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tax evasion
Why Can't We Fund Universal Public Goods? Blame the Tax-Dodging Billionaire Nepo Babies
"In 2024, these billionaire families used their enormous wealth to make record-breaking political contributions to secure a GOP trifecta," reads a new report.
Dec 13, 2024
The children of the richest families in the U.S. are well-known for spending their vast wealth on frivolous luxuries—constructing a replica of a medieval church on their acres of property, in the case of banking heir Timothy Mellon, or starting a brand of T-shirts described by one critic as "terrible beyond your wildest imagination," as Wyatt Koch, nephew of Republican megadonors Charles and David, did.
But a report released by Americans for Tax Fairness (ATF) on Thursday shows how "billionaire nepo babies" don't just waste their families' fortunes. They also benefit from "a rigged system" that allows them to "pass that wealth down over generations without being properly taxed–often without being taxed at all."
In addition, the heirs of the country's biggest fortunes spend vast sums "to elect politicians who protect their unearned wealth and manipulate the country's economy in their favor," said ATF.
Along with Mellon and Koch, the report profiles Samuel Logan of the Scripps media dynasty; Nicola Peltz-Beckham, daughter of billionaire investor Nelson Peltz; Gabrielle Rubenstein, whose family has made its fortune in private equity; and President-elect Donald Trump's son, Eric Trump.
The nepo babies are part of a small group of billionaire families in the U.S. who benefit from tax loopholes that ensure little of their immense wealth ever goes to benefit the public good.
At least 90 billionaires have passed away over the last decade, leaving their beneficiaries $455 billion in collective wealth.
But according to ATF, "$255 billion (56%) of that amount was likely entirely exempt from the capital gains tax because of a special break called 'stepped up basis.'"
"Trump and his allies in Congress are doing their donors' bidding by rigging the system in their favor and pushing a $4 trillion giveaway to wealthy elites and giant corporations."
Without loopholes included the stepped up basis tax cut, the current estate tax on billionaires and centimillionaires would yield enough revenue to fund universal childcare, preschool, and paid family leave for U.S. workers, with hundreds of billions of dollars left over, according to ATF's report.
The wealthy heirs profiled in the report and their families are some of the Republican Party's top donors—contributing hundreds of millions of dollars to candidates including Trump in the hopes of securing even more tax cuts.
Mellon, for example, is Trump's "biggest supporter, giving $140 million to a pro-Trump PAC in 2024 alone," reads the report.
A previous analysis by ATF found that as of late October, just 150 billionaire families had spent $1.9 billion on the 2024 elections.
As the Center for American Progress found earlier this year, Trump's plan to extend the tax cuts that he pushed through in 2017 would cost $4 trillion over the next decade.
"The vast wealth inherited by centuries-old billionaire families is staggering. While these heirs and their billions go undertaxed, enormous sums are squandered on lavish mansions, private jets, and vanity projects instead of funding crucial public investments," said ATF executive director David Kass. "In 2024, these billionaire families used their enormous wealth to make record-breaking political contributions to secure a GOP trifecta. Now, Trump and his allies in Congress are doing their donors' bidding by rigging the system in their favor and pushing a $4 trillion giveaway to wealthy elites and giant corporations—all while advocating for cuts to vital programs that working and middle-class Americans depend on."
The report calls for Congress to pass "proven, pragmatic proposals to unrig the tax system that enjoy high levels of popular support," such as the Ultra Millionaire Tax Act that was proposed by Sen. Elizabeth Warren (D-Mass.) and Reps. Pramila Jayapal (D-Wash.) and Brendan Boyle (D-Pa.) this year. The bill would tax fortunes between $50 million and $1 billion at 2% and wealth above $1 billion at $1 billion.
The small tax on enormous wealth would generate "a whopping $3 trillion over 10 years," said ATF.
The estate tax could also be "restored so that it can play a meaningful role in promoting fairness and equal opportunities" through the passage of the For the 99.5% Act, which was introduced in 2023 by Sen. Bernie Sanders (I-Vt.) and Rep. Jimmy Gomez (D-Calif.).
