ProPublica: How a Decades-Old Loophole Lets Billionaires Avoid Medicare Taxes

[Dennis Donovan]

ProPublica - How a Decades-Old Loophole Lets Billionaires Avoid Medicare Taxes

Some of Wall Street’s richest and most powerful figures are using a legal loophole to avoid paying millions of dollars in taxes earmarked for health care, a ProPublica investigation found.



by Paul Kiel
Dec. 11, 6 a.m. EST

For most working Americans, paying their share of the taxes that fund Medicare is an unavoidable fact of life. It’s so automatic for many workers that they may not even realize it takes a bite out of every paycheck. In theory, everyone is required to contribute to the country’s health insurance program for seniors, no matter how poor or rich, from cashiers to CEOs.

Not on Wall Street. There, some of the most powerful people in finance found a way to opt out.

The trove of tax records behind ProPublica’s “Secret IRS Files” series contains plenty of examples of billionaire financiers who avoided Medicare tax despite earning huge amounts from their companies. In 2016, Steve Cohen, the owner of the New York Mets, paid $0. So did Stephen Schwarzman, head of the investment behemoth Blackstone. Bill Ackman, the headline-grabbing hedge fund manager, was able to shield almost all his income from the tax.

How do they do it? Business owners, like any self-employed person, whether they’re a freelance Uber driver or a hedge fund manager, have the responsibility to declare their self-employment earnings on their tax returns. Indeed, the vast majority of small-business owners have no choice but to do so and pay the same taxes that wage earners pay, including Medicare.

But high-priced tax advisers, wielding a once-obscure bit of the tax code, found a way to make that obligation vanish. By carefully channeling profits through a company in a way that invokes that obscure provision, even a Steve Cohen, with a tax return showing he received hundreds of millions in profits from his hedge fund, can exempt that income from Medicare tax.

/snip

[MichMan]

1. Congress created it and continued to allow it to happen

Could have stopped it any time

[3auld6phart]

2. So

Then both Dems , the pukes and independents , are on the take.. peee- on have no chance in your world.. why would people bust their asses to live in th good old USA..?

[CousinIT]

3. The MAGA part of Congress exclusively represents billionaires, not the rest of us.

This is why that loophole still exists.

[MichMan]

4. Did you read the link?

The issue has been going on for decades, regardless of which party controlled either, or both, branches of congress.

Here was the latest attempt

The last attempt came a couple years ago, when Democrats needed to cover the cost of their $2.4 trillion climate bill. Build Back Better, as it was initially called, passed the House with a provision similar to Furman’s gap-plugging tax. The proposal was estimated to raise $252 billion over 10 years.

But the bill stalled in the Senate, where Democrats needed every vote. In the summer of 2022, negotiations suddenly approached consensus on a new, slimmer bill, soon dubbed the Inflation Reduction Act. The gap-plugging tax was part of the mix.

When a deal was finally announced on the bill, the proposal was gone. There had been other, less politically dangerous options to raise revenue.