How US Billionaires Can Avoid Paying Income Taxes (propublica.org) 229
On April 15th Americans filed their taxes with the Internal Revenue Service (or IRS). But on the same day ProPublica was reporting a difference between "the rich and the rest of us" — that their wealth just isn't easily defined:
For one, wages make up only a small part of their earnings. And they have broad latitude in how they account for their businesses and investments. Their incomes aren't defined by a tax form. Instead, they represent the triumph of careful planning by skilled professionals who strive to deliver the most-advantageous-yet-still-plausible answers to their clients. For them, a tax return is an opening bid to the IRS. It's a kind of theory....
We counted at least 16 other billionaires (along with hundreds of other ultrawealthy people, including hedge fund managers and former CEOs) among the stimulus check recipients. This is just how our system works. It's why, in 2011, Jeff Bezos, then worth $18 billion, qualified for $4,000 in refundable child tax credits. (Bezos didn't respond to our questions.) A recent study by the Brookings Institution set out with a simple aim: to compare what owners of privately held businesses say they earn with the income that appears on the owners' tax returns. The findings were stark: "More than half of economic income generated by closely held businesses does not appear on tax returns and that ratio has declined significantly over the past 25 years."
That doesn't mean business owners are illegally hiding income from the IRS, though it's certainly a possible contributor. There are plenty of ways to make income vanish legally. Tax perks like depreciation allow owners to create tax losses even as they expand their businesses... "Losses" from one business can also be used to wipe out income from another. Sometimes spilling red ink can be lots of fun: For billionaires, owning sports teams and thoroughbred racehorses are exciting loss-makers. Congress larded the tax code with these sorts of provisions on the logic that what's good for businesses is good for the economy. Often, the evidence for this broader effect is thin or nonexistent, but you can be sure all this is great for business owners. The Brookings study found that households worth $10 million or more benefited the most from being able to make income disappear....
In the tax system we have, billionaires who'd really rather not pay income taxes can usually find a way not to. They can bank their accumulating gains tax-free and deploy tax losses to wipe out whatever taxable income they might have. They can even look forward to a few thousand dollars here and there from the government to help them raise their kids or get through a national emergency.
This system also means it's much harder to catch underreported income on the tax returns of the wealthy, the article points out. And with so many legal deductions, it's also hard to prove the low incomes really exceed what the law allows. Even then, the wealthy can still hire an army of the best tax lawyers to make their case in court.
And now thousands of auditors have left the agency — and have not been replaced. The end result? "Audits of the wealthy have plummeted.
"Business owners have still more reason to be bold...."
We counted at least 16 other billionaires (along with hundreds of other ultrawealthy people, including hedge fund managers and former CEOs) among the stimulus check recipients. This is just how our system works. It's why, in 2011, Jeff Bezos, then worth $18 billion, qualified for $4,000 in refundable child tax credits. (Bezos didn't respond to our questions.) A recent study by the Brookings Institution set out with a simple aim: to compare what owners of privately held businesses say they earn with the income that appears on the owners' tax returns. The findings were stark: "More than half of economic income generated by closely held businesses does not appear on tax returns and that ratio has declined significantly over the past 25 years."
That doesn't mean business owners are illegally hiding income from the IRS, though it's certainly a possible contributor. There are plenty of ways to make income vanish legally. Tax perks like depreciation allow owners to create tax losses even as they expand their businesses... "Losses" from one business can also be used to wipe out income from another. Sometimes spilling red ink can be lots of fun: For billionaires, owning sports teams and thoroughbred racehorses are exciting loss-makers. Congress larded the tax code with these sorts of provisions on the logic that what's good for businesses is good for the economy. Often, the evidence for this broader effect is thin or nonexistent, but you can be sure all this is great for business owners. The Brookings study found that households worth $10 million or more benefited the most from being able to make income disappear....
In the tax system we have, billionaires who'd really rather not pay income taxes can usually find a way not to. They can bank their accumulating gains tax-free and deploy tax losses to wipe out whatever taxable income they might have. They can even look forward to a few thousand dollars here and there from the government to help them raise their kids or get through a national emergency.
This system also means it's much harder to catch underreported income on the tax returns of the wealthy, the article points out. And with so many legal deductions, it's also hard to prove the low incomes really exceed what the law allows. Even then, the wealthy can still hire an army of the best tax lawyers to make their case in court.
And now thousands of auditors have left the agency — and have not been replaced. The end result? "Audits of the wealthy have plummeted.
"Business owners have still more reason to be bold...."
Well, Congress helped anyway. (Score:3)
For billionaires, owning sports teams and thoroughbred racehorses are exciting loss-makers. Congress larded the tax code with these sorts of provisions on the logic that what's good for businesses is good for the economy.
You mean rich people, businesses and lobbyists did and Congress went along with it -- many (most?) of them benefit from those provisions too ...
Re:Well, Congress helped anyway. (Score:5, Insightful)
Why is depreciation a "tax perk"? You buy a truck to deliver things. The truck has a five-year life. You deduct one-fifth of the cost each year. When you sell it at the end, if it sells it for more than the end depreciated value, the sale is taxable income.
Of course, it is possible to use depreciation to wipe out current income. You just have to magically create a business that is growing 200% a year. Buy one truck this year, ten next year, a hundred the year after, then 1000. It is expected that depreciation associated with rapid growth can wipe out current taxes. But no one can keep growing at this rate forever. And then when the high growth stops the taxes hit. High growth companies are a good thing, we want as many as possible.
