How the Super Rich Ruling Class Designed the IRS to Rob Everyone Else for Their Personal Gain

irsBy Claire Bernish

“One of the saddest lessons of history is this: If we’ve been bamboozled long enough, we tend to reject any evidence of the bamboozle. We’re no longer interested in finding out the truth. The bamboozle has captured us. It’s simply too painful to acknowledge, even to ourselves, that we’ve been taken. Once you give a charlatan power over you, you almost never get it back.” ― Carl Sagan, The Demon-Haunted World : Science as a Candle in the Dark

While most of us are saddled with the burden of taxes, income tax, sales tax, etc., ad infinitum, the über-wealthy in the U.S. have essentially created their own I.R.S. — gaming the system so adeptly, it has essentially become their employee. But, wait, you might be thinking, those ultra-wealthy billionaires worked hard for those riches! Though that might certainly be true to an extent, how they’ve put the I.R.S. to work for them — manipulating the State to gain an advantage almost incomprehensible to most of us — makes these currency-movers and law-manipulators a special brand of leech.

Gaming the system has become somewhat an art form for the wealthiest of the wealthy, and they staff financial managers whose job it is to detect and exploit tax loopholes — or lobby to create them where none exist. Literally.

“There’s this notion that the wealthy use their money to buy politicians; more accurately, it’s that they can buy policy, and specifically, tax policy,” explained senior fellow at the Center on Budget and Policy Priorities, Jared Bernstein. “That’s why these egregious loopholes exist, and why it’s so hard to close them.”

It’s likely common knowledge how the wealthiest utilize offshore and overseas tax havens and shell corporations to shirk tax responsibilities and penalties; but perhaps because that ‘trick’ has garnered so much attention, more covert — and in many cases, overt — manipulation methods comprise the wealthy’s personal tax code.

So-called “family offices” often constitute the heart of such operations. Though these first emerged with the Rockefellers in the late 19th century, family offices surged in popularity during deregulation in the 1980s under Reagan, and particularly over the last ten years — with stratification of wealth not seen since immediately before the stock market crash and subsequent Great Depression.

Family offices function solely to preserve and protect the billions of dollars generated, most often, by a single family — for example, the Walton family, of WalMart infamy. Specialized financial guardians manage everything surrounding the family’s riches, such as philanthropic ventures and investment strategy; but skillful thwarting and employment of tax codes and policy constitute the bulk of their effectiveness.

“While specific techniques these advisers employ to minimize taxes can be mind-numbingly complex, they generally follow a few simple principles, like converting one type of income into another type that’s taxed at a lower rate,” described The New York Times.

[Daniel S.] Loeb, for example, has invested in a Bermuda-based reinsurer — an insurer to insurance companies — that turns around and invests the money in his hedge fund. That maneuver transforms his profits from short-term bets in the market, which the government taxes at roughly 40 percent, into long-term profits, known as capital gains, which are taxed at roughly half that rate. It has the added advantage of letting Mr. Loeb defer on this income indefinitely, allowing his wealth to compound and grow more quickly.

Making use of hedge and other high-end investment funds, as well as implementing partnerships, these ultra-wealthy families avoid the I.R.S – by design. Partnerships remain mostly out of reach of the tax man because — despite enormous income generation — the partnership cannot be taxed as an entity, unlike corporations, so, each partner pays taxes individually at significantly, comparatively lower rates. Add to that such deduction as depreciation, and these partnerships handily subvert the system the rest of us are slavishly obligated to follow.

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Such elaborate labyrinth schemes magnify in larger partnerships, which the I.R.S. has extreme difficulty tracking in order “to determine whether a tax shelter exists, an abusive tax transaction is being used,” stated a Government Accountability Office report. In fact, as evidenced in that report, one of the most effective strategies large partnerships employ against the system is forcing labor and cost intensive audits, for negligible — if any — results, leaving them almost wholly beyond the law. The report explained:

According to I.R.S. auditors, the audit results may be due to challenges such as finding the sources of income within multiple tiers while meeting the administrative tasks required by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) within specified time frames. For example, I.R.S. auditors said that it can sometimes take months to identify the partner that represents the partnership in the audit, reducing time available to conduct the audit. TEFRA does not require large partnerships to identify this partner on tax returns.

