
IRS data, adjusted for inflation, show that the poor are really getting poorer and the super rich are getting fabulously richer, a trend enhanced by their falling tax burden. In 1970, the poorest third of Americans had more than 10 times as much income as the super rich, the top 1/100th of one percent. Back then the poor had more than 10 percent of all income and the super rich had one percent.
By 2000 the two groups were equal -- the 28,000 Americans at the top had as much income as the 96 million at the bottom. The poor's share of income fell by half while the super rich's share rose to more than 5 percent of all income.
Not only did the poorest third's share of income shrink, they actually had less money. The average 25-year-old man in 1970 made $2 per hour more, adjusted for inflation, than in 2000.
Over those three decades the bottom 99 percent of Americans had an average increase in total income of $2,710. That is an annual raise of less than $100 per year, the equivalent of a nickel an hour raise each year for 30 years. The super rich did fabulously better, their average incomes rising $20. 3 million to an average of $24 million each.
Plot these figures on a chart and the results astound. If the increase for 99 percent of Americans is a bar 1-inch high, the bar for the super rich soars heavenward 625 feet.
All of this is having a devastating impact on America, which the preamble to our Constitution says was created to "promote the general welfare." Until Americans decide to take back their democracy and become actively engaged in politics, the super rich will continue to rig the tax system for their benefit only.
David Cay Johnston is a Pulitzer Prize-winning reporter for the New York Times and author of "Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich -- and Cheat Everybody Else," from which this article is adapted.
IRS has become a subsidy system for super-wealthy Americans IRS winks at rich deadbeats
David Cay Johnston
Sunday, April 11, 2004
The federal tax system that millions of Americans are forced to deal with before April 15 is not at all what you think it is. Congress has changed it in recent decades from a progressive system in which the more one earns the more one pays in income taxes. It has become a subsidy system for the super rich.
Through explicit policies, as well as tax laws never reported in the news, Congress now literally takes money from those making $30,000 to $500,000 per year and funnels it in subtle ways to the super rich -- the top 1/100th of 1 percent of Americans.
People making $60,000 paid a larger share of their 2001 income in federal income, Social Security and Medicare taxes than a family making $25 million, the latest Internal Revenue Service data show. And in income taxes alone, people making $400,000 paid a larger share of their incomes than the 7,000 households who made $10 million or more.
While millions of Americans in the last quarter-century debated about who shot J.R. and scurried for news about who would be Jennifer Lopez's next lover, Congress quietly passed tax laws that shift the tax burden from the 28,000 Americans in households with incomes of $8 million per year or more.
One 1985 law, promoted in the Senate as relieving middle class Americans, gave a huge tax break to corporate executives who make personal use of company jets. CEOs may now fly to vacations or Saturday golf outings in luxury for a penny a mile. Congress shifted the real cost of about $6 per mile to shareholders, who pay two-thirds, and to taxpayers who suffer the rest of the cost lost as a result of reduced corporate income taxes.
Since 1988, Congress has also cut in half the Internal Revenue Service's capacity to enforce tax laws, replacing it with extra effort to reduce audits of corporations and the rich.
On March 30, Congress was told that 78 percent of known tax cheats in investment partnerships are not even asked to pay because there are not enough tax collectors to go after them. Congress and the Bush administration rejected the request by the IRS Oversight Board, a citizen panel Congress created, for extra money to pursue some of these tax cheats and stop about 1 percent of the $311 billion in estimated annual tax cheating.
In the late '90s, a crooked banker gave the IRS records on 1,600 criminal tax cheats who used his Cayman Islands bank. The Justice Department prosecuted 49 of them, but the other 1,551 were not even asked to pay, lawyers for some of them say.
Two billionaires in New York, the art dealer Alec Wildenstein and his former wife, Jocelyn, testified under oath in their divorce that for 30 years they never filed a tax return. They have not been prosecuted.
There are now seminars that show business owners how to drop out of the tax system with virtually no risk of detection by the IRS, which relies on a computer system installed when John F. Kennedy was president.
