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

Razoo

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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
 
In an era of profound inequality, few issues illustrate such stark differences in economic priorities as capital gains taxes. Capital gains accrue overwhelmingly to the wealthy and receive favorable tax treatment in several ways.

Cutting capital gains taxes would confer another windfall on the wealthy, exacerbate the tax preference for income from wealth over income from work, increase inequality, and drain revenue.

By contrast, raising capital gains taxes and closing loopholes would make the wealthy pay more of their fair share, lessen tax code disparities, reduce inequality, and raise substantial revenue for the country.

Capital gains and dividends accrue overwhelmingly to the wealthy and are taxed at preferential rates​

A capital gain is the profit from selling an asset such as a stock or other financial instrument, an interest in a business, or real estate. The gains from the sale of such assets held more than one year are considered long-term gains and taxed at special low rates.

While ordinary income such as wages and salaries is taxed at rates ranging from 0 percent for low levels of income to 37 percent for the highest levels of income, long-term capital gains are taxed at 0 percent, 15 percent, and 20 percent.

Most corporate dividends that are paid to shareholders are also taxed at these favorable rates. There is also a 3.8 percent Medicare tax on high-income taxpayers’ net investment income, including capital gains and dividends.

The 3.8 percent net investment income tax (NIIT) was enacted in companion legislation to the Affordable Care Act in 2010 and essentially parallels the Medicare tax on wages.1

Capital Gains Tax Preference Should Be Ended, Not Expanded

https://www.americanprogress.org › article › capital-gai...
Sep 28, 2020 — Congress should close—not expand—capital gains loopholes and tax income from wealth the same as income from work.
 
The honest approach to not paying more in taxes is to live on the poor side of town and give up the wealth
as opposed to cheating America.

Give it up as in donating all to public education.
 
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?
 
In an era of profound inequality, few issues illustrate such stark differences in economic priorities as capital gains taxes. Capital gains accrue overwhelmingly to the wealthy and receive favorable tax treatment in several ways.

Cutting capital gains taxes would confer another windfall on the wealthy, exacerbate the tax preference for income from wealth over income from work, increase inequality, and drain revenue.

By contrast, raising capital gains taxes and closing loopholes would make the wealthy pay more of their fair share, lessen tax code disparities, reduce inequality, and raise substantial revenue for the country.

Capital gains and dividends accrue overwhelmingly to the wealthy and are taxed at preferential rates​

A capital gain is the profit from selling an asset such as a stock or other financial instrument, an interest in a business, or real estate. The gains from the sale of such assets held more than one year are considered long-term gains and taxed at special low rates.

While ordinary income such as wages and salaries is taxed at rates ranging from 0 percent for low levels of income to 37 percent for the highest levels of income, long-term capital gains are taxed at 0 percent, 15 percent, and 20 percent.

Most corporate dividends that are paid to shareholders are also taxed at these favorable rates. There is also a 3.8 percent Medicare tax on high-income taxpayers’ net investment income, including capital gains and dividends.

The 3.8 percent net investment income tax (NIIT) was enacted in companion legislation to the Affordable Care Act in 2010 and essentially parallels the Medicare tax on wages.1

Capital Gains Tax Preference Should Be Ended, Not Expanded

https://www.americanprogress.org › article › capital-gai...
Sep 28, 2020 — Congress should close—not expand—capital gains loopholes and tax income from wealth the same as income from work.

It was, is and remains ridiculous to tax (long term) capital gain (LTCG) income at a special (generally lower) rate than ‘earned’ income.

I can see the logic (fairness?) of indexing (adjusting?) any LTCG amounts for CPI inflation, but I have not been able to come up with method of doing so which would not be rather cumbersome to implement.

Of course, that does not mean that such indexing (adjusting?) could not be done, ideally by the brokerage firm handling (and reporting?) the sale(s), but I am ignorant as to the details of buying, selling, trading and/or reporting of securities transactions.
 
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?
For the most part, I'd say many got wealthy because they had a singular focus and things like this are not on their radar.

Not suggesting that makes them bad people, but simply not something most think about or care about.

Then again, there are quite a few of the uber rich who are doing exactly what you suggest. Jeff Bezo's ex, McKenzie, is giving away billions to charity and otherwise worthy non profit causes.
 
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

Do all billionaires do this? If not do you have the percent of billionaires that do and can you name them?
 
