please explain upper-class dodging taxes

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Could someone please explain to me exactly how businesses and upper-class individuals are paying less taxes than everyone else? As far as I know corporate federal tax tops out at somewhere around 36% not counting state taxes. (please, please give me references)

If the only way they are dodging these taxes are by hiding things off-shore, could someone please cite me reliable sources that give a good percentage of individuals and organizations that practice this?

I've been hearing that the rich are not paying up, and that we need to increase the taxes from the upper-class and businesses, but I am not actually seing real information about how this is being done.

rob.traynere.iii's picture
rob.traynere.iii
Joined:
May. 6, 2010 7:48 pm

Comments

Rob what you want to do is look at sources that discuss effective tax rates. I am sure you have the skills to find this yourself. The issue is what you count when calculating this number. The rich typically pay less effective rates for various reasons:

1. They do hide money off shore.

2. Sales taxes are regressive in that the more income you make the less of a percentage it makes up of your income. There are some artciles out there about "habits of the rich" that suggest they only spend about 18-20% of their income on goods.

3. Deductions targeted directly at their lifestyle and habits. This is much larger than you might think.

4. Often most of their income comes from capital gains which has a much lower rate than income taxes.

5. They often incorporate themselves of their families. The corporate family. This is separate from their actual businesses. Perfectly legal and it allows them to pay the lower corporate rates and deduct a ton of expenses. Theoretically the poor could do this as well but it would be a much harder sell and they certainly can't afford the lawyer needed to draw that up.

6. If they don't incorporate themselves they can hide a lot of money and personal expenses inside their business. Want to go to Cancun? Make sure you talk to someone about business while you're there. Now you can deduct the cost of the travel as a business expense and it is legal for you to have your company pay for your vacation.

Are you getting it yet? This really is a lot more obvious than you are making it out to be.

ah2
Joined:
Dec. 13, 2010 10:00 pm

Family corporation: http://www.ehow.com/how_6021459_start-corporation-transfer-parent_s-assets.html

http://www.reunionsmag.com/gettingstarted/governance-incorporating.html this one also explains how the rich typically evade responsibility for their criminal activity by using their corporation to protect their personal liability.

some more on this: http://www.incorp.com/why-incorporate-information.aspx

http://en.wikipedia.org/wiki/Family_Living_Partnership

offshore banking: http://www.economist.com/node/8695161

http://www.guardian.co.uk/business/2005/mar/27/politics.economicpolicy

http://www.theatlanticwire.com/business/2011/09/rich-cheats-handed-over-27-billion-offshore-tax-havens/42549/

Deductions: http://www.freerepublic.com/focus/f-news/2781543/posts

so most of that is putting wealth into real estate - multiple residents and mansions and what not. Keep in mind that "donations" probably also include donations to PACs which keep this system in place.

capital gains: http://www.alternet.org/economy/152382/the_rich_get_tax_breaks_for_destroying_jobs_how_the_capital_gains_tax_helps_the_wealthy_and_hurts_the_rest_of_us/?page=entire

http://www.ourfuture.org/blog-entry/2011093712/why-are-taxes-lower-wealthiest

Also, I forgot to mention that the payroll tax for SS stops at that magic $106,500 (something like that). Which means that this is also technically a regressive tax with two teirs. The more money you make past that magic number, the less of a percentage that makes up of your effective tax burden.

Are you getting it yet?

ah2
Joined:
Dec. 13, 2010 10:00 pm

It is in the word-smything.

First, no one is "dodging" taxes: it is all perfectly legal. Our current tax policy is very low tax rates.

Secondly, no one is claiming that "businesses and upper-class individuals are paying less taxes than everyone else." It is the effective rate of tax.

chilidog
Joined:
Jul. 31, 2007 4:01 pm

That link to the Family Corporation is pretty meaningless. I would like more information on this, as I find it highly dubious that "it allows them to pay the lower corporate rates and deduct a ton of expenses."

You can't deduct a week vacation in Cancun because "you talk to someone about business while you're there." There are overly generous provisions in the tax code for things like this, but they're not THAT generous.

chilidog
Joined:
Jul. 31, 2007 4:01 pm
Quote chilidog:

That link to the Family Corporation is pretty meaningless. I would like more information on this, as I find it highly dubious that "it allows them to pay the lower corporate rates and deduct a ton of expenses."

You can't deduct a week vacation in Cancun because "you talk to someone about business while you're there." There are overly generous provisions in the tax code for things like this, but they're not THAT generous.

Indeed they are. If you go to a location and do business and happen to stay an extra week for a vacation, you can still deduct the travel expenses.

