July 13, 2004
Edwards' dodgy tax dodges

Today's OpinionJournal - Featured Article (free registration required) is a fairly scathing indictment of the double standard enjoyed by high-income democrats using tax shelters to dodge the tax increases they advocate. It discusses the tax shelters employed by Edwards and Teresa Heinz Kerry to avoid paying taxes. While Heinz Kerry's information is interesting, the data on Edwards is appalling. The column points out this gem:

Senator Edwards talks about the need to provide health care for all, but that didn't stop him from using a clever tax dodge to avoid paying $591,000 into the Medicare system. While making his fortune as a trial lawyer in 1995, he formed what is known as a "subchapter S" corporation, with himself as the sole shareholder.

Instead of taking his $26.9 million in earnings directly in the following four years, he paid himself a salary of $360,000 a year and took the rest as corporate dividends. Since salary is subject to 2.9% Medicare tax but dividends aren't, that meant he shielded more than 90% of his income. That's not necessarily illegal, but dodging such a large chunk of employment tax skates perilously close to the line.

The article notes in a later paragraph that in 1993 the income limit on Medicare taxation was increased, primarily to ensure that high-income types like Edwards paid a fair share. It also notes that Edwards ostensibly set up the corporation to protect himself from lawsuits. A lawyer afraid of lawsuits? It speaks volumes about our hyper-litigious environment these days.

posted on July 13, 2004 07:24 AM


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