The tax treatment of the ultra wealthy might be the true scandal
Which is worse, letting a rich kid off easy for a heinous crime or allowing an ultra wealthy adult to drain public coffers through bribery? These two scenarios may seem completely unrelated, but they both illustrate the corrupting influence of modern inequality—treating those at the top differently than the rest of the country.
Consider the case of Ethan Couch. Ethan first made headlines in 2013 when at age 16 he drove his car drunk into a crowd of people in Texas, killing four people and injuring many others. While drunk driving is unfortunately not uncommon in the United States, what made Ethan unique was the defense he used in court to get a dramatically reduced sentence. Ethan, through his lawyers, claimed he suffered from “affluenza”—he didn’t know right from wrong because he grew up rich and thus couldn’t be held responsible for his actions. To the astonishment of just about everyone, that worked.
Ethan was sentenced to mere parole instead of prison. Ethan Couch, whose family is worth a reported $15 million, became the embodiment of our unfair treatment of the rich. He recently re-entered headlines after a jaunt through Mexico in violation of parole left him in federal custody. He may, in the end, face jail time.
The public outrage at Ethan’s legal treatment has been understandably intense. Why should someone get off easy simply because they’re rich?
However, much less public outrage has come from another insidious from of affluenza—the legalized tax evasion by the ultra wealthy. According to a blistering new report from The New York Times, “The very richest are able to quietly shape tax policy that will allow them to shield millions, if not billions, of their income.”
This tax evasion is enabled by the army of lobbyists hired by the ultra-wealthy to buy policies that lower their effective tax rate without actually changing the nominal tax rate. This legal corruption costs the wealthy millions of dollars, but saves them billions.
While tax rates did not change from 2008 to 2012, the effective rate paid by the top 0.01 percent dropped by 15 percent!
The methods they use to accomplish this are complex and the impact can be hard to see as clearly as, say, a manslaughter case. Some may even consider it a victimless crime.
What is the result of this unfair tax treatment? As former Supreme Court Justice Oliver Homes put it, “Taxes are the price we pay for a civilized society.” He might have added were he alive today, that massive tax evasion is the path to the breakdown of civilized society.
By appropriating billions in federal revenue, the wealthy starve important programs of critically important funding. Programs like Head Start, a program that provides early childhood education to low-income children, is consistently underfunded. Put differently, important public programs are starved so the ultra wealthy can become even wealthier.
The public outrage (and mocking) inspired by Ethan Couch is an inspiring sign that Americans are unwilling to accept a two tiered criminal justice system for the rich and the rest of us. We should extend this outrage to the two-tiered federal tax system that benefits the wealthy at the expense of the rest of us.