Sensemaker: American myth

Wednesday 9 June 2021

What just happened


Long stories short

  • A UN court rejected former Bosnian Serb commander Ratko Mladic’s appeal against his 2017 conviction for genocide, war crimes, and crimes against humanity.
  • Met Police officer Wayne Couzens pleaded guilty to kidnapping and raping Sarah Everard, the 33-year-old who vanished as she walked home in Clapham in March, but didn’t enter a plea on the charge of her murder.
  • French president Emmanuel Macron said “we must not let ultra-violent people take over the public debate” after a man slapped him in the face at an official visit to the south-east of France.

American myth

ProPublica, a non-profit investigative newsroom in the US, began publishing a series of reports based on a large leak of Internal Revenue Service data. The leak covers more than 15 years of tax returns from thousands of the wealthiest Americans. “Taken together,” the journalists wrote, “it demolishes the cornerstone myth of the American tax system: that everyone pays their fair share and the richest Americans pay the most.”

America’s wealthiest pay little – to no – income tax. Amazon founder Jeff Bezos was already a billionaire in 2011 when he paid no federal income tax, and took a $4,000 tax credit for his children. Tesla founder Elon Musk, now the second-richest person in the world, paid no federal income taxes in 2018. Michael Bloomberg paid 1.3 per cent in income taxes between 2014 and 2018. The billionaires who replied to ProPublica’s questions said they always paid the tax they owed.

  • The tax-avoidance strategies billionaires use are beyond the reach of most people. Their wealth comes from the rising value of their assets, like stock and property. US law doesn’t define those gains as taxable income unless and until the billionaires sell.
  • The true tax rate compares how much they paid in taxes each year to how much their wealth grew. The 25 richest Americans saw their wealth rise a collective $401 billion from 2014 to 2018. They paid a total of $13.6 billion in federal income taxes over the period. It sounds like a lot of money, but it’s a true tax rate of only 3.4 per cent. The rate varies. Warren Buffett, who has argued for higher taxes on the wealthy, paid a true rate of 0.1 per cent.
  • It’s a different picture for the average American. Over the same period, the average American household saw its net worth grow by around $65,000, mostly because of rising house prices. Since the bulk of its earnings was in salary payments, its tax bill was almost as much: $62,000.

That the wealthy pay little tax in the US is something most people have long suspected. But it’s proven difficult to move the debate from suspicions to facts – see, for example, how hard it was to get hold of Donald Trump’s tax records. 

Tax records are among the most closely guarded secrets in the federal government. ProPublica didn’t disclose how it got the leak, but considered that the trove may have come from a state actor hostile to American interests. The journalists verified its data and asked the subjects of its reporting for comment. Some claimed a violation of privacy. 

US tax authorities are investigating the source of the leak, which the White House called “illegal”.  As far as the journalists are concerned, it’s accuracy that matters not provenance because the public interest in publishing the records is strong.

Allowing the wealthiest Americans to game the income tax system has profound consequences. Federal budgets have been constrained for decades. Roads crumbled, so did bridges. Medicare’s sustainability is always in doubt. Social services have withered. The Covid pandemic necessitated an enormous federal spending programme that now needs funding.

A reminder: an equitable tax on income is the price of civilisation.


Wealth investment, fairness, prosperity

Operation Trojan Shield
The FBI operated an encrypted device network called ANOM, and covertly distributed devices with its chat app among the criminal underworld using informants. After monitoring communication on the app, including chats about drug trafficking, money laundering, and murder, the FBI led a joint operation that arrested more than 800 suspected criminals around the world. They included drug gangs and Mafioisi. Europol called Operation Trojan Shield/Greenlight the “biggest ever law enforcement operation against encrypted communication”. The idea for the operation came after law enforcement agencies took down two other encrypted platforms, leaving criminal gangs looking for new secure phones. In one way, ANOM is an example of what happens when law enforcement agencies grow tired of fighting big tech companies over access to encrypted data and locked devices. In another, it’s an example of fine police work.


The 100-year life health, education, living, public poliCY

Anxiety Olympics
The agonising over whether Tokyo should host the Olympics continues. Epidemiologists studying the event found that the biggest Covid danger isn’t the thousands of visiting athletes and officials, but whether the games cause greater mobility and socialising among local people. Public anxiety in Japan is high and has focused on the visitors. This latest analysis can explain why Japan, which can limit public mixing, has pushed ahead despite the anxiety and widespread opposition. “More than the number of people, it’s how they behave,” a Japanese health administrator told the Financial Times. “That’s the issue”. Just 9 per cent of the Japanese population has received at least one vaccine dose. Perhaps that’s the issue.


New things technology, science, engineering

Cloudy computing
Fastly, a cloud computing provider, experienced issues with its global content delivery network, which was designed to speed loading times for websites, protect them from denial-of-service attacks, and help them manage peak traffic. The problem affected a number of high profile websites: Amazon, Reddit, gov.uk, PayPal, BBC.com, and Twitch were all knocked offline. Other websites were partially affected, like Twitter’s emojis. Along with Amazon Web Services and Cloudflare, Fastly dominates the sector. It seems like a bad idea for so much internet infrastructure to be handled by so few companies. 


Belonging identity, society, beliefs, countries

LGBT persecution 
A court in Ghana denied bail to 21 gay rights activists. The police had arrested and detained the 16 women and five men three weeks ago at a hotel in the southeastern city of Ho for what officers had described as unlawful assembly and promoting an LGBT agenda. Promoting LGBT rights is not illegal in Ghana, neither is identifying as LGBT, but the community faces widespread persecution and gay sex is punishable with up to three years imprisonment. The individuals in custody will reappear in court on 16 June. Activists have described a rise in homophobic attacks and abuse in Ghana in recent months. Globally, the situation remains desperate for many LGBT people.


Our planet environment, natural resources, geopolitics

Lesotho power
A German solar company, Frazer Solar, began seizing Lesotho’s assets abroad in order to enforce €50 million in damages after the tiny mountain kingdom in the south of Africa reneged on its contract to build a power station. It appears that the deal collapsed because Lesotho’s finance minister at the time favoured a rival renewable project backed by Chinese investors. The country has a history of bribery and corruption. In part to address those types of problems, international asset seizures have become part of contract enforcement against African governments. They may provide investors with some comfort but, before they provide an incentive for reform in government, they first give countries a big economic blow. Lesotho, one of the poorest countries in the region, will now have to overcome it.

Stay safe, wash your hands, open windows when you can.

Paul Caruana Galizia
@pcaruanagalizia

Photographs by Getty Images


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