The debate over whether to reduce tax shelters and preferences for the rich is one of the most volatile in Washington and will move to the presidential campaign, now that repeated attempts in Congress to strike a grand bargain over spending cuts and an overhaul of the tax code have failed. This article by David Kocieniewski details some of the tax loopholes used by Ronald Lauder, an heir to the Estée Lauder fortune, who is worth about $3.1 Billion. From offshore havens to a tax-sheltering stock deal, so audacious that Congress later enacted a law forbidding the tactic, Mr. Lauder has pursued aggressive tax break advantages.

Questions:

1. Find an article on “shorting against the box.” In a short paragraph, explain what this is. How did Ronald Lauder and his mother use this technique in 1995 when the company, Estée Lauder, when public?
2. According to the article, what was the effective federal income tax rate for the 400 wealthiest taxpayers in 2008? How much lower is this than the 1995 tax rate for the same group?
3. In three sentences, how would you summarize the main point(s) of this article?
4. What is the difference between tax evasion and tax avoidance?

Source:
Kocieniewski, D. (2011). A Family’s Billions, Artfully Sheltered. The New York Times, Nov. 26 (Retrievable online at http://www.nytimes.com/2011/11/27/business/estee-lauder-heirs-tax-strategies-typify-advantages-for-wealthy.html?pagewanted=4&_r=1&hp)