Show Notes
Today’s podcast is about paying your fair share of taxes. Or at least, figuring out how to avoid paying more than your fair share of taxes.
Peter Schweizer and Eric Eggers, just back from guest-hosting Sean Hannity’s radio show, talk on this episode of The Drill Down about the supposed “swashbuckling capitalist” Elon Musk, and the supposed populist, woman of the people, and Native American hero, Sen. Elizabeth Warren (D-MA). And there is so much untruth to unpack.
Tesla founder Elon Musk was recently named Time Magazine’s “Person of the Year,” which led Sen. Warren to snipe on Twitter about getting the world’s richest man to pay his fair share of taxes. Musk clapped back, called her “Senator Karen,” and let the world know he would be paying $11 billion in taxes this year alone. Time for a reality check.
Peter points out that Elizabeth Warren is not the populist “person of the people” she pretends to be. She earned a lot of her personal wealth by buying foreclosed homes in Oklahoma for pennies on the dollar. Harvard University paid her $400,000 a year to teach exactly one law school class. That was also the job where she listed herself as “Native American” to boost Harvard’s diversity statistics. Details of her finances were reported in Peter’s 2018 book, Profiles in Corruption.
Elon Musk is also not quite the go-it-alone, hell-for-leather capitalist he claims to be. Musk, who had made a great deal of money previously on internet startups like PayPal, asked for and received enormous government loans to launch Tesla, his electric car manufacturing company. Musk received a $465 million dollar loan from the Obama administration in 2010 which, we should note, he did pay back. But it was that taxpayer money that ultimately created Tesla.
So when these two get into a Twitter spat, untruths will fly.
Peter and Eric say the debates around taxes are often skewed by concerns over whether the wealthiest people are really “paying their fair share.” And the problem with those kinds of arguments is that the wealthy have many ways to hide their income, defer it, or put it into uses that allow them to pay less tax on it. That’s where Bruce Springsteen comes in.
Springsteen owns a 200-acre estate in Colt’s Neck, New Jersey. The Boss pays only about $4,000 a year in property tax for a huge piece of land in a state with some of the highest property taxes in the nation. Why? Because the property is partially leased as an organic farm. Essentially, he hires a guy to grow organic vegetables on a plot within the property, then writes the whole estate down on his taxes as an organic farm. It is perfectly legal.
That’s not all. You may have read just recently that Springsteen just sold his entire music catalog for a world-record sum: $500 million. Why did he do that? Because by selling it he can declare the proceeds as a capital gain this year and pay a 20 percent tax rate on that amount. Selling his catalog means he no longer receives the royalties it would have paid him, which would be taxed at 37 percent as ordinary income. Born to Run, indeed, but he is not the only one.
After he left office, former president Bill Clinton gave a speech before Jesse Jackson’s Rainbow Coalition in which he said, “I must be the only person in America that pays the maximum in taxes and smiles when I pay taxes.” Did the Clintons really pay the maximum taxes? A study concluded that the Clintons paid about 20 percent of their income in taxes, seven percent less than other people in their income group.
In 1971, the members of the band The Rolling Stones announced they were leaving England for the United States. They were doing so, they said, because the government had left them no choice due to the high taxes they were paying. George Harrison had learned the same lesson a few years earlier and wrote a classic Beatles song in which the “Taxman” sings “there’s one for you, nineteen for me!” to describe Britain’s 95 percent top tax rate at the time.
Even Elon Musk does this. This year his company, Tesla, left the state of California for Texas because of… lower taxes.
As Peter says, people will vote with their feet, and you can’t just stick it to the rich, because they have ways to avoid the taxes. Elizabeth Warren’s style of moralizing and lecturing has to stop. “If you’re paying a lot, you will find ways to hide assets and avoid the taxes, legitimately or not. One of the greatest strategies for doing this legally is buying municipal bonds. Those bonds are what finance all sorts of state, federal, and local programs such as building new roads. So Warren’s premise is flawed.”
Overall, most Americans don’t really know how much the wealthy pay in taxes. When President Obama wanted to raise taxes on those making more than $250,000 a year, 69 percent of Americans said they supported it. The newspaper The Hill then did a national survey asking people what tax rate the wealthy should be paying, and the most common answer was…30 percent. That was actually lower than the current rate at the time, and far lower than what Obama wanted it to be.