And what are the alternatives? You could allow fully expensing the truck in the year that it is purchased. That is even more favorable to business. Or you could disallow the expense of trucks. But then no one would buy them.
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Or you could disallow the expense of trucks. But then no one would buy them.
Oh? There's no use for a truck other than disallowing the expense?
Re:Well, Congress helped anyway. (Score:4, Insightful)
Sure we can tax delivery companies on 100% of revenue and not let them deduct the cost of doing business -- things like salaries, trucks, and gas. Of course it is likely impossible to build an ongoing business under those rules, so no one will buy trucks.
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I should qualify that, no one will buy trucks for use in business because you won't be able to make any money off from them. Go ahead and buy them for personal and non-profit use.
Instead, consider a steel mill. Who would build a steel mill if the cost of the mill could not be deducted from revenues?
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Consider grocery stores run on a 3% margin and Apple runs on a 40% margin. 5% tax on grocery stores is more than they earn, 5% on Apple is a huge tax cut. You can't tax on revenues.
Re: (Score:2, Offtopic)
America has a trade deficit of $859B.
That is the gap between what we consumed and what we produced.
Disallowing depreciation of legitimate business investments will suppress production even more and mean even more jobs move overseas.
That is an insane policy. If the government needs more revenue, we should tax consumption, not investment and production.
Re:Well, Congress helped anyway. (Score:4, Insightful)
Depreciating the cost of a truck that has a business case such as doing deliveries is one thing. Depreciating the $600 million yacht which has the business case of entertaining clients or the Rolls Royce the CEO uses to drive to the golf course, for business reasons, is another thing.
One thing a business owner can do is not own anything, but have the company own it and have a very nice lifestyle with an income of a dollar a year.
Re:Well, Congress helped anyway. (Score:5, Informative)
That is not allowed by the tax code. If you tried to write off a $600M yacht you would immediately be audited. You better be running a charter boat service and be charting that yacht out 365 days a year. Driving the Rolls to the golf course is only deductiblr if customers are in the car with you and at a standard rate of about $1/mi. And you get the same rate for a Toyota.
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Yea, I'm not a tax expert nor American but generally the IRS needs the resources to audit, which is a lot of resources for a billionaire and then it can go to court and until a Judge rules that it was not allowed, which can take a while if you have an army of lawyers, it is a grey zone.
Re:Well, Congress helped anyway. (Score:5, Interesting)
Tax arguments like this one are typically people who have no idea what they're talking about yelling at other people who have no idea what they're talking about. The summary is a great example. Once sentence it's talking about Bezos, the next it's talking about closely held companies. The only closely held companies Bezos has are enormous money sinks.
Unfortunately all the rhetoric just obscures the actual problems. Tax systems need to be simple, and the simpler the better. The US has a comically enormous tax code because legalized bribery allows rich people and corporations to buy obfuscation in which they can hide loopholes. Those loopholes aren't sensible things like depreciation.
Probably something also needs to be done about banks making big loans using unrealized gains as collateral. There are precious few actual billionaires, but there are a lot of people who have assets that are theoretically worth billions of dollars. Those people legitimately have extremely little income and enormous debt because they borrow to buy everything. That *does* seem unfair, but could be fixed pretty easily by just requiring that personal loans be secured only by assets that have taxes paid up to assessed value.
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I'll say this much on taxing people on loans against unrealized gains: investment interest is deductible, so anything you try to do will ultimately lead to a simple shift in the mechanics of the loan.
Personally, I bought a house using a line of credit against my stock portfolio I have been saving and investing in for 20+ years since I didn't qualify for a mortgage. If I had to sell the stocks all at once to make the purchase, my tax liability would have made it impossible. Likewise, if I had to use margin
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The US has a comically enormous tax code because legalized bribery allows rich people and corporations to buy obfuscation in which they can hide loopholes.
Very well stated, only it should chap more asses when you use accurate terms like "legalized bribery". Always interesting when "legalized [obvious bad crime]" is simply ignored due to even more palms being greased. I don't think Americans truly understand just how many jobs are created with nothing but loopholes, which is yet another Catch-22 Greed has gotten us into. Now, we must sustain corruption not merely for funding, but jobs. Think of the Children? Pfft. Think of the Parents hits a lot harder.
There are precious few actual billionaires, but there are a lot of people who have assets that are theoretically worth billions of dollars. Those people legitimately have extremely little income and enormous debt because they borrow to buy everything.
Ye
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The US has a comically enormous tax code because legalized bribery allows rich people and corporations to buy obfuscation in which they can hide loopholes.
No, if it were just that, then fixing it would be a simple morality play.
The system also involves lawmakers buying voters, of whom non-rich ones vastly outnumber the rich ones.
So we have exemptions and tax credits that make sure poor even to middle class people pay no income taxes at all.
We have deductions of state and local taxes, because big local governments matter (BLgM?)!
We have mortgage interest deductions, favoring high housing cost areas (your mortgage has to be pretty big to make taking this de
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I don't know about trucks, but with rental properties: the depreciation counts as an offset against regular income, but if and when you sell the property, the amount you make over and above the depreciated value is taxed as a capital gain. Capital gains a
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All tax deductions need to be eliminated except for money paid to other individuals as income.
Then trucks will no longer be manufactured and sold. Instead, if you need a truck you will pay the individual workers in the truck factory to make a truck for you and also pay the workers who built the factory, and the investors who funded it.
