Billionaires have avoided taxation by paying themselves very low salaries while amassing fortunes

[trouble13]

I am 101% ignorant about income taxes.

But the Dems do seem right when they call for tax reform.

It's fine to be rich -- even super rich -- but with massive wealth, surely there is a social responsibility that comes along with it.

For example, when I see TV commercials begging ordinary people to donate to worthy causes (for example, medical procedures to help deformed children in developing nations), I immediately think: Some billionaires in many countries could instantly pick up the tab without any sweat. Chump change for them.

Why don't they?

Why doesn't Congress live within their means? We would not be having these arguments if Congress controlled their spending. They already collect $2 T in federal taxes alone. At what point do people tell the government that they collect enough money to run our government?

 

[ttwtt78640]

If that bothers you support replacing our income tax system with a consumption tax.

These folks consume (take control of) assets on a scale that few can even imagine. The trick is to make it appear that some fictional accounting entity (corporation) is the real owner, thus “they” (the corporate entity) are taxed under an entirely different part of the federal income tax code.

 

[Jack2aTee]

Borrowed money and unrealized gains are not income. Should you be taxed on your mortgage loan amount and your home’s annual appreciation?

I don't think it's the same thing. The same thing would be taking out an equity loan on your house. That would be the same as Bezos borrowing on his stocks. But it's still a mistake that the tax code lets Bezos borrow billions of dollars on his stock equity to finance his lavish lifestyle like buying a 100 million dollar mansion and jetting into space. Bezos has a team of the finest lawyers and accountants in the country to help him game the tax code. Does the average schmuck have that kind of resources? The whole system is gamed to help the rich avoid paying a dime in taxes while the poor and middle class carry the water for this country's reckless spending. It's simply not fair.

 

[ttwtt78640]

I don't think it's the same thing. The same thing would be taking out an equity loan on your house. That would be the same as Bezos borrowing on his stocks. But it's still a mistake that the tax code lets Bezos borrow billions of dollars on his stock equity to finance his lavish lifestyle like buying a 100 million dollar mansion and jetting into space. Bezos has a team of the finest lawyers and accountants in the country to help him game the tax code. Does the average schmuck have that kind of resources? The whole system is gamed to help the rich avoid paying a dime in taxes while the poor and middle class carry the water for this country's reckless spending. It's simply not fair.

A mortgage is an equity (aka secured) loan on the (appraised) value of “your” real estate. Trying to invent a “wealth tax” based on unrealized (annual) capital gains by pretending that such amounts are income is a trick (the 16A does not allow for non-apportioned federal taxation of any wealth). Initially it will be applicable to only super rich individuals, then easily made to apply to ever more folks (possibly business assets as well) as the congress desires to raise federal “income” tax revenue rises.

 

[Jack2aTee]

A mortgage is an equity (aka secured) loan on the (appraised) value of “your” real estate. Trying to invent a “wealth tax” based on unrealized (annual) capital gains by pretending that such amounts are income is a trick (the 16A does not allow for non-apportioned federal taxation of any wealth). Initially it will be applicable to only super rich individuals, then easily made to apply to ever more folks (possibly business assets as well) as the congress desires to raise federal “income” tax revenue rises.

I don't see a mortgage as an equity. I see it as a debt.

 

[ttwtt78640]

I don't see a mortgage as an equity. I see it as a debt.

Yep, as is any loan - precisely why borrowed funds are not income.

 

[trouble13]

I don't think it's the same thing. The same thing would be taking out an equity loan on your house. That would be the same as Bezos borrowing on his stocks. But it's still a mistake that the tax code lets Bezos borrow billions of dollars on his stock equity to finance his lavish lifestyle like buying a 100 million dollar mansion and jetting into space. Bezos has a team of the finest lawyers and accountants in the country to help him game the tax code. Does the average schmuck have that kind of resources? The whole system is gamed to help the rich avoid paying a dime in taxes while the poor and middle class carry the water for this country's reckless spending. It's simply not fair.

That's not true. The majority of taxes collected are from the rich. They are footing the bulk of the burden that our government places on us.

