The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax

[Lennie]

The source who leaked these documents remains unknown. These documents will become a major news item over the coming weeks.

The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax

ProPublica has obtained a vast cache of IRS information showing how billionaires like Jeff Bezos, Elon Musk and Warren Buffett pay little in income tax compared to their massive wealth — sometimes, even nothing.

www.propublica.org

Not even ProPublica knows the source who provided blockbuster 'Secret IRS Files'

ProPublica does not know who to thank for providing the raw material for what organization founder Richard Tofel called "the most important story we have ever published." On Tuesday morning, the nonprofit investigative news operation published "The Secret IRS Files," the first in a series of...

news.yahoo.com

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[The Heretic]

Haven't read the whole article yet, but it isn't wealth that a person pays taxes on in the USA, it is taxable income.

A person can be the richest in the world and still pay no taxes if they had no taxable income.

So the following:

In 2007, Jeff Bezos, then a multibillionaire and now the world's richest man, did not pay a penny in federal income taxes. He achieved the feat again in 2011. In 2018, Tesla founder Elon Musk, the second-richest person in the world, also paid no federal income taxes.

Is not surprising to me, especially since the wealthy can afford good tax accountants and can afford to invest such that their $ go into tax deferred or tax free investments. Also, if their income was such that they had a net loss in a given year, no tax. People like Bezos and Musk invest big time and there are years where I am sure their investments showed a loss.

 

[BrentN]

Supposedly all legal, right? I don't blame people for using the law to their advantage, that is the smart move. But it says something about our tax code.

 

[The Heretic]

A "fair share" of taxes is not based on wealth or income, but on how much cost a person incurs thru their actions. The most "fair" way is a flat sales tax, no subsidies, no minimum income, no exceptions, no deductions, no rebates. Everything is taxed - every service, every good, and everyone pays at the same rate.

But that is not possible because then:

1) The government could not control our behavior with taxes.

2) A lot of people, both rich and poor, would lose their subsidies and tax exceptions, etc.

There is simply just too much corruption in our tax system for too many people, and too much power in the hands of the government using taxes to control us, that precludes the support of a truly fair tax system.

 

[The Heretic]

Supposedly all legal, right? I don't blame people for using the law to their advantage, that is the smart move. But it says something about our tax code.

I do it every year - I take a deduction for my mortgage interest and property taxes, and my 401K/IRA contributions do not count as taxable income for that year. I basically live where I am living for free due to tax deductions and property appreciation, even with the fact that I will probably have to pay taxes on some of that appreciation. People who rent/lease do not get anywhere near that benefit.

Why?

1) Because the real estate market industry is very powerful, as are home owners. We vote, and we vote against removing those deductions.

2) Ditto with those of use who can afford to contribute a percentage of our income to a 401K and/or IRA.

3) The government wants people to own real estate. They consider land/home owners more stable, and they will always know where they can find us. Renters can move quickly with minimal loss of $ if they have to.

 

[albin25]

That's why when Democrats scream, "TAX THE RICH"...
.....the RICH just yawn! and, keep on writing those huge checks to ensure it stays that way, for pennies-on-their-tax-dollar.

To be real though, the mega-loaded are very mobile, and if they get hit too hard, they'll move off-shore.

Does someone like Bezos ever get investigated for "a lifestyle not consistent with reported income" .... y'know, like a cabby, carpenter, or restaurant owner would?

 

[The Heretic]

That's why when Democrats scream, "TAX THE RICH"...
.....the RICH just yawn! and, keep on writing those huge checks to ensure it stays that way, for pennies-on-their-tax-dollar.

To be real though, the mega-loaded are very mobile, and if they get hit too hard, they'll move off-shore.

Does someone like Bezos ever get investigated for "a lifestyle not consistent with reported income" .... y'know, like a cabby, carpenter, or restaurant owner would?

Yup - wealth == power and power -- mobility, among other things. We may soon see the wealthy people and entities moving their assets off shore like they did some years back.

