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charles littlejohn
Billionaires Buy Governments to Avoid Paying Their Fair Share in Taxes
In legislatures, the courts, and our executive offices, we have a system rigged in favor of the ultra-rich, rigged by everything from acts of Congress and judicial rulings to IRS budgets and audit policies.
Aug 03, 2024
By all appearances, former U.S. President Donald Trump has cut a sweet deal with a dozen or two of America’s richest billionaires: Finance his campaign and he’ll keep their federal taxes super low—or even lower them—once he’s sitting back in the White House.
How much do billionaires like this deal? This much: In April, hedge fund billionaire John Paulsen held a Palm Beach fundraiser for Trump that brought in $50.5 million. Immediately after Trump’s late May conviction on 34 felony counts in Manhattan, Timothy Mellon, the grandson of the classic plutocrat Andrew Mellon, ponied up $50 million. Miriam Adelson, the billionaire widow of Las Vegas kingpin Sheldon Adelson, appears eager to kick in as much as $100 million.
This past spring, meanwhile, billionaires Elon Musk and David Sacks reportedly held a secret dinner party for Trump, with attendees including the illustrious deep pockets Peter Thiel, Rupert Murdoch, and Michael Milken.
The rich themselves have actually become more brazen about avoiding taxes. Just try to stop us, they seem to be saying.
America’s billionaires clearly see politics as one route to ensuring they pay as little as possible at tax time. But they don’t just make their presence felt at election time. America’s rich have their thumbs firmly on the scale of all three branches of government. In legislatures, the courts, and our executive offices, we have a system rigged in favor of the ultra-rich, rigged by everything from acts of Congress and judicial rulings to IRS budgets and audit policies.
Some of this rigging we can all easily see. The dividends and long-term capital gains of the ultra-rich have for decades faced a maximum tax rate barely half the maximum rate applicable to other forms of income. And the investment income of the rich, unlike the paychecks of working people, faces no Social Security tax.
In 2017, the first year of the Trump presidency, intense lobbying efforts helped rich business owners to a special tax rate for their business income. In 2018 alone, according to ProPublica, that special rate translated into a $67 million gift to Mike Bloomberg, whose personal wealth now reportedly exceeds $100 billion.
But these glaring privileges the rich enjoy at tax time only tell part of the billionaire tax story. Other parts get precious little attention. In 2004, for instance, lawmakers in Congress enacted a penalty for the failure to disclose potentially abusive tax avoidance transactions on tax returns. The penalty on the surface looked substantial: 75% of the tax sought to be avoided. But Congress capped the penalty at $100,000, a move that turned the penalty into a minor nuisance for billionaires seeking to avoid millions of dollars in taxes.
In our current rich people-friendly tax climate, IRS staff who want to do the right thing face tough going. Recently, for example, one former IRS staffer, Michael Welu, went public with his concerns that the IRS itself has both official and unofficial policies that end up treating audited rich taxpayers much more gently than small business owners.
“I was putting butchers, bakers, and candlestick makers in jail,” Welu told the International Consortium of Investigative Journalists, “but the big stuff we really wanted to go after was being ignored.”
Welu found the upper management of the IRS division tasked with auditing the super rich—and the corporations they run—distinctly uninterested in investigating America’s richest and their “most egregious, ridiculous schemes” for avoiding taxes.
IRS officials like Michael Welu do occasionally speak out. But only tax wonks truly have any real sense of how much obscure tax code penalties and IRS audit policies favor the rich. And most of those tax wonks work for the rich.
The rich themselves have actually become more brazen about avoiding taxes. Just try to stop us, they seem to be saying.
Take the recently decided Supreme Court case, Moore v. United States. Working through an array of right-wing organizations, the conservative mover-and-shaker Leonard Leo attempted to use a challenge to an obscure one-time tax as a vehicle to preempt Congress from ever taxing the wealth or unrealized gains of the ultra-rich. Ultimately, the court decided the case without ruling on whether the rich can be taxed on their wealth or unrealized gains. But the opinions that four of the nine justices handed down made it clear that they stand prepared to do the billionaire bidding should a direct challenge to a tax on the wealth or unrealized gains of billionaires come before them.
Billionaires now have at least three Supreme Court justices firmly in their pockets. Reporting by ProPublica has revealed the massive gifts that have been flowing from Harlan Crow and other billionaires to Justice Clarence Thomas as well as the generous gifts that billionaire Paul Singer has been sending Justice Samuel Alito’s way. Justice Neil Gorsuch has had his entire career, including his appointment to the court, funded by the billionaire Philip Anschutz.
Those three justices, along with Justice Amy Coney-Barret, have now made it patently obvious they will not allow billionaires to be taxed on their unrealized gains or their wealth. Does anyone really think the billionaires won’t have the crucial, majority-making fifth vote from Justice Brett Kavanaugh when they need it?
Republican members of Congress are showing even less shame than our Supreme Court justices. Last year, these GOP lawmakers held the country hostage in negotiations to increase the country’s debt limit. Their price for agreeing to raise the debt limit, thereby avoiding a default on the country’s debt? They demanded—and won—a reduction in a scheduled IRS budget increase that would been used to increase enforcement moves against rich taxpayers.
