This Year’s Real Halloween Horror

[Cross-Posted from Inequality.org]

The family that has made billions off trick-or-treat candy has gone generations without paying any appreciable tax on its enormous fortune. And the Trump tax plan, if adopted, would ax a huge chunk of the tax on the family’s income!

The Mars family has made billions selling us M&Ms, Snickers, and countless other Halloween treats for a century now.  But when it comes to paying tax, the Mars family seems to be all tricks and no treats.

In fact, the family’s latest tax trick may have cost the U.S. Treasury a whopping $10 billion. What could $10 billion do? That’s the cost of delivering prenatal care to hundreds of thousands of expectant moms under Medicaid, an essential program that President Trump and the GOP Congress plan to cut by up to $1 trillion.

According to the current U.S. tax code, any American worth $25 billion can expect 40 percent of that, or $10 billion, to go to Uncle Sam in estate tax, the federal levy on the personal fortunes of deep pockets who kick the bucket. Forrest Mars Jr. had a $25-billion fortune when he died in July 2016. But the Mars family has apparently been able to avoid estate tax on that entire $25 billion.

How do we know? Researchers at Forbes and Bloomberg, the two business publications that track America’s billionaire wealth, have some fascinating numbers for us.

Forest Jr. and his two siblings started 2016 with personal fortunes in the vicinity of $25 billion. Now if Forrest’s fortune had been subject to a significant estate tax after he passed on, the collective wealth of his four daughters in 2017 would be substantially less than that $25 billion.

The just-released 2017 Forbes list of America’s 400 richest shows otherwise. Forbesputs the wealth of each of Forest’s four daughters at $6.3 billion, for a total of $25.2 billion. That’s almost identical to the 2017 fortunes of their Aunt Jacqueline and their Uncle John, each at $25.5 billion. The Bloomberg Billionaires Index reports similar numbers.

Should any of this surprise us? Not really. We’re seeing Mars family history repeat itself. Eighteen years ago, Forrest Mars Sr., the original Mars family billionaire, died. The Forbes 400 lists from the years surrounding 1999 show that the Mars family lost no wealth to estate tax back then either.

But the Mars family must at least be paying oodles of income tax, right? Nope. How could that be? This particular tax-avoidance story starts over a century ago, when Frank Mars incorporated his candy business.

Back then, the value of the stock in Mars Inc. had only minimal value. But over the years the stock appreciated considerably in value. By 1988, that appreciation had made the Mars family the wealthiest clan in America. The Mars billionaires still rank as one of America’s wealthiest families, in no small part because none of the gains in the value of the family’s Mars stock have ever been subject to income tax.

Is the Mars family content with its current level of tax savings? Apparently not. The family has joined with 17 other billionaire families and collectively spent $500 million lobbying Congress for reduced taxes on billionaires and the companies they run.

These companies face corporate income tax on their profits. Mars, Inc. has had to pay these taxes over the years. Unlike Mars family members as individuals, the Mars company hasn’t been able to sidestep its tax bills. But the Mars and other billionaire families have found a friend in President Trump and the current Republican-led Congress. The pending Trump-GOP tax plan would take a meat axe to corporate tax rates.

The resulting corporate tax savings, if this plan gets adopted, will likely translate into a multi-billion-dollar tax savings for Mars, Inc. — and a corresponding bump in the net worth of Mars family members.

The real prize for the Mars in the Trump tax plan? That may be in the elimination of the estate tax that the Trump White House is now pushing. Wait, what? How would the repeal of the federal estate tax help a family that’s already avoiding the estate tax?

For America’s ultra-wealthy, repealing the estate tax turns out to be more about the federal income than the federal estate tax. As Mars family history makes painfully clear, tax avoidance vehicles available under current law allow even billionaires to zero out their estate tax.

But billionaires, under current law, do pay an appreciable income tax price for their estate tax avoidance. Assets on which estate tax is avoided carry an offsetting income tax disadvantage.  That disadvantage would vanish in a simple estate tax repeal.

What does that mean? Let’s say we have a billionaire who paid $10 million for stock now worth $100 million and does nothing to avoid estate tax on that stock The billionaire never has to pay income tax on that gain. Those who inherit that stock from the billionaire’s taxable estate can sell it for $100 million and not pay any income tax on the gain either.

But if that billionaire stashed that stock into a trust to avoid estate tax, he would forfeit that income tax advantage. The untaxed gain associated with the stock would be passed to the trust beneficiaries. These beneficiaries would face an income tax on the previously untaxed gain when they sell the stock.

If the Trump-GOP estate tax repeal takes the same final form as the estate tax repeal bill introduced in the House of Representatives in 2015, wealthy Americans will get to have it both ways: zero estate tax and the elimination of any untaxed gain at death.

And that would allow the next generation of Mars family members to avoid income tax on over a century’s worth of economic gain. Quite a trick, huh?

So enjoy the candy, America. The Mars family will keep the cash.

Happy Halloween!

13 responses to “This Year’s Real Halloween Horror

  1. john huppenthal

    The Mars family must not have paid it’s tithe to the Democrat party. You bypassed the total lack of taxation on Bezos, Buffett, Gates and Zuckerberg.

    The Mars family hasn’t consumed a fraction of a percent of the wealth they have created, reinvesting it all to create jobs. Their managers ued to have a ritual they called rolling out the brown carpet whenever the Mars brothers visited a factory. The Mars brothers didn’t waste a penny on status symbols.

    • For Sure Not Tom

      Zuckerberg, Gates, and Bezos may look like liberals to you, I can assure you, they are not, no matter what face they wear in public. In fact most of the CEO’s in tech are pretty vile folks, interested in their stock options and do not care about any harm they or their companies may do.

