How US Billionaires Can Avoid Paying Income Taxes

Posted by EditorDavid

on Saturday April 23, 2022 @06:49PM from the rich-stay-richer dept.

• • • Re:

      No, this is why we should have a fair tax scheme. A consumption tax (like a federal sales tax) would be the best solution overall. What's better, we would do away with the IRS (since we and businesses wouldn't have income taxes to file), and we could do away with the entire tax accounting system. We just collect sales tax and pay a portion of it to the federal government. The rate could also be flexible, based on the prior year's spending.
      
      If the government spent 4T in 2022, we tax the 18T in spending at

      • Re:

        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

        • Re: Down with rich people

          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.

          • Re:

            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.

            • Re:

              If you give "free money" money to everyone, you just create inflation. If you are means testing, you might as well just tax income (and we're right back where we started).

              Flat taxes are for people who are bad at math, and for rich people who think they'll pull the wool over the eyes of people who are bad at math.

              • Re:

                "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.

      • Lying with bad math

        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:

          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.

          • Re:

            Oh goody, more donut holes to create incentives to stay poor and beat down the middle class.

            • Re:

              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:

            Any time you give people "free money", inflation inevitably results. Bought groceries lately? Heck, the money the government handed out as Covid stimulus payments was means tested; inflation would be even worse if everyone had gotten it.

            Call it UBI or something else, the only people who ever benefit under such a scheme are those who don't work at all. Free money still has some buying power, even if the consumer market has adjusted itself to gobble the money up as quickly as it is doled out.

            • Re:

              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:

        How do you define income genius? 22% on what exactly? If their stocks tripled in value then what? You think we have trouble doing basic arithmetic?

        • Re:

          >"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

      • Re:

        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.

        • Re: Down with rich people

          Not arguing in favor with whatever hairbrained scheme the grandparent was pitching, just wanted to point this out: The government will always 'get what it spends', if they really want it, one way or the next. Right up until the point the people get sick of it and erect guillotines, that is.
          When you have the ability to fiat more money onto the books with no oversight, you dilute the existing money supply, making everyone's cash worth less, not unlike just skimming tax off the top. Inflation ensues. Therefore

        • Re:

          >"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.

  • Criminal

    Personally, I think income tax is criminal and I applaud anyone's ability to avoid it.

    I wish I were successful in doing so.

    • Re:

      You're a parasite. You have the morality of a case of syphilis.

      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:

    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.

• ›

  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...

  • 1 hidden comment

  • 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.

    • 1 hidden comment

    • Re:

      Oh? There's no use for a truck other than disallowing the expense?

      • Re:

        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.

        • Re:

          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?

      • Re:

        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:

        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.

    • 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:

        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.

        • Re:

          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.

    • 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.

  • Re:

    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.

    • Re:

      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.

      • Re:

        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]

• • • Re:

      I'd be content just to vote the vast majority of them out of office. But we've got way too many poor white rural voters who think it's gays, non-fundamentalist, uppity-women, etc, who are ruining their lives, instead of parasitic televangelist grifters who really are.

      • 1 hidden comment

      • Identity politics

        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:

        Opinion polls for the upcoming midterms predict the exact opposite.

        Perhaps the Democratic Party should stop treating voters with contempt and focus on economic issues instead of waging losing battles in the culture war. Every time a Democratic politician talks about CRT, they lose another thousand votes.

  • Re:

    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

    • 1 hidden comment

    • • 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?

• ... 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?

  • 3 hidden comments

  • Re:

    It's also not an accident that the US Internal Revenue Service [youtu.be] is intentionally being gutted.

  • Re:

    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.

    • Re:

      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

    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]

  • Re:

    >"... that tax law is written in EXACTLY the perfect way so as to make it easy for wealthy to not pay taxes. "

    And, yet, 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 income taxes at all. But I know these facts won't be popular on Slashdot.

    https://www.heritage.org/taxes... [heritage.org]

• • Re:

    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:

      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%.

      You couldn't be more wrong about that: [cnbc.com]

      It's not long term gain.

• • Re:

    The feds collected $2 trillion in individual income tax revenue in 2021. Someone's paying it.
    Not me; I'm part of the 47%.

• This has nothing to do with âoenews for nerdsâ.
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  • • Re: Wrong website

      Iâ(TM)ve been reading slashdot since 1999. Personally worked with one of the early moderators during a summer internship at NRL. Just never felt the need to comment with uid until recently. Slashdot used to be better than this. Politics have ruined it.
      • 1 hidden comment

• 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.

  • 1 hidden comment

• • Re:

    You’re damn right I’m jealous of someone who makes my yearly salary in one day and pays less taxes than me.

• 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.

• 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.

• 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? Perhaps they are unaware that, for most business owners, income taxes are the least of their worries?

  • Re:

    >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?"

    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.

• It is counterproductive to tax wealth and a distraction to actual tax reform. We want to tax income. Eventually the capital gains in properties and businesses must be realized and at that point they can be taxed. Countries exist for a long time, they can wait till someone dies to collect the capital gains on an estate. Also most of the western world does not tax inheritance or gifts. We tax capital gains only when they are realized. Imagine if the tax man collected gains at the end of the year and then one year the stock market crashes, would the government then owe people who had lost the capital that they had been previously taxed on?
  
  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.

• 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,

• 2022's taxe due date was delayed by a couple days.;)

• 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.

• they take loans out on their assets, because they're well connected those loans are at or below market rates, then they live off the loans instead of earning money. Every one of them dies in debt, but not like how you and me die in debt. They get to give their wealthy to their offspring instead of to the mega corps they own money to.

• 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.

  • by t.reagan ( 7420066 ) on Saturday April 23, 2022 @10:57PM (#62473052)

    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:

      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:

    >"that articles like this always focus on how much money the government takes in rather than how much they spend?"

    Because they don't think that spending and printing more debt matters. Welcome to "modern monetary theory." So they just print more and spend more. Meanwhile, this insane inflation which is robbing everyone blind is a direct result now. The results later might be even worse... But who cares, right? We will be dead and it will be some other generation's problem.

• A flat income tax rate for all, with no more deductions/credits, ever.
  
  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:

    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.

• If you can afford to buy estates of more than one acre, most states have provisions for creating private wildlife sanctuaries, etc that often drop property taxes to 0. Trump uses provisions like this for parts of his golf courses he can't develop for one reason or another. The more land you can buy, the less likely you are to have to pay taxes on the part that is not sitting under improvements. Even farmers under production-based property taxation pay more in property tax than many wealthy people do on t

• 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.