As tax law enforcement has declined, illegal tax evasion has risen, especially among the rich and more recently among the young.
All of these actions reward cheats at the expense of honest taxpayers, but because "tax" is a four letter word in Washington, nothing is done. Those who support tax law enforcement are denounced on the campaign trail as advocates of higher taxes.
While letting rich tax cheats run wild, Congress did finance a crackdown on the poor. The working poor, most of whom make less than $16,000, are eight times more likely to be audited than millionaire investors in partnerships.
The audits of low-income taxpayers found little cheating. Two-thirds of the poor get either their full refund or more than they sought.
These and other unseen changes in the tax system are major factors in profound economic changes that have caused so many in America to lurch from job to job, a fourth of which pay less than $8 an hour, while helping a very few grow very rich.
Because the news media focus on what politicians say about the tax system, rather than how it actually operates, few Americans realize that:
-- Corporate income tax laws reward companies that move jobs offshore, allowing them to earn untaxed profits as long as the money stays offshore.
-- Widespread cuts in health insurance and pensions for the rank-and- file are driven by a special law that lets top executives defer paying taxes for years, in a way that adds 35 percent to the cost of their bloated pay.
-- The 2001 Bush tax cuts included a stealth tax increase on the middle class and upper-middle class that will cost them a half trillion dollars in the first 10 years and, for 35 million families, wiping out part or all of their Bush tax cuts.
-- The stealth tax boost on people making $30,000 to $500,000 was explicitly used to make sure that the super rich would get their entire Bush tax cuts.
-- A California couple who make $75,000 to $100,000 and have two children face a 97 percent chance of losing part of their Bush tax cuts to this stealth tax increase and overall will lose 42 percent of their Bush tax cuts by next year.
-- If your child becomes seriously ill, Congress, under this same law, will raise your income taxes if you spend more than 7.5 percent of your income trying to keep your child alive.
-- Since 1983, under a plan devised by Alan Greenspan, Americans have paid $1.8 trillion more in Social Security taxes than have been paid out in benefits, money that is used to finance tax cuts for the super rich while robbing the middle class of their capacity to save.
-- A family earning $50,000 this year will have about $1,500 of its money funneled to the super rich because of the Greenspan plan.
-- Since 1993, the income tax burden on the 400 highest-income Americans has been cut 40 percent when measured the way that President Bush prefers, which is by counting how many pennies out of each dollar go to income taxes. In 1993 the top 400 paid 30 cents out of each dollar in federal income taxes. By the end of the Clinton administration in 2000 they were down to 22 cents. Under Bush, their burden is less than 18 cents. Everyone else felt their tax bite rise to 15 cents on the dollar from an average of 13 cents.
Over time, the impact of tax relief for the super rich and more taxes for everyone else is profound. The rich can save and invest more and more, increasing their incomes and political power over time through the magic of compound interest, while everyone else has less of their money to spend or save and millions of people are mired in debt.
While wage earners have every dollar of income reported to the government, the super rich control what the IRS knows about their incomes. But the rich are rarely audited anymore. Congress also gives them many perfectly legal devices to defer reporting income for years or decades. That means that the real incomes of the super rich are much larger than the IRS data show and their tax burden is even lighter.
IRS data, adjusted for inflation, show that the poor are really getting poorer and the super rich are getting fabulously richer, a trend enhanced by their falling tax burden. In 1970, the poorest third of Americans had more than 10 times as much income as the super rich, the top 1/100th of one percent. Back then the poor had more than 10 percent of all income and the super rich had one percent.
By 2000 the two groups were equal -- the 28,000 Americans at the top had as much income as the 96 million at the bottom. The poor's share of income fell by half while the super rich's share rose to more than 5 percent of all income.
Not only did the poorest third's share of income shrink, they actually had less money. The average 25-year-old man in 1970 made $2 per hour more, adjusted for inflation, than in 2000.
