NEW YORK (PNN) - October 8, 2020 - Democrat presidential candidate Joe Biden and his wife Jill managed to dodge tax payments by setting up two S-corporations.
The Bidens funneled their income - worth millions of dollars - through these corporations to avoid paying income, Social Security and Medicare taxes.
An op-ed piece by Juniper Research Group CEO Chris Jacobs, published in The Wall Street Journal, explained how the Bidens managed to circumvent huge taxes. Tax returns obtained by the newspaper showed that the Biden couple earned about $13.3 million from book royalties and speaking fees in 2017 and 2018. This income was then declared as profits from CelticCapri Corp. and Giacoppa Corp., the two S-corporations they set up, Jacobs said.
While the Bidens did receive “salaries” from their two corporations amounting to nearly $750,000 - and they paid full taxes on that amount - it was only a drop in the bucket compared to the payroll tax for the remaining 95% of their total income received as tax-free distributions.
In a report from last year, Tax Policy Center senior fellow Steve Rosenthal called the Bidens’ move to classify their earnings from their consultancy and public speaking stints as profits “pretty aggressive”.
How did the Bidens use S-corporations to avoid paying huge taxes?
S-corporations pay employee shareholders in two ways - wages and distributions. Business owners who receive a salary from the company’s income need to pay a 15.3% self-employment tax for Social Security and Medicare.
Meanwhile, a distribution can be any amount reflecting the employee shareholder’s investment. Distributions are exempted from the 15.3% tax and are counted as the employee’s share of the corporation’s income.
The Internal Revenue Service (IRS) requires S-corporations to pay “reasonable compensation for services rendered” before distributions can be given to shareholders.
Furthermore, the IRS has mandated that the amount of reasonable compensation must not go beyond any amount directly or indirectly received by a shareholder.
The Bidens used this loophole to their advantage: The $750,000 they received as wages from their two S-corporations was still subject to tax, but the rest of their $13.3 million income was given out as tax-free distributions. The Bidens received reasonable compensation, alongside the rest of their income given out as distribution, which allowed them to skirt a larger income tax payment.
Criticism of Joe Biden’s tax avoidance strategy resurfaced once more after the Democrat presidential candidate’s campaign released an advertisement pointing out President Donald Trump’s $750 federal tax payment in 2016. The New York Times first reported Trump’s tax payment in a September 27 story, adding that he paid another $750 in federal taxes for 2017.
The president responded the next day, saying that the “fake news media” brought up “all sorts of nonsense” similar to the smear campaigns he experienced during the 2016 elections. He added that he was also entitled to “depreciation and tax credits” as his line of business centered on real estate development.
Aside from book deals and speaking engagements funneled to S-corporations to avoid huge taxes, Biden also receives substantial bribes to augment his income stream. Ukrainian gas company Burisma, where his son Hunter served as a board member, recently admitted in court that it paid the elder Biden $900,000 as a “lobbying lump sum”.