How to Get Other People to Pay Your Taxes

David Cay Johnston is exposing YAL (yet another loophole) on corporate and master limited partnership tax structures. Like Billionaires need yet another tax break. Seems energy pipeline owners have figured out a nice little way to charge customers for energy pipeline owners personal tax bills.



It seems pipelines are allowed to include tax estimates when charging rates to customers. But the thing is, unlike corporations, partnerships don't pay any business taxes, only the partnership owners do in personal taxes.

David Cay Johnston, who dug into this little MLP pipeline trick, wrote on

Even though the MLP does not pay the corporate income tax, FERC lets MLP pipelines include income tax in the rates charged to customers. FERC policy assumes the top marginal tax rate. Since the only income tax paid is by individual owners, this means that the rates include the individual income tax the MLP investors owe. In other words, you are forced to pay the income taxes of the MLP investors when you buy natural gas or petroleum products that were transported on such a pipeline.

I suggest reading the rest of the article for as with most tax loopholes, this one for big oil, in collusion with the Federal Energy Regulatory Commission (FERC), the techniques are complex to understand.

But Johnston is right in his assessment of YAL (yet another loophole) shifting tax responsibilities of the rich onto the consumer. Here is a Wall Street Journal article talking about these very MLPs paying out incredible dividends.

REITs and MLPs are required by law to pay most of their taxable income back to investors. So pros increasingly see them as a way to collect a substantial return, even when markets flatten or fall. Yields as high as Annaly's are rare—its dividend is high in part because fears about the housing market have sunk its shares—but dividends in the 5 to 7 percent range are common. Most REITs and MLPs trade like stocks, and they've been hot lately. The Dow Jones Equity All REIT index rose 10 percent in the first quarter of this year, more than doubling the return of the S&P 500; and the Alerian MLP index is up 83 percent since 2008.

Seems REITs have pass through tax restructuring properties too.

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