The result will be much more paperwork and bureaucracy to keep track of who is paying whom, but the salaries paid to the armies of individual record keepers will at least be tax-deductible.
Re:Well, Congress helped anyway. (Score:4)
This is because most people are trying to come up with ways to fix a giant tangled mess of a system which is pretty much impossible to do without causing tons of unintentional side-effects.
The only real solution at this point is to toss out our entire tax system, and go find a country which has done this well and co-opt theirs.
There is no fixing the current system in the US.
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You mean rich people, businesses and lobbyists did and Congress went along with it
Businesses and lobbyists don't pass laws. They can draft the bills they'd like to see and hand a copy of it directly to their congress-critter, complete with a check toward a committee donation, but it still takes congress-critters to pass legislation. Businesses and lobbyists aren't free from blame, but they're hardly the most culpable.
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You mean rich people, businesses and lobbyists did and Congress went along with it
Businesses and lobbyists don't pass laws. They can draft the bills they'd like to see and hand a copy of it directly to their congress-critter, complete with a check toward a committee donation, but it still takes congress-critters to pass legislation. Businesses and lobbyists aren't free from blame, but they're hardly the most culpable.
Ya, I know. That's kinda what I said in a TL;DR sort of way ... :-) Congress likes to blame big business for things, but the truth is while many of the laws favorable to businesses, etc ... were bills initially drafted by lobbyists and business interests, Congress ultimately passed them into law.
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No worries. I just feel that we should appropriately aim the blame.
No news source is without bias, but this tidbit was pretty interesting: https://www.youtube.com/watch?... [youtube.com]
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They don't pass laws, but they do control the policies in those laws:
https://www.usnews.com/opinion... [usnews.com]
It's not an ACCIDENT (Score:5, Informative)
... that tax law is written in EXACTLY the perfect way so as to make it easy for wealthy to not pay taxes. "Income" isn't the only thing that can be taxed, that's a choice being made by the lawmakers. If they chose, they could simply change what gets taxed to ensure the rich pay most of it. But then who would fun their campaigns?
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More and more, I'm seeing and reading the obvious dismantling going on in the Government, as a not-so-hidden agenda by the incompetent ones in charge who know they don't stand a chance in hell in getting re-elected. Leaving behind an absolute clusterfuck is an easy way to practically write the scripts for the MSM when Republicans take control, streaming shit-slinging being the obvious collusion-for-profit. Wonder if that shit will still work? CNN just pissed $100 million away trying to re-create the Trum
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"Income" isn't the only thing that can be taxed, that's a choice being made by the lawmakers.
The problem is also that the general public is pretty gullible when it comes to understanding the difference between progressive and regressive taxes. I frequently see people advocating for carbon taxes, completely oblivious to the fact that it would impact low income earners the most, and the wealthy won't even feel it.
If you want rich people to be taxed more or stop being so wasteful, identifying who is rich has to be step #1. Right now, we do that by examining income.
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Most carbon tax systems include refunds for the poor. At that, the Canadian Federal carbon tax returns most of the money and my Provincial one is similar in giving rebates to the poorer people. As well when introduced as the first carbon tax in N. America, it was revenue neutral, income taxes were cut by the amount the carbon tax brought in. Eventually a left wing government was voted in and the revenue neutral part was chucked.
What is weird is how carbon taxes were at first a right wing thing and now all t
No accident at all (Score:2)
tax law is written in EXACTLY the perfect way so as to make it easy for wealthy to not pay taxes.
You know why, right?
When you get that rich, do you honestly think making campaign contributions and giving to political fundraisers are done out of generosity? The rich are buying these laws via their donations. It's called a return on one's investment. Besides, those campaigns don't pay for themselves! [termlimits.com]
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...If they chose, they could simply change what gets taxed to ensure the rich pay most of it. But then who would fun their campaigns?
Sad these arguments are usually nothing more than a legalized shakedown with a "It would be a shame if something happened to your funding" threat behind it that is not so veiled.
I'll say this for a more simple argument; taxing mega-religion should not be a "sin". Watching what happens when you do not tax religion, certainly is.
Not saying we shouldn't go after billionaires, but when the "local" place of worship is a multi-million dollar mega-corp, perhaps it's time we stop allowing waivers for incessant Gre
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that tax law is written in EXACTLY the perfect way so as to make it easy for wealthy to not pay taxes.
Depending on your definition, upper classes pay way more than lower classes, simply because mostly they do pay something.
A very large swath of Americans pay no income tax at all, or even receive more back than they paid in in withholding, due to large standard exemptions and tax credits.
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while using almost no services
Only the services that matter most: police and military protection. Otherwise, the half of America that pays no taxes, and are exploited to fund the 1%, might get uppity and take some of that ill-gotten wealth. America has 724 billionaires. That would be less than a week's work with a few guillotines.
Such a misleading statistic (Score:5, Interesting)
The reason why the 1% can pay 40% of the nation's income taxes is because they control 32.1% of the nation's wealth [statista.com], and because the United States has a progressive tax which taxes higher incomes at a higher percentage rate. And because they can afford it.
But the statistic does not show what percent of -total- taxes the rich pay, only income tax. The top 1% earned about 20% of the total income in 2020, and paid about 24% of all taxes, [itep.org] once you factor in state taxes, local taxes, and payroll taxes. That's pretty close to a flat tax, not a progressive one. If there's agreement that this is too much concentration of wealth, a higher tax rate targeting incomes of this magnitude would remedy that situation.