 

[RicInOR]

What is Rich vs What is Wealth?


In many cases, the Wealthiest have increases in investments which they have not taken out of the market. Unrealized Gains.
If you have a 401k this means you, most likely. At some point, you are forced to remove some money from the 401k because the Powers That Be, decreed they want their money!

Retirement Topics — Required Minimum Distributions (RMDs) | Internal Revenue Service

Review the required minimum distribution rules for certain retirement plans, including traditional IRAs, SEP IRAs, SIMPLE IRAs and 401(k) plans.

www.irs.gov

I like the idea that you only get taxed when you remove the interest/increase from your investment. Which can also be included in "death taxes" as transfer is removing.



I have seen those ads on TV critisizing NIKE for not paying taxes. Are we going to get them for others now?


FWIW, I'll bet Trump is in this category and it is a reason he fought so hard against revealing his income tax. Good luck explaining this to idiots.


Hey Oprah, Kardasians, Celebrities, All Major League Sporty dudes .... wanna explain your tax strategies?
(( some players have refused trades due to the oppressive natures of taxes in certain cites ))

 

[ma96782]

This......will probably never be a THING on social media sights. Rrrright?

Well, consider how "stolen/hacked" computer files were handled in the past. Yup.....don't hold your breath. Besides, the Zuck wouldn't want his secrets known.

Aloha, Mark

PS.....YES, I've heard of the Buy, Borrow, Die strategy. And it has been hinted at and used to GAME the Tax System.

And, the video also mentioned the "Stepped Up Basis" for stocks and real estate as another method to avoid taxes legally. Which BTW, Biden wants to eliminate.

BUT, the DEVIL is always in the details of writing such legislation. Imagine how that might affect your family's situation upon your death.

 

[DeanfromOregon]

Accelerated depreciation. If you're buying a lot of property, it's a thing. Build a building, put a ton of money into it, then start the depreciation process. If you build one a year, you will never pay taxes.

Most people don't have the income stream to afford this, it also makes your banking relationships a little more tenuous. Basically it kills your income and destroys your retained earnings, but you have so much cash it just doesn't matter.

It's how Trump filed for bankruptcy.

Why do we have it? So people will continue to build more buildings. It would be very stupid to eliminate it, but it could be sharpened up a bit.

All that needs to happen is the tax code needs to change. Simple, right?

Heretic I agree with you on the flat tax.

-Dean

 

[ma96782]

Heretic I agree with you on the flat tax.

-Dean

I use to think that a "flat tax" would help.
BUT THEN....
I'd say that the BIGGEST (BIGGER) PROBLEM lays with the definition of INCOME?

Aloha, Mark

PS.....do you really think that the Crypto Millionaires and Traders are paying?

 

[The Heretic]

I use to think that a "flat tax" would help.
BUT THEN....
I'd say that the BIGGEST (BIGGER) PROBLEM lays with the definition of INCOME?

Aloha, Mark

That's why I say it should be a FLAT sales/consumption tax and that there should be no exceptions, subsidies, minimum or maximum of income, no rebates or deductions. If an entity purchases a service or good, there is a tax on it, period. The reason for the flat tax is that government and lobbies will want to use taxes to control behavior (e.g., sin tax, and tax rebates/etc.) and to benefit themselves.

1) The cost to government an entity incurs can be related/proportional to the services and goods the entity consumes.

2) There is much less leeway about defining what a good or service is. No debate about profit/loss, unrealized income, etc.

The benefits are that it is much simpler. The tax is flat and is paid at the point of sale. No real need for a lot of tax code or tax forms. It can all be automated. Everybody pays according to how much they consume and therefore how much governmental cost they incur. You can earn as much as you want and pay no tax on those earnings until you purchase something.

 

[ma96782]

That's why I say it should be a FLAT sales/consumption tax and that there should be no exceptions, subsidies, minimum or maximum of income, no rebates or deductions. If an entity purchases a service or good, there is a tax on it, period. The reason for the flat tax is that government and lobbies will want to use taxes to control behavior (e.g., sin tax, and tax rebates/etc.) and to benefit themselves.