Under the bill, the estate tax exemption would be lowered to $7 million per couple and the current 40% flat rate would be replaced with a sliding scale that would charge higher rates as a family's wealth grows.
"None of these tax reforms would impoverish the ultra wealthy, nor even inconvenience them in any meaningful way–but they would reduce the concentration of wealth that is so corrosive to society," reads the report. "At the same time, they would raise trillions of dollars that could be used to reduce inequality and improve the lives of families that can only dream of the kind of security and opportunity enjoyed by the nation’s richest clans."
"And if rich families ever did need to tighten their belts a bit to pay their taxes," the report continues, "the economizing might begin by reducing the flow of money funding the extravagant lifestyles of America's Billionaire Nepo Babies."
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Trump Pick to Lead IRS Signals 'Open Season for Tax Cheats'
The nomination of Billy Long, said one lawmaker, indicates "Trump's intention to make the agency less responsive to the American people, while giving a green light to wealthy tax cheats."
Dec 05, 2024
U.S. President-elect Donald Trump's nominee to run the Internal Revenue Service, former Rep. Billy Long, didn't serve on the House committee tasked with writing tax policy during his six terms in office, and his lack of relevant experience is likely "exactly what Trump was looking for," according to one economic justice advocate.
Progressive lawmakers joined advocates on Wednesday in denouncing Trump's selection of Long, who since leaving office in 2023 has promoted a tax credit that's been riddled with fraud and who spent his time in the House pushing to abolish the very agency he's been chosen to run.
As a Republican congressman from Missouri, Long repeatedly sponsored legislation to dismantle the IRS, which under President Joe Biden has recovered at least $1 billion from wealthy people who previously evaded taxes.
He also co-sponsored legislation to repeal all estate taxes, which are overwhelmingly paid by the wealthiest households, but "said almost nothing on the floor regarding taxes, the IRS, and taxation during his 12 years in Congress," said John Bresnahan of Punchbowl News.
Long's limited experience with tax policy "ought to set off alarm bells," said Sen. Ron Wyden (D-Ore.), who pointed to "vastly improved taxpayer service" under the leadership of IRS Commissioner Danny Werfel, who Biden chose to replace Trump's nominee from his first term, Charles Rettig, after Rettig served his full term.
Werfel has "set up a tremendous direct-file system, and begun badly needed crackdowns on ultra-wealthy tax cheats who rip off law-abiding Americans," said Wyden. "If Trump fires Mr. Werfel, it won't be to improve on his work; it'll be to install somebody Trump can control as he meddles with the IRS."
The appointment is likely to commence an "open season for tax cheats," said Lindsay Owens, executive director of Groundwork Collaborative.
"If he's confirmed, taxpayers can expect longer wait times for customer service, a more complicated process to file taxes, and free rein for the rich and powerful to continue rigging the system at the expense of everyone else."
Since leaving office, Long has promoted the Employee Retention Tax Credit (ERTC), a pandemic-era credit that was intended to incentivize employers to continue paying workers during the economic shutdown when the coronavirus pandemic hit the United States.
He has worked to help businesses claim the credit from the IRS, but fraudulent and improper claims have so permeated the program that the IRS stopped processing new claims temporarily. The U.S. House passed a bill to entirely halt ERTC claims, but it has been stalled in the Senate.
"These ERTC mills that have popped up over the last few years are essentially fraud on an industrial scale, conning small businesses and ripping off American taxpayers to the tune of billions of dollars," said Wyden. "I'm going to have a lot of questions about Mr. Long's role in this business, first and foremost why the American people ought to trust somebody involved with a fraud-ridden industry to run an agency that's tasked with rooting out fraud."
Wyden also pointed out that Long has not been named in a "typical nomination like you'd see after every presidential election." Werfel's term was set to go until November 2027, and the IRS typically operates as a nonpartisan agency.
"Replacing Commissioner Werfel with over three years remaining in his term is a terrible mistake," said Rep. Don Beyer (D-Va.). "He has done an excellent job rebuilding the IRS, boosting customer service, and enhancing enforcement aimed at wealthy tax evaders. Removing him will clearly signal Trump's intention to make the agency less responsive to the American people, while giving a green light to wealthy tax cheats to evade their fair share of the tax burden."