Over those three decades the bottom 99 percent of Americans had an average increase in total income of $2,710. That is an annual raise of less than $100 per year, the equivalent of a nickel an hour raise each year for 30 years. The super rich did fabulously better, their average incomes rising $20. 3 million to an average of $24 million each.
Plot these figures on a chart and the results astound. If the increase for 99 percent of Americans is a bar 1-inch high, the bar for the super rich soars heavenward 625 feet.
All of this is having a devastating impact on America, which the preamble to our Constitution says was created to "promote the general welfare." Until Americans decide to take back their democracy and become actively engaged in politics, the super rich will continue to rig the tax system for their benefit only.
David Cay Johnston is a Pulitzer Prize-winning reporter for the New York Times and author of "Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich -- and Cheat Everybody Else," from which this article is adapted.
Super-rich donations are just a drop in the ocean
Super-rich donations are just a drop in the ocean
Alison Benjamin The Guardian, Wednesday 5 July 2006 Article historyIf I had £1 for every excitable word that's been written about Warren Buffett's $37 billion (£20bn) donation to the Bill and Melinda Gates Foundation, I, too, could give away a lot of money to charity. Guardian columnist Simon Jenkins' verdict on this once-in-a-lifetime, never-seen-before munificence by the world's second richest man was that it could herald a new "age of charity".
While I'm not in any way belittling Buffett's unusual decision to hand over 80% of his £44bn fortune to a charitable foundation run by another man - the world's richest as it goes - pronouncements that such largesse will persuade the mega-rich to follow suit are decidedly premature, at least in Britain.
According to the 2006 trends in charitable giving published last week by the Charities Aid Foundation (Caf), the super-wealthy are also the super-tight. The richest 1% of the population in Britain, despite owning a quarter of all wealth, contribute a miserly 7% of the £8.2bn given to charities by individuals. And the top 10% - which includes that mega-rich 1% - own more than half of all of wealth but fare little better in the generosity stakes, contributing just over a fifth of giving, amounting to a parsimonious £1.1bn.
That leaves the vast bulk (79%) of the £8.2bn coming from the benevolent pockets of the rest of the population. But this is no surprise. Previous studies by Caf and the Institute of Fiscal Studies have calculated that the richest 10% give less than 1% of their income to charity. In contrast, the poorest 10% hand over 3%.
Cathy Pharoah, Caf's research director, says the latest findings show no signs of a wave of philanthropy sweeping through the upper echelons of society. Yet signs of a change are afoot in the shape of a new breed of financial adviser called a "planned giving adviser" (PGA), whose job is to help the mega-wealthy divest themselves of some of their fortune charitably. PGA's herald from the welfare state-less United States, where people who amass riches are expected to prop up education and healthcare.
If Salvatore LaSpada, the new US chief executive of the UK Institute for Philanthropy (Money matters, page 5) has his way, that culture of giving - which he says is still more of a nice idea than a concrete reality this side of the Atlantic - will soon be spreading across these shores.
But to get our new dotcom entrepreneurs and hedge fund millionaires signed up to the Buffett school of philanthropy requires more than a few role models. What LaSpada failed to mention was that the highly favourable US tax regime helps to focus the minds of the mega-rich on altruism.
But even if there was a sudden proliferation of foundations and large-scale donations, would it even make a dent in the spectrum of social need? It is easy to understand why commentators have got carried away by Buffet's big bucks. His unprecedented bounteousness will allow the Gates foundation to spend $3bn a year. Yet juxtaposed with UK government spending, these sums of money are a drop in the ocean.
Although gargantuan by charitable giving standards, Buffet's billions would not even keep half of the NHS - with a £90bn annual budget - afloat for one year. Social care, which costs the taxpayer £17bn, would benefit for little over 12 months. In a more global context, the Gates Foundation endowment is about the same as a year's worth of official UK development aid.
