Super-Rich Gubernatorial Candidate Used Controversial Cayman Tax Gimmick To Maximize His Fortune
Posted in Main Blog (All Posts) on August 2nd, 2014 11:08 pm by HL
Super-Rich Gubernatorial Candidate Used Controversial Cayman Tax Gimmick To Maximize His Fortune
Bruce Rauner (R-IL) is one of the richest people in the country, and he wants to be Illinois’ next governor.
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A beach on Grand Cayman, one of several popular tax havens for U.S. companies to claim as home.
CREDIT: AP
Illinois gubernatorial candidate Bruce Rauner (R) made part of his fortune from investments in a Caribbean tax haven, the Chicago Sun-Times reports. But because Rauner won’t release details on his tax filings it is impossible to tell just how much of his wealth comes from those offshore accounts.
The newspaper found five Cayman Islands-based investment funds among the dozens of income sources Rauner listed on state disclosure forms last year. Three of the five are funds set up by the private equity firm Rauner founded. Two others, including one that manages money for a large public pension fund in Illinois, are run by separate firms.
While Rauner’s income from each fund could be as low as $5,000 — the threshold for disclosure on the state forms — a more realistic guess would be in the millions of dollars. As a self-described member of the richest 0.01 percent of Americans, Rauner is unlikely to make chump change investments. Most funds of the sort the Sun-Times identified require minimum investments of $500,000 or $1 million dollars, a tax expert told the newspaper.
Rauner has released summary tax forms but has declined to disclose other paperwork that would allow tax experts to figure out how much of his wealth comes from the offshore holdings. A Rauner spokesman told the Sun-Times that the offshore locations of the investment funds do not affect the Rauners’ tax rates since they pay state and federal taxes on that income. But the success of the funds themselves, and their ability to pay dividends to both individual investors like the Rauners and institutional ones like pension funds, is enhanced by having roots in a tax haven.
The exotic Caymans linkage will draw further scrutiny to Rauner’s wealth and tax maneuvering. Like many very rich people around the world, the Rauners are able to manipulate the tax code in ways that reduce their tax rate without violating the law. Despite pulling in $108 million in taxable income from 2010 to 2012 — more than enough to qualify for the top federal income tax bracket with rates of 35 percent or more — Rauner and his wife paid an effective tax rate below 20 percent. That is mostly due to how the tax code treats investment income differently from wage income. Capital gains are taxed at far lower rates than salaries.
Rauner has also benefited from “an accounting maneuver that blurs the lines” between normal income and lower-tax investment income, the Chicago Tribune reported in July. The IRS is scrutinizing the “fee waivers” that private equity companies use to shift their partners’ income from higher-tax categories to lower-tax ones.
Rauner’s campaign has received more than $4 million in funding from billionaire financial sector colleagues. He has injected nearly $10 million of his own money into his race against Gov. Pat Quinn (D-IL). Quinn’s supporters are hoping to revive the same sorts of attacks on private equity and out-of-touch multimillionaires that helped sink Mitt Romney’s 2012 presidential campaign. But Rauner, who made national news over the winter when he called for lowering the state’s minimum wage, has enjoyed a steady lead over Quinn in summer polling.
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Congress’ August Recess Is America’s Only Required Vacation
American workers aren’t guaranteed any paid vacation or holiday time, but Congress is required to leave for a month.
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CREDIT: Shutterstock
Congress managed to adjourn on Friday night, sending all members home for a legislatively required recess for the entire month of August after becoming a close contender for the least productive Congress ever, with lots of unfinished business on the table.
The Legislative Reorganization Act of 1970 requires that the House and Senate take a break “not later than July 31 of each year,” or in an odd-numbered year “that Friday in August which occurs at least thirty days before the first Monday in September (Labor Day) of such year to the second day after Labor Day.” Congress can stay if the country is in a state of war, but that hasn’t happened since 1941. The law was passed after Congressional sessions had stretched so long that in 1963, the session began in January and ended in December with just a three-day weekend as a break in the whole time.
Lawmakers can come back early if both houses agree to it. And of course many of them hold town halls and other political or campaign events and meetings while they’re home. But they also get another break in December and often get nearly 250 days off from work in the nation’s capitol each year.
The American worker, on the other hand, could very well get no days off from work in a year. We are the only advanced country in the world that doesn’t guarantee that workers get some paid vacation time. There is no law, as there is for Congress, making sure they can take a break. The European Union, on the other hand, requires 20 paid vacation days, and many countries go further, such as the mandated 30 days in France, 28 in the United Kingdom, and 25 in Austria, Denmark, Finland, Norway, and Sweden. Even our northerly neighbors Canada require 10.
Many American employers offer vacation time anyway, but the number is shrinking, not growing. More than 80 percent of workers got paid vacation days two decades ago, but just 77 percent do today. Those who are getting the benefit get more days than before, 20 compared to 15. But most people don’t even use all of their time off, with the average employee taking only half of it. Many say they feel like they can’t be disconnected from work. And the increase in vacation days is counteracted by a decline in the number of paid holidays, which dropped from ten to eight.
Indeed, the United States doesn’t guarantee paid holidays either, unlike 13 other developed countries. That means, for example, that companies like Walmart, Gap, and Target were completely in their rights when they opened on Thanksgiving Day last year and made workers come in to work.
This isn’t just problematic for workers who may not get paid days off. Taking a break makes them perform better, helping their employers. Ernst & Young found that for every ten hours of vacation time taken by an employee, her year-end performance rating would improve by 8 percent. It also found that there was lower turnover with more time taken, which can be costly. Former NASA scientists found that people who take vacations will have an 82 percent boost in job performance upon their return, and longer vacations lead to better results. A recent study of Dutch workers also found that vacations can increase creativity by increasing cognitive flexibility when they return.
More vacation time would also boost the economy. One report found that American workers leave an average of three unused vacation days on the table every year, but if those were taken to travel, leisure spending would increase by nearly $1 trillion. Even if only some people traveled with that extra time, spending would still go up by $67 billion, adding $160 billion in business sales in the leisure industry.
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