I favor a fairly broad-based net wealth tax with few exclusions, and progressive with no caps. That's definitely apple pie and blue sky. Right now, the Trump/Rep/con tax giveaway to the rich and large corps is easily fending off even minor changes. The Rep/cons want to tax lower income levels and do away with SS and Medicare. Rick Scott of FL showed the true colors of the Rep party with his 11-point plan. His Republican plan would make even more wealth available to the rich and large corps and away from less than rich Americans.
 
Do all billionaires do this? If not do you have the percent of billionaires that do and can you name them?

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 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?
Cause they'd rather build rocket ships and make unnecessary trips into the wild blue yonder and crowned an astronaut.
 
I favor a fairly broad-based net wealth tax with few exclusions, and progressive with no caps. That's definitely apple pie and blue sky. Right now, the Trump/Rep/con tax giveaway to the rich and large corps is easily fending off even minor changes. The Rep/cons want to tax lower income levels and do away with SS and Medicare. Rick Scott of FL showed the true colors of the Rep party with his 11-point plan. His Republican plan would make even more wealth available to the rich and large corps and away from less than rich Americans.

That (bolded above) would require constitutional amendment -assuming you meant having a (personal?) property tax at the federal government level.
 
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?
Agreed.

I'm 100% capitalist, but I am also 100% human being.

"Spreading the wealth" may or may not be capitalist, but it is most certainly human. Holding oneself responsible for the disadvantaged is not capitalist at all, but it is entirely human.

Such are the problems when an economic system pits our individual self against our social nature. (All hominids are social animals, extant and extinct.)

I think we've handled this conflict well, but the concentration of wealth has gotten to a dangerous level. I have nothing against Elon Musk - Tesla employs upwards of 7000 here - but let's get some perspective.

Musk net worth: $300 billion
El Salvador GDP (2020) $25 billion (Haiti was $13b)

Musk could not only feed either country, he could afford to move the entire population of El Salvador (6.5 million), minus the warring political and gang factions, to the United States and leave that shithole country to the shit stirrers.

In other words, Musk has wealth that potentially carries geopolitical consequences. That can be beneficial or not, and the unknown to us is risky to the point of danger.

Before modern democracies and capitalism, wealth was legally held by royalty, and distributed by kings. These governments were challenged by the only other concentration of wealth, the various temples and ultimately the Vatican. The "power of the priesthood" goes back thousands of years to Egypt - some periods saw the temples successfully challenge weak pharaohs - there was a slight pause during Greek and early Roman conquest, but the creation of the Vatican changed all that.

That was then. Now, we have private citizens with the acquired wealth of popes. I'm not so sure it's healthy from a societal viewpoint. If anything, I think what we've learned is that we are people first, capitalists second.
 
Agreed.

I'm 100% capitalist, but I am also 100% human being.

"Spreading the wealth" may or may not be capitalist, but it is most certainly human. Holding oneself responsible for the disadvantaged is not capitalist at all, but it is entirely human.

Such are the problems when an economic system pits our individual self against our social nature. (All hominids are social animals, extant and extinct.)

I think we've handled this conflict well, but the concentration of wealth has gotten to a dangerous level. I have nothing against Elon Musk - Tesla employs upwards of 7000 here - but let's get some perspective.

Musk net worth: $300 billion
El Salvador GDP (2020) $25 billion (Haiti was $13b)

Musk could not only feed either country, he could afford to move the entire population of El Salvador (6.5 million), minus the warring political and gang factions, to the United States and leave that shithole country to the shit stirrers.

In other words, Musk has wealth that potentially carries geopolitical consequences. That can be beneficial or not, and the unknown to us is risky to the point of danger.

Before modern democracies and capitalism, wealth was legally held by royalty, and distributed by kings. These governments were challenged by the only other concentration of wealth, the various temples and ultimately the Vatican. The "power of the priesthood" goes back thousands of years to Egypt - some periods saw the temples successfully challenge weak pharaohs - there was a slight pause during Greek and early Roman conquest, but the creation of the Vatican changed all that.

That was then. Now, we have private citizens with the acquired wealth of popes. I'm not so sure it's healthy from a societal viewpoint. If anything, I think what we've learned is that we are people first, capitalists second.

OK, that’s a fair observation, so what (if anything) are you proposing as a solution (to the bolded above)?
 
One of the problems, for many years, is the fact that the rich have bought off the "Correct politicians" in order to rewrite the tax codes
to the advantage of the rich/corporations. Naturally as the rich get even wealthier, they keep the trough full in order to make sure
that the bucks keep flowing. It's going to be the proverbial uphill task to change that scenario. :(

Another eye-opener>>>
.
 