 

[Roadvirus]

How do billionaires avoid taxes?


Billionaires have avoided taxation by paying themselves very low salaries while amassing fortunes in stocks and other assets. They then borrow off those assets to finance their lifestyles, rather than selling the assets and paying capital gains taxes.

Oct 30, 2021

So what? As long as it's not illegal...

 

[bluesmoke]

Income generally has to be recognized as income at some point, including equity compensation. There are ways to defer recognizing it but it generally has to be recognized at some point. And borrowing against one's other assets still requires coming up with the funds later to pay off the principal loan. Where will those funds come from, and how will that not require recognizing some income?

I'm not saying all the rules are fair and good, but they're not necessarily quite as unfair and bad as some people seem to want to make it sound.

Except for the fact of an unfair US tax code that favors the rich and large corps over those at lower income levels to the point of a widening wealth gap that is among the worst of developed nations.

 

[bave]

Except for the fact of an unfair US tax code that favors the rich and large corps over those at lower income levels to the point of a widening wealth gap that is among the worst of developed nations.

The US has the most progressive tax code in the world. That is the precise opposite of "favors the rich and large corporations".

Basic facts.

 

[Neomalthusian]

Except for the fact of an unfair US tax code that favors the rich and large corps over those at lower income levels to the point of a widening wealth gap that is among the worst of developed nations.

How “fair” or “unfair” is it, really? On a scale from 0 to 100, where 0 is absolutely 0% fair, and 100 is absolutely 100% fair, what is our tax code?

 

[ttwtt78640]

Except for the fact of an unfair US tax code that favors the rich and large corps over those at lower income levels to the point of a widening wealth gap that is among the worst of developed nations.

That has much more to do with the FIT code’s complexity - dealing mostly with how and upon who one’s gross income was later spent. The very rich use special accounting methods (corporations) to create artificial entities under their control which have “their” income taxed under an entirely different system.

 

[Mike_Iger]

I am 101% ignorant about income taxes.

But the Dems do seem right when they call for tax reform.

It's fine to be rich -- even super rich -- but with massive wealth, surely there is a social responsibility that comes along with it.

For example, when I see TV commercials begging ordinary people to donate to worthy causes (for example, medical procedures to help deformed children in developing nations), I immediately think: Some billionaires in many countries could instantly pick up the tab without any sweat. Chump change for them.

Why don't they?

It is more than a social responsibility for those who are wealthy, it is also used by some to unduly influence politicians with contributions to get more, change tax laws, or pervert our democracy. Voters get one vote to decide political outcomes. but the rich get extra votes because of their accumulated wealth. It wasn't the issue it is today with the concentration of wealth in fewer hands as a percentage than in the past.

 

[bluesmoke]

How “fair” or “unfair” is it, really? On a scale from 0 to 100, where 0 is absolutely 0% fair, and 100 is absolutely 100% fair, what is our tax code?

I would use income inequality of OECD countries as a measure of input:

Inequality - Income inequality - OECD Data

Find, compare and share OECD data by indicator.

data.oecd.org

And use wealth inequality as a measure of outcome:

https://www.oecd.org/officialdocuments/publicdisplaydocumentpdf/?cote=SDD/DOC(2018)1&docLanguage=En

The distance in % from the middle would be the percentage of how fair and unfair in plus+ and -, respectively. Ultimately, the fairness would be the wealth gap.

The measure of the whole number of OECD countries would be the figure at the middle going up or down from one point in time to another.

The same "fairness" % can be applied to all countries.

How would you do it?

 

[bluesmoke]

First off, I have no idea about South Africa and you haven't provided a real source to substantiate that. Further, South Africa is a third world country spiraling into the toilet. Not really comparable to the US for a host of reasons.

Second, inequality shouldn't be the metric, overall prosperity should be. The US has a higher inequality, despite the most progressive tax code of any major developed nation, but it also has the highest household median income amongst major developed nations as well. Would you rather try and skin the rich some more even if it made the average Joe poorer?

Lastly, your comment about loopholes is illustates how little you understand the topic. Tax system comparisons are done on effectively taxes, not statutory, thus the idea that loopholes have anything to do with it is idiotic.