That is not to say that charitable giving is little more than a PR stunt or a tax dodge. But neither should it be viewed as somehow "better" than money spent by a democratically elected government. It has a different role. At its best, it funds risk taking or unfashionable projects; at its worst it promotes the whims and values of the super-rich. Even the great philanthropist Andrew Carnegie recognised this. He warned that 95% of philanthropy was at best useless or at worst actively harmful.
Given Buffett's investment record, his gift will no doubt fall into the 5% well spent. But far from ushering in the age of charity, all his actions really signify is that we have entered the age of colossal wealth.
· Alison Benjamin is deputy editor of Society Guardian.
Alison Benjamin The Guardian, Wednesday 5 July 2006 Article historyIf I had £1 for every excitable word that's been written about Warren Buffett's $37 billion (£20bn) donation to the Bill and Melinda Gates Foundation, I, too, could give away a lot of money to charity. Guardian columnist Simon Jenkins' verdict on this once-in-a-lifetime, never-seen-before munificence by the world's second richest man was that it could herald a new "age of charity".
While I'm not in any way belittling Buffett's unusual decision to hand over 80% of his £44bn fortune to a charitable foundation run by another man - the world's richest as it goes - pronouncements that such largesse will persuade the mega-rich to follow suit are decidedly premature, at least in Britain.
According to the 2006 trends in charitable giving published last week by the Charities Aid Foundation (Caf), the super-wealthy are also the super-tight. The richest 1% of the population in Britain, despite owning a quarter of all wealth, contribute a miserly 7% of the £8.2bn given to charities by individuals. And the top 10% - which includes that mega-rich 1% - own more than half of all of wealth but fare little better in the generosity stakes, contributing just over a fifth of giving, amounting to a parsimonious £1.1bn.
That leaves the vast bulk (79%) of the £8.2bn coming from the benevolent pockets of the rest of the population. But this is no surprise. Previous studies by Caf and the Institute of Fiscal Studies have calculated that the richest 10% give less than 1% of their income to charity. In contrast, the poorest 10% hand over 3%.
Cathy Pharoah, Caf's research director, says the latest findings show no signs of a wave of philanthropy sweeping through the upper echelons of society. Yet signs of a change are afoot in the shape of a new breed of financial adviser called a "planned giving adviser" (PGA), whose job is to help the mega-wealthy divest themselves of some of their fortune charitably. PGA's herald from the welfare state-less United States, where people who amass riches are expected to prop up education and healthcare.
If Salvatore LaSpada, the new US chief executive of the UK Institute for Philanthropy (Money matters, page 5) has his way, that culture of giving - which he says is still more of a nice idea than a concrete reality this side of the Atlantic - will soon be spreading across these shores.
But to get our new dotcom entrepreneurs and hedge fund millionaires signed up to the Buffett school of philanthropy requires more than a few role models. What LaSpada failed to mention was that the highly favourable US tax regime helps to focus the minds of the mega-rich on altruism.
But even if there was a sudden proliferation of foundations and large-scale donations, would it even make a dent in the spectrum of social need? It is easy to understand why commentators have got carried away by Buffet's big bucks. His unprecedented bounteousness will allow the Gates foundation to spend $3bn a year. Yet juxtaposed with UK government spending, these sums of money are a drop in the ocean.
Although gargantuan by charitable giving standards, Buffet's billions would not even keep half of the NHS - with a £90bn annual budget - afloat for one year. Social care, which costs the taxpayer £17bn, would benefit for little over 12 months. In a more global context, the Gates Foundation endowment is about the same as a year's worth of official UK development aid.
That is not to say that charitable giving is little more than a PR stunt or a tax dodge. But neither should it be viewed as somehow "better" than money spent by a democratically elected government. It has a different role. At its best, it funds risk taking or unfashionable projects; at its worst it promotes the whims and values of the super-rich. Even the great philanthropist Andrew Carnegie recognised this. He warned that 95% of philanthropy was at best useless or at worst actively harmful.
Given Buffett's investment record, his gift will no doubt fall into the 5% well spent. But far from ushering in the age of charity, all his actions really signify is that we have entered the age of colossal wealth.