1) The cost to government an entity incurs can be related/proportional to the services and goods the entity consumes.

2) There is much less leeway about defining what a good or service is. No debate about profit/loss, unrealized income, etc.

The benefits are that it is much simpler. The tax is flat and is paid at the point of sale. No real need for a lot of tax code or tax forms. It can all be automated. Everybody pays according to how much they consume and therefore how much governmental cost they incur. You can earn as much as you want and pay no tax on those earnings until you purchase something.

Well......I don't see that happening anytime soon.

________________________

I predict that the "carve outs" will still occur.

The poor will say for example......
I pay 10% tax on my loaf of bread and the Zuck also pays 10% on his loaf of bread. How much of a percentage (of income) is that to ME vs. for HIM? Not to mention.....how much bread does the Zuck buy and consume?

Consumption, Regressive Taxes....La, la, la, la...... Not Fair.

Humm.......maybe we first need to define "fair"?

And then.....
The Zuck could always go to his restaurant (say that he owns one) and take a loaf home with him. Yeah....."taste test sample". So, he'll pay no tax.

Rrrrright.....every wonder about the local Chinese Restaurant owner and his family?

Aloha, Mark

 

[BrentN]

That's why I say it should be a FLAT sales/consumption tax and that there should be no exceptions, subsidies, minimum or maximum of income, no rebates or deductions. If an entity purchases a service or good, there is a tax on it, period. The reason for the flat tax is that government and lobbies will want to use taxes to control behavior (e.g., sin tax, and tax rebates/etc.) and to benefit themselves.

1) The cost to government an entity incurs can be related/proportional to the services and goods the entity consumes.

2) There is much less leeway about defining what a good or service is. No debate about profit/loss, unrealized income, etc.

The benefits are that it is much simpler. The tax is flat and is paid at the point of sale. No real need for a lot of tax code or tax forms. It can all be automated. Everybody pays according to how much they consume and therefore how much governmental cost they incur. You can earn as much as you want and pay no tax on those earnings until you purchase something.

#3. A much more simplified tax code, such as a flat tax, without all the asterisks, would help eliminate the need for an overbearing and politicized IRS.

 

[The Heretic]

Buy, borrow, die?

As far as I can tell, the scheme never tells me how I repay the loan without income which is taxable. Sure I can borrow and only pay interest which is lower than taxes, but where do the $ come to pay the loan?

 

[The Heretic]

Well......I don't see that happening anytime soon.

I don't either, and I said why (several times I think). That doesn't make it less viable if it was actually implemented in such a way that it replaced income taxes (which is yet another problem; most gov entities would use a sales tax to supplement an existing income tax, not replace it).

That said, the other real problem with a sales tax is that gov revenue from the tax decreases the economy suffers - but then it does with an income tax too, just maybe less so.

I predict that the "carve outs" will still occur.

Yes, of course they would - it is human nature. But that is not a problem with the tax itself, it is a corruption issue.

The poor will say for example......
I pay 10% tax on my loaf of bread and the Zuck also pays 10% on his loaf of bread. How much of a percentage (of income) is that to ME vs. for HIM? Not to mention.....how much bread does the Zuck buy and consume?

Consumption, Regressive Taxes....La, la, la, la...... Not Fair.

Humm.......maybe we first need to define "fair"?

My definition is that an entity pays for their cost, unrelated to their income. If you buy a loaf of bread, then I say it is fair that you pay the same price for that bread as anybody else, regardless of your income or wealth. I say it is NOT fair for me to have to pay for a portion of the cost of your loaf of bread.

And then.....
The Zuck could always go to his restaurant (say that he owns one) and take a loaf home with him. Yeah....."taste test sample". So, he'll pay no tax.

Rrrrright.....every wonder about the local Chinese Restaurant owner and his family?

