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Anschutz’s $ 8million Colorado lawsuit is all bogus with billionaire tax breaks

Philip Anschutz – the benevolent billionaire from Colorado – should have read the mood in the room before filing a lawsuit to retroactively apply the new federal tax law to get $ 8 million in Colorado tax relief.

Because the current mood among those who make a living in this great state is that we are fed up with paying our fair share of taxes while the super-rich are using clever accounting tricks to avoid or evade their taxes.

ProPublica released secret IRS files this summer that show billionaires like Jeff Bezos, George Soros, Carl Icahn, Michael Bloomberg, Elon Musk and Warren Buffett pay a relatively small amount of income tax compared to their net worth, and sometimes nothing.

For example, Bezos paid zero federal income tax dollars despite reporting income of $ 46 million in 2007.

“He was able to make up for every penny he earned with secondary investment losses and various deductions, such as interest charges on debts and the vague catch-all category of ‘other expenses’,” the report said. by ProPublica.

Anschutz’s lawsuit exposes the same types of tax evasion that ProPublica found in its investigation, but the worst part is that the Colorado tax break Anschutz seeks to use uses an already generous federal tax deduction for them. wealthy business owners that was extended and retroactive under the guise of COVID relief.

Anschutz, unhappy with the federal tax break, is also fighting for several years of income tax breaks in Colorado, amounting to $ 8 million. Judge J. Eric Elliff ruled against Anschutz, finding that state tax authorities had the power to enact rules prohibiting retroactive deductions like the one sought by Anschutz. Anschutz appealed.

The deduction Anschutz seeks to apply to old Colorado income tax bills is a business loss or “net operating loss” deduction that allows owners of multiple businesses to double a loss out of pocket. like a loss in another pocket.

This complicated tax deduction is meant to protect small business owners whose income is volatile from year to year against overpaying taxes, but the wealthy have found ways to use it to avoid fair tax assessments.

Suppose two spouses work in their own small business: one runs a preschool and the other owns a small engineering business. The preschool operated in the red during COVID and lost $ 100,000 as it was closed much of the year and the landlord still had to pay rent and other expenses. The engineering firm flourished and the owner took home $ 100,000 in net income. The couple on their taxes could pay zero income tax, rightly so, since collectively no income was earned.

But there should obviously be a limit to that. A media mogul or oil baron could also falsely earn millions year after year but pay only a fraction of the required taxes on that income by cleverly deploying losses carefully fabricated by accountants.

This is a double deduction in our tax code and the deduction can be carried forward or back as needed to zero taxable income.

Trump’s tax cuts in 2017 reduced deductions for net operating losses to only allow 80% of a company’s losses to be deducted from other income. The law also limited how far losses could be applied to old tax debts and how far they had to be carried over into the future.

But this good reform was canceled under the CARES law temporarily reducing the deduction to an allowable deduction of 100%. In their infinite wisdom, federal lawmakers also made the deduction retroactive so that people would double business losses for a total of eight years.

To be fair, Anschutz’s company, AEG, has been hit hard by the pandemic. With concert halls shut down by the government, AEG laid off workers and suffered pay cuts across the board. There is no doubt that Anschutz suffered losses from this company.

But rather than good public policy to help business owners through tough times, the CARES Act’s treatment of business losses looks like an apology from Republicans for slightly slashing a popular deduction, no matter how badly it is. has been abused.

The last straw is Anschutz who then tries to claim the Colorado income tax deduction as well. Colorado income tax is based on “adjusted gross income” calculated by the federal government. Anschutz argues that if his adjusted gross income were changed retroactively, he should be able to return his Colorado taxes to reduce the amount of income he reported as taxable.

The judge ruled in favor of the Colorado Department of Revenue, finding it appropriate that Colorado’s tax law be only forward-looking and not retroactively apply changes to federal tax law after taxes are filed. .

Our tax code is broken both in Colorado and at the federal level.

And the solution is simple if there is the political will to do the right thing.

President Joe Biden is working on overhauling the tax code to pay for a progressive wishlist of programs. There is no doubt that the current extremely low US corporate and personal tax rates are unsustainable.

But if Biden is to do what Trump hasn’t, he should come up with a tax code that treats all income equally – regardless of how it’s generated or spent – with many graduated tax brackets. The federal government shouldn’t care whether we make our money from stocks or by digging ditches, or whether that money is spent raising children or buying depressed assets.

In Colorado, Governor Jared Polis is eager for tax reform. His proposal to make state income tax zero, however, is the exact opposite of what that state needs. Property, auto, and sales taxes are based on how people spend their money and are regressive, punishing those who scrimp and save for years to buy the items they need and only want to face high taxes. ‘they can’t afford.

A progressive income tax, without distinction or deduction, is the only tax system that really charges Americans their “fair share.” And yes, for the lowest-income Coloradans their fair share may be zero, or in the case of those who qualify for the Colorado Income Tax Credit, they may even be a net recipient of the state. in income tax to help offset the uneven impact of sales and property taxes, not to mention rising car registration fees.

This is of course a pipe dream. There is almost no political will for real tax reform, as we saw when Republicans attempted this in 2017 and ended up cutting the corporate tax rate without eliminating a significant number of reliefs. tax loopholes.

Biden is targeting the wealthy and corporations with his tax hikes, which, according to the ProPublica article, seems like a logical place to start fixing this mess. Once the rich start paying their fair share, I’ll start writing more about how my effective federal tax rate under Trump and Biden dropped to near zero.

But for now, I think billionaires like Anschutz should stop complaining about Biden’s tax plans and stop stretching for another tax break. Maybe the ultra-rich in America should try to be thankful for what they have.

Megan Schrader is the editor of the Denver Post Opinion Pages.

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