Look it up yourself. Talk to a lawyer. Saying the source is dubious without offering up refuting information is even more meaningless. It exists. Rich people do it.

ah2
Joined:
Dec. 13, 2010 10:00 pm

On what companies pay, check USuncut, the list of companies who pay nothing in US income taxes are Verizon the nation's largest cell phone co, Bank of America, GE, Chevron, etc.
And they aren't tax dodgers, these corporations bribe congress... Errr, provide PACs money to lobby congress to get tax code exemptions. Typically the return is about 90% of the bribes, and that extra return allows them an advantage over other suckers who pay taxes.

Phaedrus76's picture
Phaedrus76
Joined:
Sep. 14, 2010 8:21 pm

i like how the response from ah2 was to berate me and not actually explain anything or show any actual proof.

the burdern of proof is not on me. it is on the person making the claim.

rob.traynere.iii's picture
rob.traynere.iii
Joined:
May. 6, 2010 7:48 pm

I provided proof - 4 different sources in fact. You provided an ad hominem leveled at my sources. The ball is in your court. Ad hominems are a logical fallacy not a legitimate argument. Buck up.

ah2
Joined:
Dec. 13, 2010 10:00 pm

you provided a little more than 4, and a bunch of claims with very few actual numbers to back them up.

i'm done talking to you, though. thanks for doing nothing but discouraging me and turning me away from these forums! maybe next time don't be such a jack-ass? =oD

<3

rob.traynere.iii's picture
rob.traynere.iii
Joined:
May. 6, 2010 7:48 pm

Good day. Don't let the door hit you.

The simple fact of the matter is, this is an online forum. I gave you information using the limited sources readily available to me in a brief websearch and with online sources. If you want "legit" sources, go talk to a lawyer or an accountant, buy a book, or take the time yourself to dig deeper online. It is not our responsibility to hold your hand through that. Don't come in here asking for help and then complaining when people can't magically produce everything you want. Seriously... grow up.

ah2
Joined:
Dec. 13, 2010 10:00 pm
Quote rob.traynere.iii:

Could someone please explain to me exactly how businesses and upper-class individuals are paying less taxes than everyone else? As far as I know corporate federal tax tops out at somewhere around 36% not counting state taxes. (please, please give me references)

If the only way they are dodging these taxes are by hiding things off-shore, could someone please cite me reliable sources that give a good percentage of individuals and organizations that practice this?

I've been hearing that the rich are not paying up, and that we need to increase the taxes from the upper-class and businesses, but I am not actually seing real information about how this is being done.

Perhaps someone at one of these 10 corporations can help you:

http://blogs.suntimes.com/sweet/2011/03/ten_giant_us_companies_avoidin.html

As someone said earlier, semantics would allow you to rationalize that these corporations are not "dodging" anything. What they are doing is perfectly legal, but that doesn't make it right.

A 5th grader would be able to connect the dots from AH2's list of how and my list of who. Only a fool could not acknowledge that this is happening and only a crook could say it's not wrong.

If you were hoping to just post your ideological pablum in the form of a rhetorical question without any intelligent responses, this forum is not the place you thought it was. Good luck peddling your crap somewhere else.

Laborisgood's picture
Laborisgood
Joined:
Jul. 31, 2007 4:01 pm

The upper income earners do not pay a lower income tax rate AP did a study of IRS data that showed people making over a million pay a 29% tax rate They showed the top 10% pay 70% of tax, more than the 49% of income they earn.

Sobieski's picture
Sobieski
Joined:
Jul. 6, 2011 2:19 pm
Quote Sobieski:

The upper income earners do not pay a lower income tax rate AP did a study of IRS data that showed people making over a million pay a 29% tax rate They showed the top 10% pay 70% of tax, more than the 49% of income they earn.

Again, this all depends on what you count and what you don't. What did they include as income or more importantly, what DIDN'T they include as income. What taxes and fees did they include and not. All this matters. You could have a different group come in and do a similar study and count different stuff and come up with a completely different number. This is underscored by the information provided above regarding the ability for the rich and corporations to hide money off shore. That money isn't considered "income" in some of these studies so it inflates the effective tax rate in the findings.

Example: On the Ed Show last week (Friday I think), he had a Congress Person on talking about a bill they were sponsoring that would make it so companies could NO LONGER continue to defer payment of taxes for income earned overseas. The deal is now, companies can defer tax payments on profits from overseas sales as long as they simply don't let the money enter the U.S. What sense does that make? We are incentivizing them to keep money out of the country and our GDP artificially low. And it is things like this where companies can claim lower profits or income that sometimes does not get tallied in a study like the one you speak of. But the money is still there... They did earn it... We just aren't counting it...

ah2
Joined:
Dec. 13, 2010 10:00 pm

It's IRS data, and we're takling about individual income tax rates, not corporate tax rates.

The rich do not pay a lower tax rate than their secretaries.

Buffet is just misdirecting you from the billion he is fighting the IRS over.

