Memo to Republicans: You Do Not Have to Cut Taxes for the Wealthy – They Are Perfectly Capable of Doing It Themselves

Thought the Top Tax Rate was 35%, Think Again

One of the nice things about being wealthy is that you have a lot of money.  And if you have a lot of money, you can hire a lot of experts to make sure you don’t pay a lot of taxes, so you have a lot more money to pay a lot more experts.  The New York Times reports on such an individual, Ronald Lauder heir to the Estee Lauder cosmetics empire fortune.

First of all Mr. Lauder came by his fortune the old fashioned way, he made sure he was born into the right family.



Bill Cunningham/The New York Times

THE COLLECTOR To celebrate the

 10th anniversary of his Neue Galerie,

Ronald Lauder exhibited works from

 his personal collection, including Cézannes.



As the son of a fabulously wealthy fashion icon, Mr. Lauder developed aristocratic tastes — and grand aspirations — at an early age. He summered in Vienna as a boy, developing a passion for Austrian art and medieval armor. At age 13, he bought his first Schiele with money from his bar mitzvah. 

and since then he has become very, very wealthy,  a fabulous art collector and a man about town, the town being New York City.

Mr. Lauder’s tax strategies have helped him accumulate this wealth.

His vast holdings — which include hundreds of millions in stock, one of the world’s largest private collections of medieval armor, homes in Washington, D.C., and on Park Avenue as well as oceanfront mansions in Palm Beach and the Hamptons — are organized in a labyrinth of trusts, limited liability corporations and holding companies, some of which his lawyers acknowledge are intended for tax purposes. The cable television network he built in Central Europe, CME Enterprises, maintains an official headquarters in the tax haven of Bermuda, where it does not operate any stations.

and it is beyond the scope of this Post to go into the details of his strategies (readers, say thank you to The Dismal Political Economist) but his actions illustrate this very important point.

The tax burden on the nation’s superelite has steadily declined in recent decades, according to a sliver of data released annually by the I.R.S. The effective federal income tax rate for the 400 wealthiest taxpayers, representing the top 0.000258 percent, fell from about 30 percent in 1995 to 18 percent in 2008, the most recent data available.

As for that horrible estate tax, the Lauders did not pay anywhere near the top rate.

the family’s tax planning was effective enough that after Estée Lauder died in 2004, she passed down nearly $4 billion to her heirs, according to tax experts who studied the case and estimated that the estate was taxed at an effective rate of 16 percent — about a third of the top estate tax rate at the time.

The complexity of the issue is further compounded by the fact that Mr. Lauder has donated a tremendous amount of money to charity and has made his art collection somewhat available to the public.

Ronald Lauder and his wife, Jo Carole, were honored for a variety of contributions: the work of their joint foundation supporting hospitals, rebuilding monuments and refurbishing American embassies around the world — more than a quarter of a billion dollars over the last five years, according to his spokesman.

The Ronald S. Lauder Foundation has donated tens of millions of dollars to rebuild Jewish communities devastated by the Holocaust and communist rule. Mr. Lauder has also given to a variety of Jewish and Israeli organizations, including the World Jewish Congress, where he has served as president since 2007. Richard Parsons, the former Time Warner chairman, presented the award, calling Mr. Lauder and his wife two of “the nation’s pre-eminent supporters of the arts and civic causes.”

So no, Mr. Lauder is not an evil man for using legal means to cut his taxes, and his charitable contributions (for which he gets a nice tax benefit) do ameliorate to some degree his actions to concentrate wealth in just a handful of people.  But at the end of the day Mr. Lauder is the poster child for why cutting taxes on the wealthy is not necessary and why raising taxes on the wealthy to fund government programs to support those who need support is the right and proper policy.  If Mr. Lauder has one less beautiful painting in his collection and thousands of children are raised out of poverty, that is an action a decent and humane society should take.