The purported motive for this legislative hostage taking—“concern” over the federal deficit—made for an absurd justification. The proposed increase in the IRS budget would have been recovered, several times over, through increased tax collections. The IRS budget reductions the Republican lawmakers extracted will, in fact, only increase the federal deficit. But those reductions will serve a political purpose. They’ll protect the GOP’s richest patrons from tax enforcement.
The mainstream media, to no one’s surprise, did a miserable job of exposing this Republican dishonesty in the debt limit negotiations. But at one point in our recent past a courageous soul did emerge to expose the rot in our tax system. What happened? The ultra-rich and their henchmen in Congress make sure that this soul faced a punishment far more severe than any punishment ever meted out to those few rich Americans who actually get caught evading their taxes due.
That courageous soul, Charles Littlejohn, worked as an IRS contractor. He leaked tax return information related to Trump and America’s billionaires to The New York Times and ProPublica. ProPublica used that leaked information to write over 50 stories about billionaire tax avoidance, embarrassing and angering many of our richest in the process. Two of them even brought lawsuits, one against the IRS and the other against Littlejohn’s employer.
Ultimately, Littlejohn pled guilty to one count of unauthorized tax return information disclosure, a crime that carries a recommended sentence of four to 10 months. But 25 Republican members of Congress, undoubtedly at the behest of their billionaire patrons, wrote the judge in the case and urged the harshest possible sentence of five years. The judge obliged, stating in her sentencing remarks that Littlejohn posed a graver threat to democracy than the January 6 rioters. As tax law professor Reuven Avi-Yonah has noted, Littlejohn is now serving a sentence far harsher than any imposed on rich Americans convicted of tax evasion.
Littlejohn’s extreme sentence did not reflect the one single count of unauthorized tax return information disclosure he pled guilty to. That sentence reflects his “crime” of exposing the tax avoidance of the billionaire class.
Try this thought experiment: Imagine if Littlejohn had released the return information of 1,000 or so taxpayers with modest incomes to ProPublica. Imagine that ProPublica had then publicly detailed all the tip income that servers and bartenders among these taxpayers had failed to report and all the social meals that small business owners in the sample had claimed as business expenses. If Littlejohn had then pled to one count of unauthorized disclosure, would 25 members of Congress have intervened? Would the judge have imposed a sentence over six times the maximum recommended in federal sentencing guidelines?
Doesn’t it become dangerous to society when the punishment for a crime depends on who the victim happens to be?
We are now living that danger. Our billionaires sit firmly in control. And they will do whatever it takes to make sure they never pay tax at an appropriate level—even if that means locking a human being up for a preposterously long time just to send a message.
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'The Guy Is a Hero': IRS Contractor Who Leaked Trump Tax Returns Gets Max Sentence
"Billionaires control our lives and our government and pay... lower tax rates than the rest of us, but this is the bad guy who should be punished with a five-year prison sentence?"
Jan 29, 2024
As the U.S. tax season began Monday, a former Internal Revenue Service contractor who leaked to the media the tax records of wealthy Americans including ex-President Donald Trump was sentenced to five years in prison and ordered to pay a $5,000 fine.
U.S. District Judge Ana C. Reyes, an appointee of President Joe Biden, handed down the maximum sentence to Charles Littlejohn, who pleaded guilty to unauthorized disclosure of tax returns and return information in October. Littlejohn gave The New York Timesinformation on Trump—who is expected to face Biden in the November election—and shared with ProPublica data on Jeff Bezos, Michael Bloomberg, Warren Buffett, Bill Gates, Rupert Murdoch, Elon Musk, Mark Zuckerberg, and more.
While Reyes called the decision to release Trump's filings "an attack on our constitutional democracy" and Littlejohn told the court that he "acted out of a sincere but misguided belief that I was serving the public," others framed the 38-year-old's move as heroic.
"This guy is a hero who showed us how the superrich steal from the American public,"
Slate politics writer Alexander Sammon said Monday. "Naturally, the judge gave him a max sentence, claiming it was 'a moral imperative' to punish him as harshly as possible."
Jeff Hauser of the Revolving Door Project noted that "this whistleblower's cause has been ignored by a LOT of people who have defended much more intrusive leaking. (Tax returns were public in the past, are in some countries now, and should be fully transparent—they're inherently public information, unlike, e.g., John Podesta's emails)."
People's Policy Project founder Matt Bruenig similarly pointed out that "in Finland, these returns are public record available to anyone who wants to see them."
After decades of presidential candidates voluntarily releasing income tax returns, Trump declined to do so—breaking his promise to make them public. The Republican also unsuccessfully fought to block Congress from receiving some of his tax records.
After the sentencing on Monday, Littlejohn's attorney told reporters that his only statement was to thank the court for consideration of the case. Meanwhile, Acting Assistant Attorney General Nicole M. Argentieri of the U.S. Department of Justice's (DOJ) Criminal Division said that his "sentence sends a strong message that those who violate laws intended to protect sensitive tax information will face significant punishment."
When Littlejohn pleaded guilty last year, ProPublicadeclined to comment other than reiterating that the news outlet "doesn't know the identity of the source who provided this trove of information on the taxes paid by the wealthiest Americans."
Charlie Stadtlander,a spokesperson for the Times, said last year that "we remain concerned when whistleblowers who provide information in the public interest are prosecuted. The Times' reporting on this topic played an important role in helping the public understand the financial ties and tax strategies of a sitting president—information that has long been seen as central to the knowledge that voters should have about the leader of our government and the candidates for that high office."
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