It's a very fair argument to ask whether one percent of Americans controlling thirty-two percent of its wealth and twenty percent of its annual income is a benefit to the welfare of the United States as a whole. The argument that weighs on me most heavily is how much this wealth and income inequality negatively influences our politics, for the maintenance of the status quo and expansion of tax breaks for the rich. Take for example, the Heritage Foundation, the organization that provided you that statistic you just quoted.
The Heritage Foundation has had an incredibly extremist and negative influence on the politics of this nation. They were a puppet behind four years of the Trump Administration, hand-picked his vice president, and gave lists directly to Trump about which judges to nominate for the Supreme Court. [nytimes.com] They continue to advocate for hard-conservative politics that include overturning Roe v Wade, making homosexuality illegal, they continue to deny climate change, and not to mention lower tax rates for the wealthy. One can imagine that if the United States would ever crumble into a theocracy as imagined by Margaret Atwood, the Heritage Foundation would be an instrument of that destruction.
Re: It's not an ACCIDENT (Score:2)
while using almost no services
What ? No police, and various law enforcement services ? How would the laws they paid for be enforced ?
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>"What ? No police, and various law enforcement services ? How would the laws they paid for be enforced ?"
Should have been more specific. Not using social-support type services like welfare, food stamps, social services, disability, Medicaid, housing assistance, EIC, head-start, Pell grants, etc (far too many to list here). Something on the order of 2 trillion of the spending each year. Can probably throw in public schools, too.
Headed for the usual cliff (Score:4, Interesting)
The allegedly hyperintelligent Masters of the Universe follow wealth-seeking strategies with all the foresight and wisdom of bacteria eating sugar, mindless exponential increase, until it goes off the cliff. The latest was the 2008 financial crisis, what a cliff that was.
I hope we can avoid the tumbrels, this time.
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That "cliff" made a lot of ordinary people lose their homes, while many wealthy people were able to buy investment properties at reduced prices. One might almost think that the crisis was driven by those wealthy people.
Easy to pay no taxes. (Score:3, Interesting)
Here is how you can do it.
1) Put 1/2 your money into a trust. Say $100 million.
2) Also make a series of say 10 long shot investments, $10 million each (another $100 million total). Think very risky tech companies. Expect most of them to become worthless, but a couple to become profitable, hopefully recovering your full $100 million, maybe making a profit.
3) Take loans out on the trust, with the trust as collateral. Say 1 million a year. Given you are a billionaire with significant collateral, you can get very low interest rates. 1%-5% is a good range. Lets say $50 grand a year.
4) Assume you make $6 million a year. Taxes could easily cost you $2 million a year, far more than than the $50 grand a year you pay in interest. But the interest builds each year.
5) Each year you take out $1 million to live on, pay your $50 grand of interest. After ten years, you are paying $500 grand a year, still less than $2 million each you would be paying. Your debt to the bank has grown to $10 million.
6) Remember those long shot investments? Sell two of the losers for practically nothing, say $2 million, for a lose of $18 million. Maybe also take another $8 million of gains from other investments. Net zero capital gains. But your $2 million from losses and your $8 million of capital gains (plus the original investment, whatever it was) pays off your Debt to the bank of $ 10 million.
7) Repeat the process.
The main things you need to do this is enough money so that paying $30 grand for lawyers to set up a trust and the loan initiation fees seems like chump change.
Re: (Score:3, Insightful)
Here is how you can do it. 1) Put 1/2 your money into a trust. Say $100 million. 2) Also make a series of say 10 long shot investments, $10 million each (another $100 million total). Think very risky tech companies. Expect most of them to become worthless, but a couple to become profitable, hopefully recovering your full $100 million, maybe making a profit. 3) Take loans out on the trust, with the trust as collateral. Say 1 million a year. Given you are a billionaire with significant collateral, you can get very low interest rates. 1%-5% is a good range. Lets say $50 grand a year. 4) Assume you make $6 million a year. Taxes could easily cost you $2 million a year, far more than than the $50 grand a year you pay in interest. But the interest builds each year. 5) Each year you take out $1 million to live on, pay your $50 grand of interest. After ten years, you are paying $500 grand a year, still less than $2 million each you would be paying. Your debt to the bank has grown to $10 million. 6) Remember those long shot investments? Sell two of the losers for practically nothing, say $2 million, for a lose of $18 million. Maybe also take another $8 million of gains from other investments. Net zero capital gains. But your $2 million from losses and your $8 million of capital gains (plus the original investment, whatever it was) pays off your Debt to the bank of $ 10 million. 7) Repeat the process.
The main things you need to do this is enough money so that paying $30 grand for lawyers to set up a trust and the loan initiation fees seems like chump change.
You missed a step between 6 and 7:
6.5) Pay yourself the $8 million, incur income taxes of $3.9 million and only then will you have $4.1 million to pay off your personal debt.
Taking on debt is a good tool because it allows you to retain your current investments rather than liquidating them, however, it cannot be used to avoid taxes - you can only pay off your personal debt with after-tax income.
You also have to take into account the interest expense of that debt vs the potential of your investment
Stop Electing Millionaires. (Score:2)
The simple reason that the financial/tax laws are how they are nowadays, is that everyone in the Senate is a millionaire, or if they aren't, they will be soon.