As The Free Thought Project previously pointed out, though the American public is roped into believing the popularized lie that “the government takes from the rich to redistribute to the poor, the reality is actually the opposite. The state fleeces the poor and middle class in America, and that money is, in turn, redistributed to the most wealthy Americans.”

The wealthy are, indeed, fleecing not only the system, but all of us. As David Cay Johnston, a Pulitzer Prize-winning reporter explained:

Such massive inequality reflects not market economics but political influence that tilts the economic playing field. And because of their political influence, those at the top get tax favors, especially the deferral of taxes into the distant future, which transforms the burden of taxes into a bonanza of increased profits.

This is not, by any stretch, a natural function of a free market where anyone can join the competition. What has manifested, instead, is a system whereby the ultra-wealthy exploit and create policy and politicians for gains most of us cannot even comprehend — though we are its unwitting and unwilling slaves.

When I say cut taxes, I don’t mean fiddle with the code. I mean abolish the income tax and the IRS, and replace them with nothing. -Ron Paul

Claire Bernish writes for

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21 Comments on "How the Super Rich Ruling Class Designed the IRS to Rob Everyone Else for Their Personal Gain"

  1. A ten percent flat tax (with no corporate or business taxes) and no exceptions and no deductions and a five percent federal sales tax (with no exceptions and no deductions) or some similar ratio, should buy all the government we need.

    • William Burke | January 1, 2016 at 8:12 pm | Reply

      I’m incorporating in that event. Me, Inc. can pay no taxes, along with all the other businesses and corporations.

      Actually, I read we could tax everyone at 1% flat and enjoy out present level of amenities. The big corporations pay no taxes, and never have, so 1% would be an improvement.

      • The last time I heard it mentioned, I think it was Ryan’s campaign, 18% was necessary to be static or equal to current spending. Thanks for making clear the point that only people pay taxes, customers in the case of businesses and corporations. I think a flat tax should be low enough to be applied to everyone and that a tax receipt should be your ticket to vote.

    • AtomicMetroid | January 4, 2016 at 9:20 am | Reply

      We have to take the taxes away from them because they are misusing it.

  2. A 20% flat tax on Public Accountable Businesses with 0 tolerance on Industrial Pollution.
    No more corporations, no more “international” & “private entity status”, no more non-profit loopholes & no more “international labor” loopholes.

    • Businesses don’t pay taxes, all corporate and business taxes are just hidden taxes on customers, causing higher prices!!! The not voted for geo-engineering/climate-engineering going on now is probably the greatest pollution to ever take place on the planet. I can’t believe no one in the House of Representatives has the courage to introduce a bill to defund it. We are literally going to choke to death on political correctness, if the Islamites don’t destroy us first.

      • The middle men mafia enforcers (governments) actually believe they have reserved spots in the bunkers the rich built. That’s why.
        It’s easier to rule a nation of idiots (Arabs). So Rome wrote the Koran for a purpose, Eternal Warfare or an Empire of Idiots.

  3. Occam's Razor | January 1, 2016 at 9:54 pm | Reply

    A low, flat sales tax for narrowly defined programs, voluntary Social Security and health insurance. The more you do and buy, the more resources you use. Zero tolerance for corruption in government and taxation. Of course, we’ll need to convert to interest free fiat dollars issued by the treasury and convert to a hemp economy to realize a stable, healthy surplus economy.

  4. BTW: Follow Iceland and now Switzerland – jail the gold collar psychotic nimrods that usurped the unfed and their will be a thousand years of peace.

  5. Clean and Greasy | January 4, 2016 at 5:46 am | Reply

    Very true. By the way, the new film “The Big Short” I think it is called was very entertaining as far as Hollywood goes, Arnon Milchan who was Israel’s largest arms dealer and produced the film “JFK” (which is also a good film but hides mossad involvement) and is it not oh so interesting how “Baum” the main character is the protagonist while the housing debacle is mainly blamed on some trader with an Italian name? Alan Greasepan and other yarmulke wearers get off easy…