It doesn't matter how progressive a tax code is, how high is the median income or what are the effective rates if the wealth gap continues to widen. That says there is enough net advantage to the rich v poor and median incomes in the US tax system that favors those at the highest income levels. That's the point of it all, the outcome of the system.

 

[bluesmoke]

The US has the most progressive tax code in the world. That is the precise opposite of "favors the rich and large corporations".

Basic facts.

No. The US "progressive" tax system revisions have become more regressive. The Trump Rep/con tax plan lowered effective corp rates, lowering statutory rates from 38% to 21%. Basic facts.

 

[bluesmoke]

That has much more to do with the FIT code’s complexity - dealing mostly with how and upon who one’s gross income was later spent. The very rich use special accounting methods (corporations) to create artificial entities under their control which have “their” income taxed under an entirely different system.

Nonetheless, a system within the US tax code that thereby favors them.

 

[bave]

It doesn't matter how progressive a tax code is, how high is the median income or what are the effective rates if the wealth gap continues to widen. That says there is enough net advantage to the rich v poor and median incomes in the US tax system that favors those at the highest income levels. That's the point of it all, the outcome of the system.

 

[Razoo]

No preferential tax loopholes, we all pay the whatever not look for a way for some to pay more to cover the cost of a loophole. Want to pay less taxes? Make less money.

 

[Cope]

It should not matter how (in what form - other liquid assets or cash) one’s income (employer provided compensation) is paid - that should be treated as taxable income.

I don't see how they can stop the borrowing of money against something that is listed as an asset, yet it remains unrealized?

Maybe if we went to an all sales tax world, then we can ensure that we tax all utilized money in a system?

 

[bave]

No. The US "progressive" tax system revisions have become more regressive. The Trump Rep/con tax plan lowered effective corp rates, lowering statutory rates from 38% to 21%. Basic facts.

Lul, what? Corporate taxation has nothing to do with the progressivity of a code. Progressivity is a metric of individual tax burdens. Get the basic definitions before you claim basic facts.

FWIW, the lower/middle class received the bulk of the benefit from the TCJA tax reforms. IRS even said so, keep up with the news.

Nonetheless, a system within the US tax code that thereby favors them.

Again, lol.

The US having the most progressive tax code inherently means that it is the least advantaged to those at the higher end.

I don't see how they can stop the borrowing of money against something that is listed as an asset, yet it remains unrealized?

Maybe if we went to an all sales tax world, then we can ensure that we tax all utilized money in a system?

Oh, please go a pure VAT system. Let the half the country not paying in start paying.

Edit: Posting something as collateral has nothing to do with realization of a gain or loss. When someone posts their house as collateral to a mortage or home equity line, should that trigger a realization of capital gains? There is a hard and fast definition of what realization is, and that is based upon the disposal of an asset. Meaning, change in ownership. So as long as you remain the owner of an asset, then there has been no realization.

 

[CaughtInThe]

i bet the people here, who make in the neighborhood of $50k - $75k will defend the billionaires (while these posters pay their own taxes).

 

[Michael Cole]

OK, that’s a fair observation, so what (if anything) are you proposing as a solution (to the bolded above)?

I have no novel idea, if that's what you're asking. Taxation worked fairly well for a long time. Our current 40-year-old system has been constructed around lower tax rates and tax incentives given to business. So, while the former, steeper progressive tax code helped keep the scales somewhat balanced, reverting back to 70% nominal rates would need to be done gradually. I would have no problem taking 70% of Musk's wealth from him as taxation.

Entrepreneurs are a given, but an entrepreneur is an efficiency specialist, not necessarily filled with material ambition above that of a normal parent. The question is, do we need ambitious actors whose only goal is the accumulation of material wealth? I'm not sure we do. We might. Tough question. I ask myself, "Would anything be different if John D. Rockefeller hadn't been born?" In other words, were the infamous Robber Barons (for example) a necessary cog in our economic wheel? I don't know.