"Trump's nominee has clearly stated that he wants to abolish the IRS," added Beyer. "The change Trump proposes in IRS leadership would be a gift to tax cheats and a blow to anyone who believes it is important to rein in deficits."
Sen. Elizabeth Warren (D-Mass.) added that Trump's nomination of Long signals "the weaponization of the tax agency."
"If he's confirmed," she said, "taxpayers can expect longer wait times for customer service, a more complicated process to file taxes, and free rein for the rich and powerful to continue rigging the system at the expense of everyone else."
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Simple Charity Reforms Could Unlock Hundreds of Billions for Nonprofit Sector
An estimated $1.7 trillion in donations, ostensibly earmarked for philanthropy, are currently languishing in private foundations and donor-advised funds—while charities like Feeding America and Habitat for Humanity are under-resourced.
Aug 09, 2024
Thanks to outdated charity tax laws, the U.S. is missing out on hundreds of billions of dollars that could flow toward housing and food security, health research, education, advocacy, and other crucial nonprofit efforts aimed at uplifting the common good—but simple reforms could unlock some of the extreme wealth that is currently "warehoused" in private foundations and donor-advised funds.
This is according to a new Institute for Policy Studies analysis that shows charitable groups currently hold an estimated $1.7 trillion in donations that are "ostensibly earmarked for philanthropy," but are able to "languish in go-between funds" while working charities remain under-resourced.
The foundations and donor-advised funds (DAFs) are able to collect tax breaks while sitting on billions of dollars thanks to provisions in the Tax Reform Act of 1969 that haven't been updated in decades, wrote IPS associate fellow Helen Flannery and associate director of charity reform initiatives Bella DeVaan at Inequality.org, a project of the organization.
"Initially, in the Tax Reform Act of 1969, private foundations were mandated to give away 6 percent of their wealth or the annual net growth from their investments: Whichever was higher," wrote Flannery and DeVaan. "Foundations' tax benefits wouldn't provide license for funds to just grow forever and ever, and they were to be consistently responsive to shifting economic reality. A decade of revisions to payout requirements reflected those principles and eventually created our flat 5% mandate. But that 5% is overdue for re-evaluation, and our elected representatives have fallen asleep at the wheel."
"It's worth imagining a future in which billions more flow towards life-saving medical cures, food security, housing access, and environmental protection through organizations that are already woven into our social fabric."
While the nation's largest foundations give charitable donations at a rate of about 5%, "their gains in the market have averaged 9% over the last five years," they explained.
In other words, said Flannery and DeVaan, the funds "are growing faster than the rate at which they give" while donations to working charities like Habitat for Humanity, United Way, and Feeding America fall behind.
The wealth of DAFs has skyrocketed by 411% in the last decade, with the funds stockpiling an estimated $230 billion in assets in 2023.
IPS noted that billions of dollars in DAF gifts have been directed as dark money contributions—whose donors "might well have second thoughts" if tax laws were reformed to require both boosted payouts and more transparency.
In its policy brief, IPS proposes reforms that would:
- Increase the minimum payout rate requirement to 10% for foundations with assets of $50 million or more, and increase it to 7% for all other foundations;
- Exclude private foundation overhead expenses above 1% of assets from counting towards payout;
- Exclude grants from private foundations to DAFs from counting towards payout;
- Require DAFs to pay out funds within five years of receipt (and provide individual account-level transparency);
- Exclude grants from DAFs to other DAFs from counting toward payout; and
- Generate excise tax revenue from intermediaries that don't meet the new requirements.
The new rules would generate more than $110 billion in additional funding for working charities each year, as well as $339 billion in donations over three years.
"It's worth imagining a future in which billions more flow towards life-saving medical cures, food security, housing access, and environmental protection through organizations that are already woven into our social fabric," wrote Flannery and DeVaan, "or organizations that could and should be with strengthened access to funding."
IPS released the analysis as legislators prepare to overhaul the tax code in 2025.
"We're hopeful that this can be a watershed moment for charity reform akin to 1969," wrote Flannery and DeVaan, along with IPS program director Chuck Collins.
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