· Alison Benjamin is deputy editor of Society Guardian.
America's Super-Rich Aren't Big On Sharing
America's Super-Rich Aren't Big On Sharing
By GREGG EASTERBROOK Special to the Los Angeles Times
Published: Mar 25, 2007
There are hundreds of people in the United States with so much money that they will never be able to spend their net worth, no matter how many Picassos or mansions or personal jets they buy.
Last year, for the first time, everyone in the Forbes 400 index of the super-wealthy was a billionaire. Sales of 200-foot-plus yachts and other indulgences of extreme wealth are at record highs. Income for the top 1 percent of Americans has more than doubled in the past quarter of a century, while that of the bottom fifth barely budged. The rich, in short, are getting steadily richer, in absolute terms and compared with the rest of society.
Yet with the sainted exception of Warren Buffett and maybe Bill Gates, virtually all of them refuse to give any meaningful fraction of their wealth to the less fortunate - or even to give a decent fraction to such endeavors as art or medical research, which they would benefit from.
Consider the numbers (which are based on current estimates in the recent Slate 60 index of the year's leading philanthropic donors and the net-worth estimates in the Forbes 400). The 60 leading American donors gave away $51 billion in 2006, according to Slate. They were led by Buffett, whose spectacular $44-billion donation - mainly to the Bill & Melinda Gates Foundation, whose primary cause is health care in the developing world - was the largest gift anyone has ever given. These donors had an estimated combined net worth of $630 billion last year, meaning that they gave away 8 percent of their money, on average. Sounds magnanimous, until you consider that the Dow Jones industrial average rose 16 percent in 2006 - which suggests that, as a group, the leading donors contributed less than they gained.
Now subtract Buffett and his generous gift from the group, and the rest of them begin to look downright miserly, handing to others a mere $7 billion of a combined net worth of $584 billion - or slightly more than 1 percent. Numbers from the philanthropy watch organization Giving USA show that Americans as a whole annually give away about 0.5 percent of their net worth. So, except for Buffett, society's top givers donate to others at only a tad higher rate than the population as a whole. That's, well, pathetic. And that's just counting top givers, not the super-rich who give away little or nothing.
Microsoft mogul Paul Allen, net worth $16 billion, gave away $53 million in 2006, according to Slate - one-third of 1 percent of his fortune. Software magnate Lawrence Ellison, net worth $20 billion, gave away $100 million - half of 1 percent. Pierre Omidyar, founder of eBay, net worth $7.7 billion, gave away $67 million - less than 1 percent. Nike tycoon Philip Knight, net worth $7.9 billion, gave away $105 million - slightly more
than 1 percent.
Donations of this sort, in the multimillion-dollar range, inevitably mean a lot to charities or schools, and of course it is certainly preferable that the super-rich give millions rather than nothing at all. But for those whose net worth soars into the billions, even $100 million is a pittance compared with what they have the means to give.
Gates, one of history's richest men, has given $26.2 billion to the Gates Foundation, according to a spokesperson, and for this he has been widely praised. Gates and his wife were two of Time's Persons of the Year in 2005, exalted in a cover story as grand philanthropists. Yet $26.2 billion is crumbs from the table compared to what Gates might give. Even after the donations, his net worth is about $53 billion, according to Forbes.
Converting to today's dollars, during his lifetime the industrialist Andrew Carnegie gave away $8 billion of his $10.3 billion net worth, or 78 percent, according to Carnegie Corp. figures.
Why do the super-rich hoard? Certainly not because they need money to spend. As economist Christopher Carroll of Johns Hopkins University points out in an upcoming paper, the super-rich save far more than they could ever spend, even with Dionysian indulgence. Gates' fortune must throw off, even by conservative estimations, about $6 million a day after taxes.