There are so many ways to make money once you get elected, that it's 100% in their interest to pass laws that will protect their money.
Perhaps this person has never owned a business? (Score:3)
Re: (Score:2, Troll)
>The author seems extremely naive. Perhaps they are unaware of the hundreds of taxes, fees, and costly regulatory burdens the average business pays that are not income tax?"
+1
They have a narrative and that is all that matters.
What you won't find in their analysis of income tax is that the wealthy (top 1%) pay 40% of all the income tax in the country while using almost no services. Adjusted for services used, half of Americans pay no net taxes at all. But I know these facts won't be popular on Slashdot.
Re: Perhaps this person has never owned a business (Score:3)
Except that none of that is relevant.
Except maybe the paying 40% of the tax whilst holding 99% of the money.
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>"Except maybe the paying 40% of the tax whilst holding 99% of the money."
The 1% only take in 21% or something of income.
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>"This is the second time I've seen you post this in just this page, alone. And you talk about "narrative."
I am responding to others. I didn't write an article nor start any thread here.
Re: Perhaps this person has never owned a business (Score:2)
Forgive me if I'm wrong, but what do businesses have to do with it? Businesses are owned by rich and poor alike, it's wealth, not job title, that distinguishes them. At least, in most countries. If yours differs, feel free to say.
We tax earning not wealth (Score:4, Insightful)
There is one wealth we do tax, property taxes. How well does that work? Well since property taxes are used for local schools and local government spending it seems to actually perpetuate more inequality.
Re: We tax earning not wealth (Score:4, Insightful)
It is counterproductive to tax wealth
I know this is essentially the mantra, but... why, actually?
And I don't mean wealth of 1 or 2 houses and 5 cars, in the vicinity of 1..10 million. I mean excessively .ore than anyone would ever need in his life. Say, 100 mio and above. Why is it "counterproductive" to tax that? What's the justification to allo people to have and keep that much wealth? Because clearly "they earned it" doesn't pass the laugh test.
Re:We tax earning not wealth (Score:4, Informative)
We want to tax income.
We're doing that and it's not working.
Eventually the capital gains in properties and businesses must be realized and at that point they can be taxed.
Wrong. When you have billions in the bank, you can get a lot of stuff without actually buying it. You can buy entire companies with stock deals. You can get eternal credits that you pay back at your convenience (i.e. in a bad year when you have losses and can realize profits as income with tax breaks) and you have an army of lawyers finding loopholes for you to avoid that pesky "income" gate.
Good and bad (Score:3)
There are "good" and "bad" methods for tax deferral.
(Taxes cannot be completely avoided*, but can be deferred for a very long time).
The first one is investing 100% of your income. This is how you get very large and very successful companies. This is a good thing, because it is literally how the capitalism is supposed to thrive. You have lots of employees, build lots of products, and eventually pay lots of taxes and stock dividends. Every body is happy (eventually).
The second one is playing accounting games, shifting profits to offshore subsidiaries, "Hollywood accounting", where best selling movie of the day (Lord of the Rings) makes zero profit (and Tolkien estate very unhappy).
However we seem to have mixed these two categories. Take Elon Musk, like the guy, or not. However he is paying the highest ever tax bill by a single person this year. He also famously paid zero taxes in the past. Long term = it pays out really well. Short term = yes, sounds not so good. Also take IKEA, which is largest non-profit research organization for interior design. They also happen to license the IKEA logo from an another entity (pure coincidence they are managed by the same group). And they avoid paying billions in taxes. This is the bad one.
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Actually, the tax on capital gains can be completely avoided. Simply never sell those assets and, when you die, your estate does not have to pay capital gains taxes on the increase in value.
Re: Good and bad (Score:2)
It doesn't matter if person X pays the highest tax bill, it's not about your ranking, it's about how much you're investing in the country.
Of course, that would require the governments to do likewise.
It is not a complete shock that people pick governments that don't invest sensibly when they aspire to be rich and not invest sensibly.
4/17/2022! (Score:2)
2022's taxe due date was delayed by a couple days. ;)
Keno (Score:2)
Years ago I lived in a share house owned by an "unemployed" guy. He had a 2 hole practice golf course, swimming pool, sauna... it was a big party house. He played golf or went gambling on Keno. He was a mathematician and accountant, he had devised a scheme which always won, either a bit or a lot, but never lost. He didn't pay tax and had a low income health card. A really nice, down to earth guy.
Why is it.... (Score:5, Insightful)
that articles like this always focus on how much money the government takes in rather than how much they spend? Yes, billionaires are convenient targets and envy is an easily triggered emotion. But the fact of the matter is that people like Bezos and Musk's companies put more money into the federal pig trough than any of us will in an entire lifetime. How? These articles conveniently ignore things like payroll tax where they have to match the contribution of each employee. Real estate taxes on buildings their companies own. Sales taxes on equipment their companies buy. The list goes on.
Not to mention the value they return to shareholders of their respective companies. My 401K has grown enormously over the years due to the likes of Apple, Microsoft and Tesla. I am thankful that they are successful because I, in turn, became successful on the coattails of their company stock.
Why is it that we keep hearing about government revenue shortfalls? Why are we not talking about government spending? Our government has a spending problem not a revenue problem. Here is a list of federal government agencies: https://en.wikipedia.org/wiki/... [wikipedia.org]
Keep in mind this is only the federal government - it does not include state and local governments.
