The Waltons are the Secret Stars of the 2015 State Of The Union

The Waltons – who became the richest family in the world by inheriting Wal-Mart – are going to make a stealth appearance in the State Of The Union tonight when President Obama discusses his proposals to close tax loopholes that unfairly benefit the ultra-rich.

For starters, the President is going to propose ending the so-called “trust fund loophole.” According to the Administration, this loophole allows hundreds of billions of dollars to avoid capital gains taxes each year by letting the wealthy pass appreciated assets to their heirs tax-free (details here).

That reform is potentially significant to the Waltons, who hold most of their wealth in Wal-Mart stock that has appreciated greatly over the years and is currently worth more than $142 Billion.[1] The Waltons would undoubtedly like to pass that $142 billion in Wal-Mart stock to their heirs tax free.

After all, it’s no secret that the Waltons have lobbied for permanent repeal of the estate tax and are the undisputed masters of avoiding taxes on inherited wealth. As Bloomberg reporter Zachary R. Mider put it:

America’s richest family… has exploited a variety of legal loopholes to avoid the estate tax, according to court records and Internal Revenue Service filings obtained through public-records requests. The Waltons’ example highlights how billionaires deftly bypass a tax intended to make sure that the nation’s wealthiest contribute their share to government rather than perpetuate dynastic wealth, a notion of fairness voiced by supporters of the estate tax like Warren Buffett and William Gates Sr.

Americans for Tax Fairness estimates that the Waltons have avoided $3 Billion in estate taxes by using special tax trusts and could potentially avoid tens of billions more down the line using these same techniques.

It’s not just estate taxes that the Waltons use loopholes to avoid.

Americans for Tax Fairness estimates that the Waltons avoid about $1.66 Million per day in taxes due to the preferential 20% tax rate on capital gains and dividends.[2] Last year, the Waltons raked in about $3.16 Billion in Wal-Mart dividends but they paid less in taxes on those dividends, percentage-wise, than a typical working stiff on their wage and salary income.

The President’s proposal would cut into the Waltons’ tax avoidance a bit by increasing the top rate on capital gains and dividends to 28% (still lower than the top rate for wage and salary income).

How will this all sit with the Waltons – the unheralded stars of the State Of The Union?

We imagine that Wal-Mart’s reigning family will be displeased. But, given that the Waltons are among the 80 families in the entire world that own more wealth than 50% of humanity combined, it seems like maybe they could afford to pay their fair share.

 

[1] Based on our analysis of Walton family share ownership and Wal-Mart’s stock price as of January 20, 2015 at 2PM. For share ownership, see http://www.sec.gov/Archives/edgar/data/104169/000130817914000196/lwmt2014_def14a.htm; For stock price, see http://stock.walmart.com/stock-information/

[2] According to Americans for Tax Fairness, the Waltons save $607 million annually on their dividend income because it is taxed at the preferential rate of 20% as opposed to the 39.6% top rate on wage and salary income. See, http://www.americansfortaxfairness.org/files/Walmart-on-Tax-Day-Americans-for-Tax-Fairness-1.pdf