M&M Mars Candy, Trump and The Estate Tax Giveaway
[Ed Note: This is a guest post by our tax law expert friend Bob Lord. It is a particularized abject story of exactly what kind of interests are pushing the Trump “Tax Cuts” agenda, why, and how ridiculously corrupt and insulting to the 99.5% of America the effort really is.]
The Mars family has made billions selling us M&Ms, Snickers, and countless other Halloween treats for a century now. But when it comes to paying tax, the Mars family seems to be all tricks and no treats.
In fact, the family’s latest tax trick may have cost the U.S. Treasury a whopping $10 billion. What could $10 billion do? That’s the cost of delivering prenatal care to hundreds of thousands of expectant moms under Medicaid, an essential program that President Trump and the GOP Congress plan to cut by up to $1 trillion.
According to the current U.S. tax code, any American worth $25 billion can expect 40 percent of that, or $10 billion, to go to Uncle Sam in estate tax, the federal levy on the personal fortunes of deep pockets who kick the bucket. Forrest Mars Jr. had a $25-billion fortune when he died in July 2016. But the Mars family has apparently been able to avoid estate tax on that entire $25 billion.
How do we know? Researchers at Forbes and Bloomberg, the two business publications that track America’s billionaire wealth, have some fascinating numbers for us.
Forest Jr. and his two siblings started 2016 with personal fortunes in the vicinity of $25 billion. Now if Forrest’s fortune had been subject to a significant estate tax after he passed on, the collective wealth of his four daughters in 2017 would be substantially less than that $25 billion.
The just-released 2017 Forbes list of America’s 400 richest shows otherwise. Forbes puts the wealth of each of Forest’s four daughters at $6.3 billion, for a total of $25.2 billion. That’s almost identical to the 2017 fortunes of their Aunt Jacqueline and their Uncle John, each at $25.5 billion. The Bloomberg Billionaires Index reports similar numbers.
Should any of this surprise us? Not really. We’re seeing Mars family history repeat itself. Eighteen years ago, Forrest Mars Sr., the original Mars family billionaire, died. The Forbes 400 lists from the years surrounding 1999 show that the Mars family lost no wealth to estate tax back then either.
But the Mars family must at least be paying oodles of income tax, right? Nope. How could that be? This particular tax-avoidance story starts over a century ago, when Frank Mars incorporated his candy business.
Back then, the value of the stock in Mars Inc. had only minimal value. But over the years the stock appreciated considerably in value. By 1988, that appreciation had made the Mars family the wealthiest clan in America. The Mars billionaires still rank as one of America’s wealthiest families, in no small part because none of the gains in the value of the family’s Mars stock have ever been subject to income tax.
Is the Mars family content with its current level of tax savings? Apparently not. The family has joined with 17 other billionaire families and collectively spent $500 million lobbying Congress for reduced taxes on billionaires and the companies they run.
These companies face corporate income tax on their profits. Mars, Inc. has had to pay these taxes over the years. Unlike Mars family members as individuals, the Mars company hasn’t been able to sidestep its tax bills. But the Mars and other billionaire families have found a friend in President Trump and the current Republican-led Congress. The pending Trump-GOP tax plan would take a meat axe to corporate tax rates.
The resulting corporate tax savings, if this plan gets adopted, will likely translate into a multi-billion-dollar tax savings for Mars, Inc. — and a corresponding bump in the net worth of Mars family members.
The real prize for the Mars in the Trump tax plan? That may be in the elimination of the estate tax that the Trump White House is now pushing. Wait, what? How would the repeal of the federal estate tax help a family that’s already avoiding the estate tax?
For America’s ultra-wealthy, repealing the estate tax turns out to be more about the federal income than the federal estate tax. As Mars family history makes painfully clear, tax avoidance vehicles available under current law allow even billionaires to zero out their estate tax.
But billionaires, under current law, do pay an appreciable income tax price for their estate tax avoidance. Assets on which estate tax is avoided carry an offsetting income tax disadvantage. That disadvantage would vanish in a simple estate tax repeal.
What does that mean? Let’s say we have a billionaire who paid $10 million for stock now worth $100 million and does nothing to avoid estate tax on that stock The billionaire never has to pay income tax on that gain. Those who inherit that stock from the billionaire’s taxable estate can sell it for $100 million and not pay any income tax on the gain either.
But if that billionaire stashed that stock into a trust to avoid estate tax, he would forfeit that income tax advantage. The untaxed gain associated with the stock would be passed to the trust beneficiaries. These beneficiaries would face an income tax on the previously untaxed gain when they sell the stock.
If the Trump-GOP estate tax repeal takes the same final form as the estate tax repeal bill introduced in the House of Representatives in 2015, wealthy Americans will get to have it both ways: zero estate tax and the elimination of any untaxed gain at death.