Re:Why is it.... (Score:5, Informative)
that articles like this always focus on how much money the government takes in rather than how much they spend? Yes, billionaires are convenient targets and envy is an easily triggered emotion.
It isn't emotion, it is pure math. The rich existed in 1950-1980 but the gap wasn't so preposterous. The system wasn't as rigged. There will always be inequality, that isn't the issue. The system isn't fair and isn't generating the the best results. Today's rich aren't working that much harder, they haven't "earned" that much more, the system is just rigged that much more heavily in their favor.
https://en.wikipedia.org/wiki/... [wikipedia.org]
Re: (Score:2)
OK...so what to do about it?
If the answer is confiscation through taxes we know how that is going to work out. The rich will figure out a way to get around it because the lobbyists they pay big money to have the politicians in their back pockets. The laws will be crafted in such a way that loopholes will exist that the rich can exploit but John and Jane Citizen can't. The middle class will take it in the shorts once again because the rich will wiggle out of it and the poor can't afford to pay.
The only way I
Re: Why is it.... (Score:2)
Ranking doesn't matter.
It's about who invests what in their country.
If nobody paid taxes, but a rich guy threw a quarter in once in a while, they'd rank top tax payer but they've still got a crap investment strategy.
Time for more down-modding... (Score:2)
That way, we're all in the same boat and we'll act like it instead of all the class fighting, scamming and back-room deals. Bonus: A reduction in wasted resources and a child could understand and calculate it.
Re: (Score:2)
Even if it isn't a flat tax, we could do away with a lot of deductions. No more loss carry-forward would be a huge step in the right direction.
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Now let's tax the minimum wage folks $10k. Considering that even if they found a 40 hr / wk job at $8 / hr, they make $16k per year. They're expected to live on $6k for the entire year? Flat taxes are regressive for people who aren't wealthy.
Re: Time for more down-modding... (Score:2)
Flat taxes don't benefit anyone and are the worst possible strategy.
Property tax can also be avoided (Score:2)
What trope! (Score:3)
Sorry, but the summary is really stupid. The tax "loopholes" are not really that... for a business, what is income-- gross income or net income? If you try to equate a business' income tax to an individual's tax, the individual has about ~30% of their income that is considered expenses rather than real income. For a business, they outline all actual expenses against their revenue (kind of like profit margin) to establish their tax base. It isn't a perfect system, but it isn't corrupt in and of itself. Also, things like depreciation actually increase taxes-- an expense is only deducted over its life rather than when incurred.
Now, wealthy people often have complicated ways of cheating the system like expense accounts that can cover their living expenses (which for a normal person would not be deductible), but that is a different issue.
For me, I've just broken down and not tried to be creative on my taxes anymore. My income tax was stupidly high this year because I sold stocks to pay down my mortgage. I could have planned better to avoid it, but the goal was to reduce risk which is a taxable event.
Americans filed on April 18 this year (Score:2)
Bwa ha! (Score:2)
Gee, I wonder how that could be?
I'd be happy to replace this system with a postcard and a single rate with no deductions. Who's with me? (crickets, crickets)
Re: (Score:2)
The feds collected $2 trillion in individual income tax revenue in 2021. Someone's paying it.
Not me; I'm part of the 47%.
Re: (Score:3)
Can you please tell me what this has to do with Slashdot / technology / etc.?
Some billionaires such as Bill Gates, Mark Zuckerberg, Elon Musk, and arguably Jeff Bezos, have technology-based companies which allowed them to gain their billions. Once one reaches a certain point of wealth accumulation it is necessary to find ways to limit or halt paying taxes so that wealth can accrue much faster.
For example, Musk does not pay income tax like us peons. His wealth comes from Tesla stock and options. Yes, he
Re: (Score:3)
For example, Musk does not pay income tax like us peons. His wealth comes from Tesla stock and options. Yes, he recently had to sell a few billion dollars worth of stock to meet an impending tax bill, but that's an anomaly.
Musk has to pay 54% to the government on stocks worth twenty billion. Considering his total lifetime income, this is not "an anomaly" -- an anomaly in his life was everything else besides this income-taxed stock compensation. Basically the overwhelming majority of all the money he ever saw in life would be taxed at those 53%.
Also, he would pay tax as a long term gain on that stock, not as if he was given those billions as a salary which means he paid a lower rate.
You couldn't be more wrong about that: [cnbc.com]
The options expire in August of next year. Yet in order to exercise them, Musk has to pay the income tax on the gain. Since the options are taxed as an employee benefit or compensation, they will be taxed at top ordinary-income levels, or 37% plus the 3.8% net investment tax. He will also have to pay the 13.3% top tax rate in California since the options were granted and mostly earned while he was a California tax resident.
It's not long term gain.
Re: (Score:2)
While it's not directly related to news for nerds, it is because it illustrates how Bezos could get a tax credit despite being worth billions. As a side note, my salary is above the limit for getting covid relief payments, but because of how I structured my contributions to my organization's retirement plan, I was able to get those checks. Does that make me as bad as Bezos?
In reality, your move and every other move does nothing more than highlight how bad the tax code is, and why. One might argue you're no more ethical than Bezos with that move, but we could go on all day if you drag Morality into the room with Greed. Mandatory Ethics Training has practically become an oxymoron in 21st Century Capitalism.
The same corruption that got it to this point, is the same corruption that keeps it there. It will change, when the USD ceases to be something of value.
