Throughout his political career, Ted Kennedy advocated the wholesale redistribution of wealth via steeply progressive tax rates designed to fund an ever-expanding array of entitlement programs and social-welfare benefits as well as the public education system. Opposed to any provisions in the tax laws that might help mid- to high-earners minimize their tax liability, Kennedy once said, on the Senate floor, that he would be glad if “the word ‘shelter’ disappears from the tax vocabulary.”[1] On another occasion he said, “Instead of shutting down classrooms [due to a supposed lack of funding], let us shut off tax shelters.”[2] Whenever fellow legislators proposed tax cuts, Kennedy typically framed them as “giveways” and “bonanzas” intended to help only the wealthy.[3] And in the name of social justice, he supported the inheritance tax on assets that are transferred from one generation to the next; a repeal of that tax, he said, would unjustly “benefit millionaires.”[4]
But while the multi-millionaire Kennedy stood firmly in favor of raising taxes on high earners across the United States, he showed a pronounced reluctance to pay taxes on his own wealth. For many years, Merchandise Mart, the Chicago-based real estate conglomerate that Joseph Kennedy established in 1935, was the most valuable asset belonging to Ted Kennedy and his family. In 1974 Joseph Kennedy divided Merchandise Mart’s ownership among numerous family members, including Ted, in the form of a trust that was domiciled in the Pacific island of Fiji. Because the trust was based in Fiji, it was not subject to the taxes normally imposed on trusts domiciled in the United States.
As of 2005, the tax rate on U.S.-based trusts was 49 percent on everything above the first $2 million. But as of 2005, the Kennedys, who had transferred at least $300 million in trust funds from one generation to another, had paid a mere $132,000 in estate taxes -- a rate of four one-hundredths of one percent.[5] Had they set up those trusts in the United states, they would have owed more than 7,000 times that amount in taxes.
Ted Kennedy also received additional money -- free of inheritance taxes -- from a series of trusts that were established for him in 1926, 1936, 1978, 1987, and 1997.
Kennedy became skilled at avoiding not only inheritance taxes but also property taxes. For example, in 1980 theChicago Tribune conducted an investigation which found that although Merchandise Mart had a market value of $35 million, it had been assessed at only $22.8 million by tax assessor (and Ted Kennedy political ally) Thomas Tully. The low assessment permitted Kennedy and his extended family to decrease their property taxes by some $4 million over the course of two years. Another Kennedy-owned building, Apparel Mart, received similar, preferential consideration from the tax assessor, saving Kennedy and his clan another several million dollars in property taxes.[6]
In yet another maneuver to avoid paying taxes, Senator Kennedy invested hundreds of thousands of dollars in tax-free Massachusetts bonds.[7]
An additional area where Kennedy’s rhetoric is inconsistent with his actions was in the realm of affirmative action. Publicly, Kennedy championed the virtues of race- and gender-preferences (in favor of nonwhite minorities and women) in business and academia. Largely because of his unwavering support of affirmative action programs, the NAACP gave Kennedy a perfect 100 percent rating.
But in his private business dealings, Kennedy preferred not to be bound by the dictates of affirmative action regulations. In 1981, for instance, the senator and his family formed two limited partnerships under whose auspices they purchased an entire city block of prime piece of real estate near the Capitol Building in Washington, DC. Their intent was to build, on that land, an upscale office complex that could generate a fortune in rental income.
The DC Redevelopment Land Agency had previously enacted a set-aside requirement mandating that minority-owned businesses be guaranteed of participating, to some extent, in any new development project like the one planned by the Kennedys. At the senator's request, Kennedy political ally and DC mayor Marion Berry -- an African American who strongly supported affirmative action -- waived the set-aside clause.
By the late 1980s, the newly constructed Kennedy building housed several government agencies as long-term renters. The senator, to avoid the “appearance of a conflict of interest,” sold his stake in the property to his father’s trust company, Joseph P. Kennedy Enterprises. As of 2005, the building was worth $200 million.[8] |
