In recent months, Democrats from around the nation have called out President Donald Trump on his refusal to release his tax returns for the last five years or so. According to many, it is a sign that he is hiding something from America, and most likely, something illegal.
To make a more prominent issue out this than it needs to be, Democratic presidential candidates have a made a very public point to release their returns, showing they have nothing to hide. Or so they thought.
For former Vice President Joe Biden, he may have been better off not releasing them, that is if he wants to continue campaigning for the 2020 election.
According to his 2017 and 2018 returns, the Bidens avoided paying nearly $500,000 in taxes by running most of their income through S corporations as profits, a strategy that tax experts for the Wall Street Journal called “legally questionable.”
But the Democratic Party is choosing to stand by the current frontrunner for the time being and is refusing to request IRS audits for those questionable returns.
Financial records released this week show that the Bidens accumulated over $15 million in the last two years from book sales, Biden’s work as a professor for the University of Pennsylvania, and speeches. However, instead of it being recorded as income for the family, a whopping $13 million of it was run through two S-corporations that were created to fund Medicare and Obamacare as profits.
According to current tax laws, profits from S-corps are required to pay federal income tax but not Social Security or Medicare tax. In contrast, earnings from sole proprietors are held liable for both in full.
Therefore, to avoid being heavily taxed on their family business or sole prop, the Bidens chose to report their income as profits of S corporations.
Now, to be clear, this is a tax strategy that is used by several high-income families and business throughout the US, and it is entirely legal. However, it is ‘questionable’ and fishy, to say the least, especially for a man who claims that this tax strategy, among others, to be a loophole and one that should be avoided at all costs.
He has even taken measures to makes sure that it cannot be used in the future by others, calling for S-corps to be subject to both Social Security and Medicare taxes, among other things.
A little hypocritical, don’t you think?
A significant part of his campaign, in fact, is to raise taxes for all taxpayers, not just the wealthy, as some of his opponents suggest. If he becomes president, his raise in taxes will cut the child tax credit and standard deduction in half, raise taxes for family businesses, force nearly 5 million households back into the alternative minimum tax, and increase corporate income taxes to the highest in the world. He also wants to raise the capital gains tax.
All of this info is on his campaign website, which claims that the very strategy he used needs to be eliminated as they are “special tax breaks that reward special interests.”
Furthermore, the Bidens decided to report only $800,000 of the $15 million as actual income. As the strategy is technically legal and fairly well-known by the IRS, they require S-corps owners to report a “reasonable salary” so that at least some of the funds are taxed.
The problem is that “reasonable” is very debatable and has never been fully defined by the IRS. Thus, the Bidens’ low-end salary can be considered reasonable, even though it is less than 6% of their overall profits.
What even further compounds the situation is that while Biden has friends in high places that have agreed to not push for an audit, the chances of an S-corp being examined in the first place is highly unlikely. According to data from the IRS, the chances of an audit for highly paid professionals such as Biden diminish significantly if they are run through an S-corp instead of a sole proprietorship.
And yet, if Biden becomes president, he plans to increase the budget for the IRS to conduct many more audits throughout the American population.
Just to make this as transparent as possible, he wants increased taxes for all of America, thousands of more yearly audits, and the elimination of “loopholes” and yet, those same rules don’t apply to him.
And people are actually considering making this man the leader of our nation? I don’t think so.