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They're right in a way, we do need to broaden the tax base but you have to use that increase in revenue to fund strong public services and benefits. Healthcare, childcare would help a whole lot in the near future and probably some form of UBI or negative income tax in the future is going to be necessary. To fund those things long term you need a wide tax base. When Republicans talk about how the lower end pays more taxes in the Nordics they always happen to leave out that the money goes towards programs t
Re: Not to worry (Score:5, Insightful)
Way to pick a terrible example, the system that can deliver a letter to anywhere in the entire United States in around 3 days for 0.50c and if not for a stupid pension prefunding bill that no other agency or company has to follow would likely still be turning a decent profit to boot. This is also the agency that tends to trend highest in approval ratings in service and trust.
I am willing to voice and defend my positions, are you or do you just want to complain?
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The cannot even run the postal system properly.
Let's see how efficiently your business operates when it's actively sabotaged by its board of directors for partisan political gain. Fuck Trump and DeJoy: may they both rot in prison.
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I'm not going to click the link, but are you referring to the proposal by a single Republican Senator in which he wants every American paying at least a minimal income tax? It's not part of any Republican platform. Biden was awarded three Pinocchios for making the claim by the very left leaning Washington Post. The only reason it did not get four was because it was proposed by one Republican Senator.
Identity politics (Score:2, Interesting)
The Democrats have come to be seen as the campaigners on all these life issues rather than keeping a laser focus on the economic needs of the marginalised. It's far easier to construct a political powerbase on the basis of identity, with the result that those who do it well gain and keep power indefinitely.
A good example of this is the frozen nature of Scottish politics at the moment where the Scottish National Party has a lock on power despite a dismal record in government. The African National Congress in
Re: Not to worry (Score:2)
If you don't understand a comment, ask.
Re: (Score:2)
Socialism is just more rich people, but claiming to be "the people".
If you want a government doing something against the rich, you need the goverment protecting the small business.
Re: Down with rich people (Score:2)
Tax has nothing to do with socialism. Being wealthy has nothing to do with socialism. In fact, virtually nothing has to do with socialism because socialism is an umbrella term covering over 30 different, utterly unrelated, core philosophies and hundreds - if not thousands - of blends. There is simply nothing in common with them all.
Re: (Score:2, Interesting)
If the government spent 4T in 2022, we tax the 18T in spending at
Re:Down with rich people (Score:4, Insightful)
Cunsumption tax is inherently regressive since the 22% presents a much larger share of the money for the poor and middle class in terms of utility of that money. If I make $30k that potential $6600 has a lot more value to me than the $66000 to someone making $300k
The Fairtax plan specifically accounts for this with it's prebate program which get's it more progressive so it's worth mentioning in any consumption tax plan since that's always been the one that gets the most attenion, but we are about as likely to switch to that as we are to switching to VAT which would also be an improvement.
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It does not even out, they still spend a higher proportion on everything else. Consumption tends to fall as a percentage of income as income rises.
This is pretty much an assumed aspet of all consumption taxes which is why systems like VAT and the Fairtax have some process to deal with it. It's not good or bad it's just reality and the system has to account for it.
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"Free money" ala the Fair Tax "prebate" just offsets the tax they're paying on essentials. It doesn't encourage inflation unless it requires the printing of more money.
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Someone making 33k/yr spends much more of their income on rent (which does not have a consumption tax) than someone who makes $330k/yr. That levels it out. Consumption is higher among the wealthy.
You're joking, right? People living at or near the poverty line tend to spend 100% of their after-tax income on some combination of consumption and rent/utilities/insurance. By the time you get into the territory where people are making 8x the poverty line, they're typically spending under a quarter of their income. So for an 8x increase in income, you have a 2x increase in spending. The rest goes into rent, utilities, 401k, stock grants, other investment accounts, charitable giving, and other things th
Re: (Score:3)
Someone making 33k/yr spends much more of their income on rent (which does not have a consumption tax) than someone who makes $330k/yr. That levels it out. Consumption is higher among the wealthy.
You're joking, right? People living at or near the poverty line tend to spend 100% of their after-tax income on some combination of consumption and rent/utilities/insurance. By the time you get into the territory where people are making 8x the poverty line, they're typically spending under a quarter of their income. So for an 8x increase in income, you have a 2x increase in spending. The rest goes into rent, utilities, 401k, stock grants, other investment accounts, charitable giving, and other things that don't qualify as consumption, typically.
Wow.
Such a target-rich environment.
1) People living at or near the poverty line pay NO INCOME TAXES, so there is no concept of "after-tax income"
2) The OP excluded rent from a consumption tax, presumably other "living expenses" would also be exempt (utilities, food, etc). The "at or near the poverty level" individual would have very little money left over to purchase things with "consumption taxes", since, as you note, nearly all their money goes toward living (hence exempt) expenses.
3) I know a wide range
Re: (Score:3)
Someone making 33k/yr spends much more of their income on rent (which does not have a consumption tax) than someone who makes $330k/yr. That levels it out. Consumption is higher among the wealthy.
You're joking, right? People living at or near the poverty line tend to spend 100% of their after-tax income on some combination of consumption and rent/utilities/insurance. By the time you get into the territory where people are making 8x the poverty line, they're typically spending under a quarter of their income. So for an 8x increase in income, you have a 2x increase in spending. The rest goes into rent, utilities, 401k, stock grants, other investment accounts, charitable giving, and other things that don't qualify as consumption, typically.
Wow.