Aloha, Mark

If Zuck owns the restaurant, then he has already paid the sales tax on the loaf of bread when the restaurant purchased the bread.

 

[ma96782]

IMHO.....a sales tax to fund the Federal Govt on top of the State Taxes.....well, nope. Not something I'd like.

Then......
As for the tax on the raw materials that the restaurant will pay? Well, it's way different (less) from the the marked up out the door price (plus tax) on that loaf of bread (if he had paid for it).

But, the actual point I was trying for......
Was that some people, use their business to "write off and hide" what would ordinarily be paid for with "income," attributable to them personally.

But whatever.....the IRS allows many things to go as "tax deductible".



Like really? A porn actress can write off her "boob job (and also probably tattoos)." Cough, cough..... Rrrrright......it will help her to get more jobs in the industry.

Thank GOD for the IRS code. Cough, cough.....

Not.


Aloha, Mark

 

[ma96782]

Buy, borrow, die?

As far as I can tell, the scheme never tells me how I repay the loan without income which is taxable. Sure I can borrow and only pay interest which is lower than taxes, but where do the $ come to pay the loan?

As I see it......
The TRICK, is mostly getting the bank to give you a loan on the assets that you own. You give them a pledge of those assets, against the loan(s).

So you die.

The executor of the estate pays for the debts and loans out of the assets of the estate. BTW....did you invest in a Life Insurance Policy? Of course by then, your stocks and other holdings have probably grown in value.

IF NOT......do you really care since you're 6' under?

But, assuming that you have ALOT.....
The rest (minus taxes and fees) get's distributed to your heirs per your trust or will. NOW.....the "Stepped Up" basis will really shine for the heirs.

Aloha, Mark

PS.....to learn more. Go here: https://wealthability.com/podcast/buy-borrow-die/
and press transcript, to read more.

 

[The Heretic]

I just don't like being in debt. I much prefer having no debt to some kind of scheme where I have a lien against my assets.

I have a friend whose brother lived out of his car. I asked the brother if he had any debt, he said no, I told him that he was far ahead of a LOT of people who had more debt than assets, and therefore had negative net worth - at least he actually owned his car and his belongings.

I have good net worth, and some wealth (I would not call myself wealthy, but maybe next year if things go right and I pay off all of my debt), but I am not "rich". Even if it works, I do not like this schema of buy/borrow/die - I've seen too many people live high on the hog only to lose it all. Plus, I want to leave nothing but positive worth to my daughter if at all possible - not debt - if I can leave her enough to live on so that she does not have to work and can live comfortably, then I will consider that to be success.

 

[The Heretic]

IMHO.....a sales tax to fund the Federal Govt on top of the State Taxes.....well, nope. Not something I'd like.

I did much better state tax wise in WA state with their sales tax than I do here in ORegon with their income tax. I spent much less than I earned, so I paid much less in sales tax and saved the rest.

Then......
As for the tax on the raw materials that the restaurant will pay? Well, it's way different (less) from the the marked up out the door price (plus tax) on that loaf of bread (if he had paid for it).

But, the actual point I was trying for......
Was that some people, use their business to "write off and hide" what would ordinarily be paid for with "income," attributable to them personally.

But whatever.....the IRS allows many things to go as "tax deductible".

1) You pay many hidden taxes with income tax that get passed on to you. When you buy a meal at a restaurant, you pay the income tax of the restaurant owner, you pay the income tax of the waiter and chef, you pay the income tax of the truck driver who delivers the raw supplies, and his/her employer, and on and on up the chain. All of that is passed on down to you, hidden in the cost of the goods and services. At least, with a flat sales tax (assuming no income tax), it isn't hidden - you know that along the line a tax was paid. By the time it gets to you, you are paying all of those taxes, but you just don't see it.

2) As for hiding something from the tax man, with a flat sales tax on everything, there is much less hiding and other shenanigans going on. For one thing, it is hard to do because the seller must collect and pay the tax.