Carroll speculates that the super-rich won't give away money they know they will never use for two reasons: because they love money and because extreme wealth confers power. We know already that people who give their lives over to loving money surrender their humanity in the process. As for clout, Carroll quotes Howard Hughes: "Money is the measuring rod of power." Runaway wealth accumulation by zillionaires, combined with the rising share of national income claimed by the top 1 percent, often inspires calls to soak the rich. But I disagree. The magnificent productivity and innovation of the U.S. economy is fostered by the same market forces that cause big fortunes. This leaves us with one final question: What is the effect of wealth on the wealthy themselves? Psychologist Edward Diener of the University of Illinois interviewed members of the Forbes 400 and found them only slightly happier than the population as a whole.
Ebenezer Scrooge discovered that giving money away is life's most pleasurable act. Why do today's super-rich devote so little of their wealth to engaging in life's most pleasurable act?
Gregg Easterbrook is a fellow of the Brookings Institution and author of "The Progress Paradox" and a novel, "The Here and Now."
By GREGG EASTERBROOK Special to the Los Angeles Times
Published: Mar 25, 2007
There are hundreds of people in the United States with so much money that they will never be able to spend their net worth, no matter how many Picassos or mansions or personal jets they buy.
Last year, for the first time, everyone in the Forbes 400 index of the super-wealthy was a billionaire. Sales of 200-foot-plus yachts and other indulgences of extreme wealth are at record highs. Income for the top 1 percent of Americans has more than doubled in the past quarter of a century, while that of the bottom fifth barely budged. The rich, in short, are getting steadily richer, in absolute terms and compared with the rest of society.
Yet with the sainted exception of Warren Buffett and maybe Bill Gates, virtually all of them refuse to give any meaningful fraction of their wealth to the less fortunate - or even to give a decent fraction to such endeavors as art or medical research, which they would benefit from.
Consider the numbers (which are based on current estimates in the recent Slate 60 index of the year's leading philanthropic donors and the net-worth estimates in the Forbes 400). The 60 leading American donors gave away $51 billion in 2006, according to Slate. They were led by Buffett, whose spectacular $44-billion donation - mainly to the Bill & Melinda Gates Foundation, whose primary cause is health care in the developing world - was the largest gift anyone has ever given. These donors had an estimated combined net worth of $630 billion last year, meaning that they gave away 8 percent of their money, on average. Sounds magnanimous, until you consider that the Dow Jones industrial average rose 16 percent in 2006 - which suggests that, as a group, the leading donors contributed less than they gained.
Now subtract Buffett and his generous gift from the group, and the rest of them begin to look downright miserly, handing to others a mere $7 billion of a combined net worth of $584 billion - or slightly more than 1 percent. Numbers from the philanthropy watch organization Giving USA show that Americans as a whole annually give away about 0.5 percent of their net worth. So, except for Buffett, society's top givers donate to others at only a tad higher rate than the population as a whole. That's, well, pathetic. And that's just counting top givers, not the super-rich who give away little or nothing.
Microsoft mogul Paul Allen, net worth $16 billion, gave away $53 million in 2006, according to Slate - one-third of 1 percent of his fortune. Software magnate Lawrence Ellison, net worth $20 billion, gave away $100 million - half of 1 percent. Pierre Omidyar, founder of eBay, net worth $7.7 billion, gave away $67 million - less than 1 percent. Nike tycoon Philip Knight, net worth $7.9 billion, gave away $105 million - slightly more
than 1 percent.
Donations of this sort, in the multimillion-dollar range, inevitably mean a lot to charities or schools, and of course it is certainly preferable that the super-rich give millions rather than nothing at all. But for those whose net worth soars into the billions, even $100 million is a pittance compared with what they have the means to give.
Gates, one of history's richest men, has given $26.2 billion to the Gates Foundation, according to a spokesperson, and for this he has been widely praised. Gates and his wife were two of Time's Persons of the Year in 2005, exalted in a cover story as grand philanthropists. Yet $26.2 billion is crumbs from the table compared to what Gates might give. Even after the donations, his net worth is about $53 billion, according to Forbes.
Converting to today's dollars, during his lifetime the industrialist Andrew Carnegie gave away $8 billion of his $10.3 billion net worth, or 78 percent, according to Carnegie Corp. figures.
