In the last few years, two different billionaire investors settled tax disputes that ended in large payments to the federal government.
In 2019, Robert F. Smith, founder and CEO of the private equity firm Vista Equity Partners, paid a $140 million fine to federal authorities and agreed to forego $180 million in charitable deductions for failing to pay taxes on a portion of his firm's profits moved to an offshore account.
Two years later, an investment company founded by Jim Simons called Renaissance Technologies was fined $7 billion for its long-running efforts to shoehorn short-term capital gains into the category of long-term capital gains because those are taxed at a lower rate.
While both events triggered a slew of media coverage, there has been much less opprobrium expressed regarding Simons' tax issues relative to Smith’s. A simple Google search for the terms “tax cheat” and “Jim Simons” returns only 32 hits, but substitute “Robert F. Smith” for Simons’ name and you’ll receive 4,460 hits.
There are a couple of possible reasons for the difference: The first is that Robert Brockman, the investor who created the offshore accounts used by Smith, died in August, and the lawyer who set up the accounts committed suicide last month. Neither had resolved their own tax issues with the IRS, and those cases continued to draw media interest.
But another possible reason for the discrepancy in news coverage between the two men is that Smith’s life story as an incredibly successful investor who happens to be a Black man can seem incongruous to some people, and many have a predilection to find another reason for his wealth besides a remarkable aptitude for investing.
Most wealthy African Americans come from entertainment or sports: Oprah, Jay-Z, LeBron James, Michael Jordan, and Derek Jeter are all at or approaching billionaire status. While all have proven successful at making money outside their original endeavors, it is also unlikely they would have become as exorbitantly wealthy without their skills in sports, music, or entertainment.
Smith, on the other hand, came out on top of a different hypercompetitive realm – investing – by his sheer intelligence and drive. These traits helped the investor take the title of the wealthiest African American in the country.
This may be difficult for some people to process. And so, being able to point to his tax disputes helps them conceive of a story that comports with their long-held notions: He can’t be that smart so he must have cheated to earn his money.
Most of the media attention Simons receives concerns his investment genius and the computer model he created that does the investing. Smith, however, has seen his past tax issues crowd out most other coverage on his investing success and his widespread philanthropic work within the Black community.
The disparity in coverage between Simons and Smith once again show that Black men in America are judged on a different – and unfair --- standard than their white peers and, no matter how successful one is in their chosen field, it is impossible to escape the vestiges of racism and the deeply ingrained prejudices that still haunt this country.
Smith’s investment record over the last two decades, however, has established him as one of the leading investors in the 21st century – no matter the color of his skin. Chalking his success up to a tax scam, as more than a few journalists have done, is not only unfair, but perpetuates the kinds of tropes and stereotypes that, for centuries, have seen Black Americans judged more harshly than their White peers.
