My response to this silly article from abc news. I originally submitted this in the comments section of the article but for some reason it never posted.
What a bunch of crap. It is obvious that the purpose of the story is to manipulate people's emotions by massaging the facts. First off, Hendrick's company switched from a S corp to a C corp. She might not have paid state income tax at the individual level but the company certainly paid tax at the corporate level. Also, if the company pays out a dividend to the owners then the will have to pay tax on that at the individual level, the so called double taxation of C corps.
As far as how the top 3 percent "finagle" their income tax burden down to zero, the reporter says that the majority of them donate to charity, invest in local and state governments, earn money overseas and write off doctor bills. So lets look at each of these. 1) Donating to charity means that you actually had to send that money to a charitable organization which means that the wealthy individual gave it away. They didn't buy a new car with it or invest it in the stock market, they gave it away. To me this seems like a good thing. Should we penalize Bill Gates when he donates $3 billion is one year to his foundation because it didn't go to the government but instead went to an organization which feeds the starving, educates children and provides healthcare to the poor? 2) You don't pay tax at the state level for investments in that state because, well, you invested money in that state. States want you to buy their bonds so that they have money to spend on their various projects. If you buy a bond for a state you live in, you usually don't have to pay tax on the interest you receive from them. 3) You might not have to pay tax on overseas income because you had to pay tax to the country where you originally made the money and so you get a credit or a deduction to offset that tax. 4) You can deduct medical expenses as an itemized deduction but to do so the expense must first be over 7.5% of your adjusted gross income. This means that a wealthy person who has a lot of income for the year would have to have quite a lot of medical expenses to be able to use this deduction. Also, it is not like the wealthy are living it up when they have to spend money (out of pocket money) on medical expenses. They don't sit around trying to show each other up by seeing who has the biggest scare on their chest after dishing out money for heart surgery.