Why do the super-rich hoard? Certainly not because they need money to spend. As economist Christopher Carroll of Johns Hopkins University points out in an upcoming paper, the super-rich save far more than they could ever spend, even with Dionysian indulgence. Gates' fortune must throw off, even by conservative estimations, about $6 million a day after taxes.
Carroll speculates that the super-rich won't give away money they know they will never use for two reasons: because they love money and because extreme wealth confers power. We know already that people who give their lives over to loving money surrender their humanity in the process. As for clout, Carroll quotes Howard Hughes: "Money is the measuring rod of power." Runaway wealth accumulation by zillionaires, combined with the rising share of national income claimed by the top 1 percent, often inspires calls to soak the rich. But I disagree. The magnificent productivity and innovation of the U.S. economy is fostered by the same market forces that cause big fortunes. This leaves us with one final question: What is the effect of wealth on the wealthy themselves? Psychologist Edward Diener of the University of Illinois interviewed members of the Forbes 400 and found them only slightly happier than the population as a whole.
Ebenezer Scrooge discovered that giving money away is life's most pleasurable act. Why do today's super-rich devote so little of their wealth to engaging in life's most pleasurable act?
Gregg Easterbrook is a fellow of the Brookings Institution and author of "The Progress Paradox" and a novel, "The Here and Now."
Does Foundations Really Serve A Great Purpose?
Does Foundations Really Serve A Great Purpose?
Under current law, an estate owner can establish a private foundation while living or at death and any contributions made to a private foundation are tax deductible. Although highly regulated to stem and prevent "self-dealing" strategies, the tax benefits are indeed tempting.
The tax deduction allowed for contributions to a private foundation cannot exceed 30% of your adjusted gross income while living. On the other hand, there is no limit on the deduction your estate can make after your death.
Reduce Estate Taxes, Buy a Piece of Immortality, and Serve a Great Cause
Let's look at an example. Let's say a husband and wife has a $10,000,000 dollar estate. Today, they elect to establish a private foundation designed to benefit under privileged children and single mothers.
Of the $10,000,000, they take $4,000,000 and contribute it to the private foundation. As far as the IRS is concerned, their taxable estate is now only $6,000,000 and they've saved over $2,000,000 in estate taxes by this one simple maneuver.
The husband and wife placed their children as the directors of the foundation, of which they will draw annual salaries.
Each year, the foundation is required to distribute 5% of its assets to known charities. This give the donors and the children who run it great leverage and prestige in the community in which they reside.
Quintuple Tax Play
Again, let's look at another example of how to use a private foundation combined with some of the other strategies we've examined earlier in our site.
Let's say Bob and his wife who are now in there late 60's. Bob starting buy stock in his late 20's and was a buy and hold, valued-oriented investor. Today, their stock portfolio is valued at over $6,000,000. If they were to sell their shares, they would incur huge capital gains tax liability. If they elect to continue holding the shares until he and the wife pass away, estate taxes will consume over 55%.
To avoid the inevitable, Bob and his wife established a charitable remainder income trust, a tax free inheritance (insurance) trust and a private family foundation.
Bob and his wife donated the $6,000,000 of stock to the charitable remainder trust and as acting trustees, they liquidated the stock holding and incurred no capital gains taxes. The proceeds were invested in government paper, which earned approximately 7%. The charitable remainder trust paid Bob and his wife $420,000 annually.
As you may recall, assets donated to a charitable remainder trust eventually wind up in the possession of a charitable organization or foundation. Hence, at their death, the $6,000,000 dollars that remained went to the Bob Johnson Foundation, which he and his wife created long ago.
The foundation distributes 5% of it's income annually ($300,000), which leaves another $120,000 to pay for the foundation's expenses including salaries to the children who serve as directors.
The one drawback to this strategy lies in the fact that Bob's children stand to lose $3,000,000 dollars, assuming he and his wife held his stock instead of transferring it to the charitable trust.