And that would allow the next generation of Mars family members to avoid income tax on over a century’s worth of economic gain. Quite a trick, huh?
So enjoy the candy, America. The Mars family will keep the cash.
[Robert J. Lord, a tax lawyer in Phoenix, Arizona and former Congressional candidate, is an associate fellow at the Institute for Policy Studies.]
Here is the irony. These billionaires are ruining Capitalism and the Free Market. The whole point of the income tax and the estate tax is to level the playing field so that the next generation has a chance at a piece of the pie (market share). Endowments and Trust Funds just allow the inheritance class to graft the rest of society. Please, please, Mars trust fund babies… don’t tell me you worked for it!
Think that is exactly right. Which is why I thought this an excellent post. It not only filets open a concrete example, but also, generally, shows the absurdity of the Trump “tax cuts”. They are gratuitous and unconscionable in favor of the filthy rich. And, as Atrios relentlessly points out, sooner or later it will devastate the middle class, because that is the only other place where the money is.
They won’t tell you they worked for it because they don’t have to rationalize it. Grandpa earned it and they are lucky it was their Grandpa. End of story. You just are jealous it wasn’t YOUR Grandpa!
Yes, excellent essay. More please.
“Will” devastate the middle class? I think it already has. But like boiling the frog, when the decimation temperature increases a little at a time – and when the middle class is relentlessly told, at the cost of billions in advertising from leaders on the right and left, that the changes are in their best interests – the middle class seems to accept its fate. Cuisses de grenouille anyone?
I am a little busy being boiled right now!!
Happy 10th anniversary show on now. “Best podcast in the universe.”
Media assassination WRIT LARGE.
Drink the MSM kool-aid & ye get snockered.
Many thanks to the Robert and BMAZ .
And so it goes, the Republicans play a ghostly hand.
(1) Even if gains in value of the stock don’t do so, wouldn’t distributions to the Mars family trigger income tax liability? (2) And think of how a few billion in estate tax would help combat the obesity epidemic in which Mars products — a key component of which, sugar, benefits from subsidies — play a not inconsiderable role.
Listen to yourself! Mr. Mars doesn’t hold people down and force them to eat his candy bars! People have( or used to have) free will and the ability to make choices. That is the free market. If people choose to eat candy bars all day that is their choice and they have the right to be fat if they want. They do not however have the right to expect someone else to pay the bill for any medical treatments that result from that choice.
So? Mr. “Mars” has the right to the fruits of his labor and the right to leave those “fruits” to whoever he wants. If his children and grandchildren and on and on forever enjoy those fruits so what? That is the whole point of America. Anyone with a good idea and the discipline and desire and determination to work hard and bring that idea into fruition can be successful beyond their wildest dreams, regardless of their social status or lineage or race. It is the fuel behind innovation. Why would anyone work hard to invent something if they know they will not be allowed to keep the money that innovation might earn? People like Mr. “Mars” create the wealth that allows all Americans to enjoy a standard of living unknown anywhere else in the world. You people sound like Communists. Why is some person too lazy to work entitled to the money EARNED by Mr ” Mars” more than his own children? It is not like the lazy guy doesn’t have the same opportunity to get up and work hard and earn his own fortune. I feel sure he would be singing a different tune when the Government comes and takes his money to give to someone other than his own children. Get it? No one has the right to take the property of another, even if someone is stinking rich and never worked a day in their life thanks to their industrious Grandpa. It is none of your business what the hell they do or don’t do. Instead of trying to steal from those that worked hard, be it last week, 10 years ago or 200 years ago, go out and work hard and do what Mr. “Mars” did, come up with an idea and make your own gazillion to leave to your own brats! They will remember you fondly, I’m sure!
For the record, I have met a few of the Mars heirs and they are very nice down to earth people. Not that it matters. If they were champagne guzzling, vapid clothes horses they still have a right to be the beneficiaries of their ancestor’s wealth. They, and every other family that built fortunes in America, are responsible for building just about every library, art gallery, museum, hospital, home for the elderly, orphanage, ect… ect… in America 100 years ago and their descendants still give large amounts to charity and worthwhile projects that benefit those less fortunate. Must you also be reminded of the millions of jobs Mr. Mars created so that millions of American families were able to rise out of poverty and live the American dream? The Mars family and many others like them deserve the undying gratitude of Americans, not scorn and petty jealousy and to be robbed of what is rightfully their’s.
Thanks to Mr. Manigault for informing us that the Mars family was able to lift “millions of American families” out of poverty by employing a little less the 10,000 “associates” in the US and about 40,000 worldwide (see: https://www.richmondfed.org/publications/research/region_focus/2005/summer/cover_web_exclusive). Guess this in just a modern example of that loaves and fishes thing. Seems M&M’s must have it all over Skittles.