One of the problems, for many years, is the fact that the rich have bought off the "Correct politicians" in order to rewrite the tax codes
to the advantage of the rich/corporations. Naturally as the rich get even wealthier, they keep the trough full in order to make sure
that the bucks keep flowing. It's going to be the proverbial uphill task to change that scenario. :(

Multiple “likes” are deserved for ^^^^

Exactly, the electorate has far less influence and control over legislation and it’s enforcement than the donor class does. That political manipulation, of course, is not limited to tax laws.
 
It was, is and remains ridiculous to tax (long term) capital gain (LTCG) income at a special (generally lower) rate than ‘earned’ income.

One reason why capital gains taxes should be eliminated completely is because you are taxed on gains you never received.

Suppose you bought an investment property for 50k twenty years ago and sell it for 200k today, for a 150k gain. Where I live the capital gains tax would be about 20% (state and federal) or 30k. The gain is not adjusted for inflation, so you will be taxed on "gains" that you never received. Even at just 2 or 3 percent inflation, over 20 years, about half of that 150k gain is due to inflation. Your real gain is closer to 75k, but you have to pay tax on the other 75k "gain" that you never got. In reality, you paid 30k in taxes for a 75k gain, which is 40%.
 
OK, that’s a fair observation, so what (if anything) are you proposing as a solution (to the bolded above)?
I thought about including that. Don't have any solutions. I'm just the guy in the tower with the binoculars. ;)

I'd guess that first we should look to history. I'm not qualified to make any determinations - just a buff - but the general historical trend seems to be one that oscillates between government and church power.

The Enlightenment, capitalism and the industrial revolution, and democracy all coincide, and historically, this happened yesterday. Perhaps we're seeing the church being replaced by global corporatism? One institution replacing another?
 
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?
Republicans don't do social responsibility and will scoff at you for even suggesting the idea.
 
For the most part, I'd say many got wealthy because they had a singular focus and things like this are not on their radar.

Not suggesting that makes them bad people, but simply not something most think about or care about.

Then again, there are quite a few of the uber rich who are doing exactly what you suggest. Jeff Bezo's ex, McKenzie, is giving away billions to charity and otherwise worthy non profit causes.
And they get attacked by the right for it.
 
One reason why capital gains taxes should be eliminated completely is because you are taxed on gains you never received.

Suppose you bought an investment property for 50k twenty years ago and sell it for 200k today, for a 150k gain. Where I live the capital gains tax would be about 20% (state and federal) or 30k. The gain is not adjusted for inflation, so you will be taxed on "gains" that you never received. Even at just 2 or 3 percent inflation, over 20 years, about half of that 150k gain is due to inflation. Your real gain is closer to 75k, but you have to pay tax on the other 75k "gain" that you never got. In reality, you paid 30k in taxes for a 75k gain, which is 40%.

I addressed the inflation issue (factor?) in the post which you quoted only part of.

The tricky part is computing the inflation involved. Assuming (constant) 2% inflation, that would double the asset‘s value value over 36 years. Assuming (constant) 3% inflation, that would double the asset‘s value over 24 years.

With groups of like assets (e.g. shares of stock) bought incrementally over time it gets even more complicated. Let’s say you bought 100 shares of X stock per year consistently for 20 years (you now have 2K shares each purchased at a different price and in different years). If you sell 1K shares - which of among that group of shares were sold (required to know their initial value)? Was it the first bought shares, the average price paid for all shares (purchased over a year ago) or the last bought shares (which may have been bought in the current tax year) - and who decides which answer is correct?
 
I think there's plenty of evidence that it's not.
I'd say the preponderance of evidence says it's not. We of course do have examples of great philanthropists throughout history.

Today, we have oil and water with Bezos and his ex-wife.


Good for her.
 
Tax all income as income above a cap.
 
Been happening forever.

I think Bezos' salary is something like $180,000 per year.
 
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

Billionaires lobby Congress to enact laws that they know inside out that the legislators don't read and would not understand in any case.

If our tax system was to be fair, there would be a flat rate to pay and everyone would pay it. Period.

That rate could be assessed on what is earned or on what is spent. What is spent would be more progressive.

A 10% tax assessed on the outlay to buy a house priced at $100,000 would be less than the 10% tax assessed on the outlay of cash to buy a $50 million house.

The buyer of the Hearst Mansion would pay a whole bunch more than the buyer of 2 Bedroom Fixer upper in the slums.
 
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