To ensure that his children get their share, he used the Tax-Free Inheritance (insurance) trust to purchase a $3,000,000 million dollar Survivorship Life insurance plan on he and his wife. The deduction that Bob and his wife received for making the original contribution to the charitable trust is more than enough to cover the cost of the insurance premiums.
In Summary
Bob and his wife established a charitable trust and transferred the stock to avoid the capital gains taxes and estate taxes.
They established a private family foundation to serve as the eventual recipient of the charitable trust proceeds.
The foundation is run by his children/grandchildren at they are paid handsomely for doing so.
The children receive the death benefit from the tax free inheritance (insurance) trust 100% income and estate tax free.
And the foundation distributes 5% of its assets to charitable causes it supports.
Under current law, an estate owner can establish a private foundation while living or at death and any contributions made to a private foundation are tax deductible. Although highly regulated to stem and prevent "self-dealing" strategies, the tax benefits are indeed tempting.
The tax deduction allowed for contributions to a private foundation cannot exceed 30% of your adjusted gross income while living. On the other hand, there is no limit on the deduction your estate can make after your death.
Reduce Estate Taxes, Buy a Piece of Immortality, and Serve a Great Cause
Let's look at an example. Let's say a husband and wife has a $10,000,000 dollar estate. Today, they elect to establish a private foundation designed to benefit under privileged children and single mothers.
Of the $10,000,000, they take $4,000,000 and contribute it to the private foundation. As far as the IRS is concerned, their taxable estate is now only $6,000,000 and they've saved over $2,000,000 in estate taxes by this one simple maneuver.
The husband and wife placed their children as the directors of the foundation, of which they will draw annual salaries.
Each year, the foundation is required to distribute 5% of its assets to known charities. This give the donors and the children who run it great leverage and prestige in the community in which they reside.
Quintuple Tax Play
Again, let's look at another example of how to use a private foundation combined with some of the other strategies we've examined earlier in our site.
Let's say Bob and his wife who are now in there late 60's. Bob starting buy stock in his late 20's and was a buy and hold, valued-oriented investor. Today, their stock portfolio is valued at over $6,000,000. If they were to sell their shares, they would incur huge capital gains tax liability. If they elect to continue holding the shares until he and the wife pass away, estate taxes will consume over 55%.
To avoid the inevitable, Bob and his wife established a charitable remainder income trust, a tax free inheritance (insurance) trust and a private family foundation.
Bob and his wife donated the $6,000,000 of stock to the charitable remainder trust and as acting trustees, they liquidated the stock holding and incurred no capital gains taxes. The proceeds were invested in government paper, which earned approximately 7%. The charitable remainder trust paid Bob and his wife $420,000 annually.
As you may recall, assets donated to a charitable remainder trust eventually wind up in the possession of a charitable organization or foundation. Hence, at their death, the $6,000,000 dollars that remained went to the Bob Johnson Foundation, which he and his wife created long ago.
The foundation distributes 5% of it's income annually ($300,000), which leaves another $120,000 to pay for the foundation's expenses including salaries to the children who serve as directors.
The one drawback to this strategy lies in the fact that Bob's children stand to lose $3,000,000 dollars, assuming he and his wife held his stock instead of transferring it to the charitable trust.
To ensure that his children get their share, he used the Tax-Free Inheritance (insurance) trust to purchase a $3,000,000 million dollar Survivorship Life insurance plan on he and his wife. The deduction that Bob and his wife received for making the original contribution to the charitable trust is more than enough to cover the cost of the insurance premiums.
In Summary
Bob and his wife established a charitable trust and transferred the stock to avoid the capital gains taxes and estate taxes.
They established a private family foundation to serve as the eventual recipient of the charitable trust proceeds.
The foundation is run by his children/grandchildren at they are paid handsomely for doing so.
The children receive the death benefit from the tax free inheritance (insurance) trust 100% income and estate tax free.
And the foundation distributes 5% of its assets to charitable causes it supports.
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