    • Lewis Renieri came up with the concept of the MBS (mortgage backed security) back in the late seventies. It was a good idea in that the typical home mortgages that were bundled into the bond were genuinely good mortgages being paid on time. The problem over time was that as the available “prime” mortgages dried up, the greedy banks, who were making huge fees selling the bonds, started putting sub prime garbage into this product. This means that the bonds were comprised of many poor performing loans that would default. In addition, the mortgage lenders would loan money for home purchases to buyers who were unqualified because the housing market was always rising and if a mortgage went bad, the underlying property could be sold at a price that would exceed the debt due on the unpaid note. The housing debacle was the fault of 1) the banks that were too greedy to stop issuing bonds that were sold as gold but were actually garbage 2) the ratings agencies that were not willing to lose business to competitors for not giving the high ratings to bonds that were actually junk 3) the lenders who would loan a ham sandwich a million dollars to buy a home 4) the SEC which rarely if ever actually polices the markets because there is a revolving door between the financial institutions on Wall Street and the SEC where former SEC officials go to work for the very people they monitor and vice versa and 5) the financial press like the Wall Street Journal, which would not publish a story that would create a scandal and infringe upon their access to industry insiders in the banks and hedge funds.

      • Splendid summary of our dismal situation.

        I would add to your reply, and to the subject article that the buying of tax policy also happens on a large scale on the level of state taxes. Many of the tax policy administrators for states enter the revolving door of “tax advocacy firms” that buy, for their wealthy corporate clients, state tax policy that always makes the rich guys richer and fleeces the little guy.

        • I did not even look at the state angle in this. Thanks for pointing it out. I will add that there is a Tobin tax of sorts that NY state completely ignores. It essentially requires that the State of NY gets a piece of every trade made on the exchanges in the state; however, it is never enforced. NY says if it were enforced the financial firms and exchanges would move to a state without the tax.

      • Clean and Greasy | January 4, 2016 at 5:53 pm | Reply

        Yes, the film The Big Short did a good job of explaining your excellent explanation in an entertaining way. What was interesting to me was that Hollywood (as we all know controlled by Iceland) took on this hot topic in order to hide the identity of the real culprits. Slick BS of the Milchan variety which tells most of the truth while avoiding the real truth of the matter, and placing blame elsewhere. No mention of our buddy Alan Greasepan, Ben Bernanke or Janet Yellin, not to mention the current Fed sub chief who is an Israeli.

        Below is another good example of Hollywood Hate propaganda made to blame the victim.

        • The Federal Reserve is a private entity that has had a knife at our throats since the cowards in congress voted them into power in 1913 just before the Christmas recess. 1913 also saw the formation of the IRS, which is the private agency designed to collect from us lowly citizens the payments in the form of taxes on the debt our government runs up. The IRS is actually a private corporation domiciled in Puerto Rico. People who have sued them and received their tax files find that IMF is stamped all over the documents. Thanks for the links! If you want to know who is in power, find out who you cannot criticize!

        • “No mention of our buddy Alan Greasepan, Ben Bernanke or Janet Yellin,
          not to mention the current Fed sub chief who is an Israeli.”

          Oh, let’s go ahead and name all the names. The “current Fed sub chief is Stanley Fischer.

          “DC no longer has the bucks to bail out failing banks so confiscation of deposits fits the bill.

          The legal framework is already in the works since depositors are
          tagged as “lenders” and last to be paid if a bank goes belly up.

          And once they go belly up, Stanley Fischer—the real head of the
          Fed…and dual citizen of Israel, whose loyalties are questionable—has
          bail-ins in mind.”

          Quote Stanley Fischer starts here…
          [Clip: “Work on the use of the resolution mechanisms set out in the
          Dodd-Frank Act, holds the promise of making it possible to resolve banks
          in difficulty at no direct cost to the taxpayer. As part of this
          approach, the United States is preparing a proposal to require
          systemically important banks to issue bail-inable long-term debt that
          will enable insolvent banks to recapitalize themselves.”] Fischer quote ends.

          All his financial gobbledygook means that banks will “recapitalize”
          by grabbing your check book. You, the depositor—I mean, “lender”—takes
          the hit.”

          Quote from Brother Nathaniel Kapner on his latest video titled

          “What To Expect In 2016

          January 5, 2016 ©

          Now, we have an even better identification of who are “super rich ruling class are.”

  6. Most people just get reimbursed for their labor, that’s not state or federal income and no tax need be paid on that.

  7. This is exactly why elites spend billions every year promoting a communist agenda. Those top cats will make out like bandits once the middle class has been taxed into oblivion trying to support all the wars. border jumpers, and refugees.

  8. They are the Khazarian Mafia, read any Preston James article to learn the truth.

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