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The Super Committee is facing growing pressure to work together and develop new bipartisan plan for reducing U.S. debt.
Over the summer there was widespread frustration with U.S. politicians in Washington D.C. regarding their reluctance to work together and avoid a U.S. default and credit downgrade.
As the Occupy Wall St. renews their calls for the 1% to pay more of their share, it is important to take a look at how many billionaires in the U.S. use tax loopholes to avoid paying taxes.
Billionaire Warren Buffett said that he thinks it is absurd that he pays a lower tax rate (17%) than his secretary.
The vast majority of Americans agree with him.
This morning on In the Loop with Bloomberg’s Betty Liu, Bloomberg correspondent Gigi Stone discussed the topic of billionaires and taxes.
Gigi said that according to U.S. data on taxes, the U.S income tax rate for billionaires has fallen to 18%, down from 30% in 1995.
What is the reason for this decline?
Complicated accounting strategies
The vast majority of billionaire’s income is derived from appreciating stock with futures contracts.
Through tax loopholes billionaires can avoid reporting tax gains on their adjusted gross income. If audited by the IRS, billionaires can only pay a settlement fee and avoid paying more in taxes.
Gigi Stone reports that the IRS is trying to crack down on this practice.
Hopefully new tax reforms will be developed to make it more difficult for billionaires to take advantage of tax loopholes.
What about the U.S. corporate tax rate of 35%?
Every Republican presidential candidates during the Republican debates have proposed that corporations should pay less than 35% in corporate taxes, the current U.S corporate tax rate.
But in reality the majority of large companies avoid paying anything close to the current level of 35 % in corporate taxes.
Multinational companies have discovered sophisticated ways to avoid taxes by moving profits around their global subsidiaries. U.S.based businesses hire teams of lawyers to navigate through murky tax laws and widen every loophole.
New tax reform laws are sorely needed to secure added revenues for the U.S. government to pay down its large debts and improve the health of the overall U.S. economy.