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A story that made few waves earlier this week due to the focus on the election reminds me of Leona Helmsley’s infamous “only the little people pay taxes” comment. If you missed it, a Bloomberg report on Monday exposed billionaire John Malone, chairman of Liberty Global, as a world-class tax dodger.
The detailed story is jaw-dropping because Malone’s crafty maneuvers that allowed his company to dodge millions in taxes and allowed him to avoid millions in personal income taxes were all arguably legal.
Here’s how he did it: Last year Malone’s Liberty Global, the largest international cable company, “moved” from Colorado to London through a merger with Virgin Media. The merger was structured as a corporate inversion, a tax-dodging gambit much in the news lately. Although Liberty gives its London office top billing on its website, the company didn’t actually move its headquarters to London—it’s still run primarily out of the company’s office in Colorado.
As my colleagues and I at Citizens for Tax Justice have noted repeatedly, corporate inversions are often a farce that allow companies to claim they are headquartered elsewhere, while they reap all the benefits of operating in the United States and avoid paying their fair share.
Aside from Liberty Global’s current and future tax savings expected from the paper move, Malone is estimated to have personally escaped $200 million in income taxes in the inversion deal which generally subjects the shareholders to income taxes on their capital gain. He did that by transferring $600 million of his stake in the company to a charitable trust the day before his company announced the inversion deal and by twisting Treasury regulations into a pretzel to avoid tax on the remaining $260 million piece.
The greed that says Malone—whose estimated net worth exceeds $7.5 billion—can’t even pay 20 percent in capital gains tax (compared to a 35 percent rate on wages) on his $860 million dollar gain is truly unimaginable to me. And that we have laws that allow tax avoidance on this scale is deplorable.
If what Helmsley said more than two decades ago is true, that only the little people pay taxes, then perhaps only the “little people” should get the benefits of the public services that taxes pay for: roads, airports, the courts, the Coast Guard (Malone has two yachts), military and police protection—to name just a few.