      To your point, the difference between left leaning billionaire Tom Steyer and say right wing billionaire Sheldon Adelson, for example, is that right wing billionaires spend their money to get more money from the rest of us and left wing billionaires spend their money to enact policies that may make them less wealthy to fight inequality.

      See the difference? Right wingers look out for themselves, left wingers for the general good, like Jesus told us all to do in the Book of Matthew.

      I hope that helps, and by all means, feel free to call me anytime you’re confused again, FalconNada.

      • FSNT, you think I should allow his comments under john huppenthal, or should he be required to go by Thucky here?

        • For Sure Not Tom

          I vote for “Thuckhead”, but Thucky is fine.

        • For Sure Not Tom

          I change my vote to Thuckwad.

          I also acknowledge that it’s juvenile. I also think it’s kinda’ funny.

          Also, I’ll be selling Thuckwad t-shirts and coffee mugs with the proceeds going to the Mexican American Studies in Tucson.

      • So, Steyer paid his tithe, he’s contributed exactly 10% to the liberal cause.
        But, he is still sitting on $1.6 billion of untaxed unrealized capital gains. Completely accessible for any playtime activity he wants.

        Compare that 10% to the crushing burden you all advocate on small business women. 39.6% federal, 12.4% social security, 2.4% medicare, 5% state and 8% sales tax = 67.4%. Not enough left to drive business growth. But, you assholes are such idiots, you believe that you can drive that number to 87% without affecting job creation. IN FACT, you are such morons, you think that job creation will be higher at 87%.

        If you think Steyer, Soros, Bezos and Buffet don’t know that a false commitment to collectivism is a route to power and riches, you are deluding yourself.

        Every year, Buffet waxes poetic about his support for greater “taxes on the rich” and the lying sack of human excrement is allowed to get away with this charade by the media. Buffet hasn’t paid even one-tenth of one percent taxes on his accumulated wealth of $80 billion. None of the taxes he advocates for touch him even slightly.

        They are all taxes on small businessmen and women. While Buffet and Steyer pay zero.

        • For Sure Not Tom

          You seem to be operating under a serious misconception.

          Progressives are not against profits. They’re against privatizing profits and socializing losses.

          They’re against all the profits going to the top 1% because they can pay off politicians when it’s the 99% literally doing all the work and they can’t.

          I take the mortgage deduction and so does Bernie Sanders, because of course we do.

          And that lying sack of human excrement Warren Buffet makes about a zillion times more than you ever have or ever will, and based on your previous comments where you go all in lickspittle on the Kochs and Walton’s you should have a nice picture of Warren on a little table with a fee candles lit.

          Maybe some incense.

          FYI, I’m not foolish enough to think that a billionaire who does something progressive isn’t also looking out for his or her self.

          I’m aware that when Gates or Zuckerberg gives a few billion to charity that it’s structured to actually profit them because the tax system is bought and paid for to do so.

          But if Tom Steyer wants to spend his money fighting fossil fuel company lies I’m going to slow clap him all day long.

          You really need to stop thinking there are Stalinists in America in 2017, it’s clouding your ability to understand issues.

  2. For Sure Not Tom

    We really need to tax investment income at a higher rate than labor.

    Some trust fund baby or hedge fund manager in NYC or frat-boy CEO raking in millions of dollars a year doing no actual work, then paying tax on that money at a lower rate than a person doing real work and sweating for every penny is obscene.

    The idea was to encourage investment, I get that, but the results are people abusing the system and we do not see the growth we were promised.

    • There’s really not a lot of evidence to suggest that a lack of capital accumulation is a significant malaise on the U.S. economy. Lower taxes on capital investment would make sense if a policy maker believed it was pertinent to restrict present consumption and encourage capital investment, so as to grow the economy in future periods. However, with trillions of dollars in cash-equivalents on the balance sheets of non-financial Fortune 500 companies, that suggests to me at least that we’re not currently suffering from a lack of real investment – we have insufficient demand to drive further investment, and C-level executives are investing the cash in dividends and stock buybacks, not on real capital or R&D expenditures.

      The other problem is that a substantial amount of corporate profits really aren’t returns to capital in the traditional sense – they are broadly speaking economic rents derived from the exercise of monopoly and monopsony power, being retained by the owners of capital to the expense of both labor and the consumer. Just look at what sorts of concessions and rent extractions one of the largest companies in the world, Amazon, is going to extract from wherever they end up building HQ2, no doubt to the detriment of local businesses. We are rapidly approaching the world where there is only too big to fail… and too small to succeed.

      • For Sure Not Tom

        Well said.

        And how about Trump’s estimate that there are 4 trillion dollars in corporate profits sitting offshore waiting for a cheap tax deal to come home?

        That money is being held hostage, and will go into stock buybacks and bonuses, it won’t create a single job (we’ve done this dance before) and some may be used for job killing M&A’s.

        We need to enforce the Sherman Anti-Trust Act and restore consumer choice and end the too big to fail threat.

  3. elections have consequences. the voters said I want trumps bring back the jobs not obama saying those jobs are never coming back get over it! or clinton cash saying I will shut down the coal industry. bernie sanders had hope and change and the clintonista’s stopped him. today on du the clintonista’s were attacking tulsi gabbard for being a sanders supporter. 2018 is coming and democratic party is getting ready for it by re installing donna brazille into the democratic party executive. be sure to donate to the party so her pay check doesn’t bounce. tom (I know nothing about fusion gps sgt. schultze) perez