Sobieski's picture
Sobieski
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Jul. 6, 2011 2:19 pm
Quote Sobieski:

It's IRS data, and we're takling about individual income tax rates, not corporate tax rates.

The rich do not pay a lower tax rate than their secretaries.

Buffet is just misdirecting you from the billion he is fighting the IRS over.

Exactly my point. If it is IRS data, then it is not counting all the income they have hidden from the IRS. This is really not that difficult to understand...

ah2
Joined:
Dec. 13, 2010 10:00 pm

http://www.wweek.com/portland/article-17350-9_things_the_rich_dont_want_you_to_know_about_taxes.html

Here is how you pay no tax

Many of the very richest pay no current income taxes at all.

John Paulson, the most successful hedge-fund manager of all, bet against the mortgage market one year and then bet with Glenn Beck in the gold market the next. Paulson made himself $9 billion in fees in just two years. His current tax bill on that $9 billion? Zero.

Congress lets hedge-fund managers earn all they can now and pay their taxes years from now.

In 2007, Congress debated whether hedge-fund managers should pay the top tax rate that applies to wages, bonuses and other compensation for their labors, which is 35 percent. That tax rate starts at about $300,000 of taxable income—not even pocket change to Paulson, but almost 12 years of gross pay to the median-wage worker.

The Republicans and a key Democrat, Sen. Charles Schumer of New York, fought to keep the tax rate on hedge-fund managers at 15 percent, arguing that the profits from hedge funds should be considered capital gains, not ordinary income, which got a lot of attention in the news.

What the news media missed is that hedge-fund managers don’t even pay 15 percent. At least, not currently. So long as they leave their money, known as “carried interest,” in the hedge fund, their taxes are deferred. They only pay taxes when they cash out, which could be decades from now for younger managers. How do these hedge-fund managers get money in the meantime? By borrowing against the carried interest, often at absurdly low rates—currently about 2 percent.

Lots of other people live tax-free, too. I have Donald Trump’s tax records for four years early in his career. He paid no taxes for two of those years. Big real-estate investors enjoy tax-free living under a 1993 law President Clinton signed. It lets “professional” real-estate investors use paper losses like depreciation on their buildings against any cash income, even if they end up with negative incomes like Trump.

Frank and Jamie McCourt, who own the Los Angeles Dodgers, have not paid any income taxes since at least 2004, their divorce case revealed. Yet they spent $45 million one year alone. How? They just borrowed against Dodger ticket revenue and other assets. To the IRS, they look like paupers.

In Wisconsin, Terrence Wall, who unsuccessfully sought the Republican nomination for U.S. Senate in 2010, paid no income taxes on as much as $14 million of recent income, his disclosure forms showed. Asked about his living tax-free while working people pay taxes, he had a simple response: Everyone should pay less.

Credits: WW CHART — SOURCE: AUTHOR CALCULATIONS FROM IRS

douglaslee's picture
douglaslee
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Jul. 31, 2007 4:01 pm

That AP IRS study took all taxpayers of a group and their income, and the total amount of tax that group paid, divided the two numbers and came up with a percentage. This does not address the issue that some very wealthy high income people, like Mr Buffett, pay very little or no federal income tax.

Phaedrus76's picture
Phaedrus76
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Sep. 14, 2010 8:21 pm

There is more money hidden from the IRS than IRS will or can go after, due to its own lack of recognition of anything more than 10 years old, failure to recognize 150 year old lawyer tricks paired with insider white collar criminals, and ignorance of where their own records are filed, that in itself a trick devised by lawyers.

Here is a list of some hidden money pools- all the unaccounted for Bechtel and Halliburton war expenses, the Van Sweringen Brothers fortune, drug and racketeering money, ENRON, BCCI, Credit Mobilier, double-issued securities printed by the Treasury on at least one occasion, assets of The Flagler System, and the Confederate Treasury.

The rich are not rich from evading taxes- they have become exponentially richer as a class by having the advantage of access to concealed funds. Like having money under the Monopoly Board, it is the secret advantage that insures we will never catch up to them because we always owe them. They don't have to account for anything made on what's off IRS books. So who cares about taxes, really? Mobsters and racketeers pay taxes. Only a really stupid rich person evades taxes. An organized rich person buys securities to cover their taxes and doesn't have to do without a single mansion.

But I think it is very difficult for undevious citizens to understand the concept of hidden and illicit money, and how all the money that is generated from it has to be hidden from IRS as well. Yet eventually at the end of the spin cycle it has to be laundered to be useful.

What occurred in the mortgage crisis was strings of electronic assignments to mortgage and finance companies which come and go like fiends in the night. They were shells through which many of "the rich" received deeds, financing, and satisfaction of mortgages on all sorts of property.

No one is better equipped to hide money than the Federal Reserve, within which exists a plundering organization carrying out the Queen's wishes through our unregulated, unmonitored Central Bank.

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leighmf
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