Now that Treasury Secretary Scott Bessent is securely ensconced within Donald Trump’s administration, he is dragging his feet over a confirmation pledge that he would set aside funds to pay almost $1 million in taxes he should have paid into Medicare.
According to a report from the New York Times’ Andrew Duehren on Wednesday morning, Bessent, who has become the face of Donald Trump’s economic policies, has been using a tax dodge for his personal income by setting up an investment firm in such a way that he can avoid paying into Social Security and Medicare.
As the Times is reporting, objections have been raised about the loophole, which the IRS agreed was a problem and, when confronted with the issue when he was being confirmed, the Wall Street hedge funder said he would not follow the IRS guidance, but would “create “a reserve fund to address any contingency related to this issue.”
However, as he has doubled as the head of the IRS since August, the agency has been dragging its feet when it comes to definitive regulations allowing him to avoid making any payment at all as he disputes the amount.
The Times is reporting, “Mr. Bessent’s hedge fund, Key Square Capital Management, was set up as a limited partnership. Through that structure, Mr. Bessent avoided paying roughly $910,000 in Medicare taxes on money he made running his hedge fund in 2021, 2022 and 2023, according to a memorandum prepared by Democratic Senate staff for Mr. Bessent’s confirmation hearing in January.”
The Times’ Duehren observed, “Mr. Bessent’s decision to not pay the additional tax has now put him in the unusual spot of personally opposing — and having a personal stake in — how the I.R.S. interprets tax law. And since he took office, the Treasury and I.R.S. have backed away from developing regulations to address it.”
Noting that Bessent is up to date on Social Security taxes now, the report adds, “Under the Biden administration, the I.R.S. and Treasury made it a goal to curb the ability of firm owners to avoid paying self-employment taxes like Mr. Bessent did. In 2023 and 2024, they included the issue on a public list of priorities for further guidance or regulation.”
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