The balance between economic freedom and societal cohesion has always been a work in progress. I totally disagree with Bernie Sanders' billionaires shouldn't exist position. I also think allowing private citizens to accumulate wealth with potential geopolitical consequences is dangerous.

Here's a stark but true description of capitalism vs society.

If society were a family, capitalism looks at that family as unrelated individuals, whose only motivation is the self. Like I said in the other post, we are capitalists and humans. We are family, and we are related, and our motive of course is self-directed. It's not a new problem. We are necessarily moral beings whose survival requires amoral behavior. This would seem unremarkable if not for the fact that some of us, sometimes, engage in immoral behavior.

Okay, that was way too deep. My answer is taxation. Slowly take some of the money back. People like Rockefeller and Musk were/are addicted to power more than money (that's why they're dangerous.) After a certain point, we are not taking material wealth from such people - they have more money than they could possibly spend - we are preventing them from gaining the power to alter the political landscape on a global level. As power is their main ambition, and they have more money than the pope, high taxation will not disincentivize their behavior, as is often claimed.

 

[ttwtt78640]

I have no novel idea, if that's what you're asking. Taxation worked fairly well for a long time. Our current 40-year-old system has been constructed around lower tax rates and tax incentives given to business. So, while the former, steeper progressive tax code helped keep the scales somewhat balanced, reverting back to 70% nominal rates would need to be done gradually. I would have no problem taking 70% of Musk's wealth from him as taxation.

Entrepreneurs are a given, but an entrepreneur is an efficiency specialist, not necessarily filled with material ambition above that of a normal parent. The question is, do we need ambitious actors whose only goal is the accumulation of material wealth? I'm not sure we do. We might. Tough question. I ask myself, "Would anything be different if John D. Rockefeller hadn't been born?" In other words, were the infamous Robber Barons (for example) a necessary cog in our economic wheel? I don't know.

The balance between economic freedom and societal cohesion has always been a work in progress. I totally disagree with Bernie Sanders' billionaires shouldn't exist position. I also think allowing private citizens to accumulate wealth with potential geopolitical consequences is dangerous.

Here's a stark but true description of capitalism vs society.

If society were a family, capitalism looks at that family as unrelated individuals, whose only motivation is the self. Like I said in the other post, we are capitalists and humans. We are family, and we are related, and our motive of course is self-directed. It's not a new problem. We are necessarily moral beings whose survival requires amoral behavior. This would seem unremarkable if not for the fact that some of us, sometimes, engage in immoral behavior.

Okay, that was way too deep. My answer is taxation. Slowly take some of the money back. People like Rockefeller and Musk were/are addicted to power more than money (that's why they're dangerous.) After a certain point, we are not taking material wealth from such people - they have more money than they could possibly spend - we are preventing them from gaining the power to alter the political landscape on a global level. As power is their main ambition, and they have more money than the pope, high taxation will not disincentivize their behavior, as is often claimed.

What you seem to be missing (avoiding?) is that the bulk of this vast ‘personal’ wealth is invested in (income producing) assets. Taking it (via increased taxation) would require selling those (income producing) assets to be spent on some other federal government defined priorities. Currently, about half of annual federal spending is on entitlement and “safety net” programs which simply amounts to robbing (producing) Peter to pay (consuming) Paul.

 

[Cope]

Oh, please go a pure VAT system. Let the half the country not paying in start paying.

That may be the only way that all utilized money is captured. Although, that would, in essence be a flat tax.

Edit: Posting something as collateral has nothing to do with realization of a gain or loss. When someone posts their house as collateral to a mortage or home equity line, should that trigger a realization of capital gains? There is a hard and fast definition of what realization is, and that is based upon the disposal of an asset. Meaning, change in ownership. So as long as you remain the owner of an asset, then there has been no realization.

I agree that there is no realization, and that the loans that you take out to give you money to live on (even if it is Millions and then claim the interest as a deduction) so that you don't have to sell and realize the asset is kind of brilliant.
That type of thing goes on regularly (not this particular case but the usage of the tax code as written)
The only person I've really heard reporting on that does this is Musk, but I am sure if he does it so do other Billionaires.