Such a target-rich environment.
1) People living at or near the poverty line pay NO INCOME TAXES, so there is no concept of "after-tax income"
Not true. In areas with a high cost of living, the poverty line can be as high as $40,000 per year, and the threshold for paying income taxes is less than half that, I think, even after factoring in the EITC. At $40k per year, you'll pay around $6k in total taxes (income tax + Medicare + Social Security). That's not zero.
2) The OP excluded rent from a consumption tax, presumably other "living expenses" would also be exempt (utilities, food, etc).
Yes, and I assumed that.
The "at or near the poverty level" individual would have very little money left over to purchase things with "consumption taxes", since, as you note, nearly all their money goes toward living (hence exempt) expenses.
What magical world do you live in where people (no matter how wealthy) spend huge amounts of money on random crap? The wealthy don't get wealthy by spending. Th
Re: Down with rich people (Score:2)
If their $33k income is from wages, they are still paying social security and Medicare taxes on that.
There are all kinds of consumption taxes, such as sales taxes, utility taxes, car registration, property tax, etc., many of which someone with low income would still end up paying, and could be represent a significant chunk of their income.
Lying with bad math (Score:3, Informative)
What happens to the lowest portion of the income earners under your scheme? I'm referring to the people making $12k/yr or less who presently pay no income taxes, up to whatever income level reaches a break-even point with our current income tax brackets.
The inherent problems with every flat tax scheme are that they make the lowest income earners pay the proportionally largest amount of their income as taxes, and they ignore the fact that the wealthy can afford to pay higher taxes. It's not unreasonable to
Re: (Score:3)
The FairTax [fairtax.org] deals with this by issuing a "prebate" - an equal cash payment at the start of every year to each individual. Think of it as universal basic income if you like, or as a way to make the first $X of spending be tax-free.
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Oh goody, more donut holes to create incentives to stay poor and beat down the middle class.
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Nahh. I hate the idea of a UBI, but am OK with the format of the Fiartax Prebate:
THE FAIRTAX PREBATE
The Prebate is designed to ensure that no American pays federal taxes on spending up to the poverty level. All valid Social Security cardholders who are legal U.S. residents receive a monthly Prebate payment equivalent to the FAIRtax paid on essential goods and services, as measured by the Dept.
UBI doesn't math. A prebate can. If the govt threw a little technology at the problem and devised a system to exa
Re: (Score:2)
The FairTax [fairtax.org] deals with this by issuing a "prebate" - an equal cash payment at the start of every year to each individual. Think of it as universal basic income if you like, or as a way to make the first $X of spending be tax-free.
I'd be happier with a "postbate" - you have to spend the money before you can claim it back.
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Your entire post is so absurdly untrue I barely know where to start.
I suppose the best place is to illustrate that is via minimum wage statistics https://www.investopedia.com/a... [investopedia.com]. While increases in minimum wage do sometimes spur inflation they just as often do not. In other words, government benefits to not inevitably lead to inflation.
Re: Lying with bad math (Score:2)
People making $12k/year from wages are still paying social security and Medicare taxes on that income.
Re: (Score:3)
Your plan guarantees the government gets whatever it spends. That is not much of an incentive to control costs. They already have enough of a "we gotta spend it or we're going to lose it" mentality. This would reinforce this thinking and lead to more waste.
A better idea is to give them a fixed percentage, and force them to live within these means, just like everyone else.
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>"Your plan guarantees the government gets whatever it spends. That is not much of an incentive to control costs"
I think his concept is that when EVERYONE has to pay and RIGHT NOW, and in a VERY visible way for what the government spends, it might greatly affect who gets voted into office. It is not such a crazy concept.
Just imagine if those TRILLIONS of dollars the Federal government loves to spend (not even counting the States) gets on your tax rate.
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I'm not sure about the idea overall, but it would be a benefit if it gets the politicians talking about "cutting spending" rather than "cutting taxes".
I am always suspicious of candidates that talk about "cutting taxes" without actually addressing which spending is being cut to get there, and think that "tax and spend" is at least marginally more honest than "cut taxes and spend anyways".
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Getting rid of the IRS would save a lot of money, too.
Re: (Score:2, Informative)
>"How do you define income genius? 22% on what exactly? If their stocks tripled in value then what? "
I can't speak for him. But stock value is not income. It also isn't capital gains. It is "unrealized gain" that means precisely nothing unless the stock is sold. Same thing with unrealized loss. You shouldn't have to pay taxes on (or be able to off) anything that isn't realized yet.
Oh, and the money used to BUY the stocks likely was income, so it was already taxed.
>"You think we have trouble doing
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Currently, the 10% of top earners pay 90% of taxes. What's your definition of the word "fair"?
What percentage of the income and wealth do those top 10% of earners have?
Re: (Score:3, Insightful)
You think taxes aren't needed? Get the fuck off the roads that I paid for. Don't use anything that ever went on any kind of vehicle. Taxes pay for roads at all governmental levels. Railroad administration is up to the government. So are airplanes via the FAA. The FCC makes sure that communications work, the FDA keeps you from being poisoned, local and state police keep you from being robbed and/or killed, the federally regulated banks means you
Re: Wrong website (Score:2)
I was reading it before accounts existed and, yes, politics has been in Slashdot.
Re: Feel Better EditorDavid? (Score:2)
Why would anyone assume that making the rich pay for the services they use constitutes jealousy? Seems... Odd.