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

[Provincial]

Government always wants more. My residence has always been in Oregon. During the 1980's, In the Spring, I would go to the Seattle area to get an aircraft ready for a season in Alaska. Then I would take it there and work it until Fall, return to Washington to put the airplane "to bed" for the Winter, and then return to Oregon.

In Oregon, all I heard was the whining: "We can't make it on a Property Tax and an Income Tax -- We need a Sales Tax too!!!!"

In Washington, all I heard was the whining: "We can't make it on a Property Tax and a Sales Tax -- We need an Income Tax too!!!!"

In Alaska, all I heard was "How big is my Permanent Fund check going to be this year?"

 

[The Heretic]

Government always wants more. My residence has always been in Oregon. During the 1980's, In the Spring, I would go to the Seattle area to get an aircraft ready for a season in Alaska. Then I would take it there and work it until Fall, return to Washington to put the airplane "to bed" for the Winter, and then return to Oregon.

In Oregon, all I heard was the whining: "We can't make it on a Property Tax and an Income Tax -- We need a Sales Tax too!!!!"

In Washington, all I heard was the whining: "We can't make it on a Property Tax and a Sales Tax -- We need an Income Tax too!!!!"

In Alaska, all I heard was "How big is my Permanent Fund check going to be this year?"

When I worked in Alaska (Fairbanks, Anchorage and Ketchikan), especially Anchorage, I saw trucks with bumper stickers that said something like "Oh God, please bring back the Permanent Fund - I promise I won't piss it away this time". That was in the late 80s.

 

[Provincial]

At that time there was no Alaska state tax. Some of the Boroughs had sales tax (Anchorage, Fairbanks, and Kenai come to mind), and I don't know about property taxes. Oil financed the state government.

 

[The Heretic]

We all "game the tax system" to one degree or another - assuming all of us file tax returns. Not taking advantage of every possible option to reduce the taxes we pay would be unwise. The wealthier you are the more you can afford to take advantage of the system. Some people at the other end of the scale not only do not pay taxes, they get refunds/credits/etc. such that they are paid by the government.

This doesn't make anybody evil or greedy or what not, as long as they do not lie or evade taxes illegally. It means they are not stupid.

 

[The Heretic]

BTW - with regards to defaulting on loans by dying and leaving the debt to the estate, last I checked, with a few exceptions (such as a mortgage on a principal residence), either the estate has to pay back the loan (probably by selling the assets, and being taxed on the appreciation at either income or capital gains rates) or if the estate defaults on the loan and then has to pay taxes on the defaulted amount. Either way, the taxes get paid.

This does not take into account trusts/et. al., and I am not knowledgable enough to know how that works with regards to inheritances and taxes, but I believe an estate that has its assets in a trust still has to pay the debts. The one exception category for debt payment is 401K/IRAs where the beneficiaries are defined - I have as much in those, with my daughter as the beneficiary as I have in my real estate assets - more actually, and both are appreciating at about the same rate. I plan to have my next real estate asset and all other assets (except the 401k/IRA?) held by a revocable trust with my daughter as one of the trustees, hopefully with no debt owed on the property.

 

[ma96782]

Collecting tax is one thing but....
Where does the tax money go?

Half of the pandemic's unemployment money may have been stolen

Criminals may have stolen as much as half of the unemployment benefits the U.S. has been pumping out over the past year, some experts say. Why it matters: Unemployment fraud during the pandemic could easily reach $400 billion, according to some estimates, and the bulk of the money likely ended...

www.yahoo.com

Just imagine.....
What if......we were able to cut the amount of WASTE, FRAUD and ABUSE from a Govt Program(s)?




Aloha, Mark

 

[ma96782]

BTW - with regards to defaulting on loans by dying and leaving the debt to the estate, last I checked, with a few exceptions (such as a mortgage on a principal residence), either the estate has to pay back the loan (probably by selling the assets, and being taxed on the appreciation at either income or capital gains rates) or if the estate defaults on the loan and then has to pay taxes on the defaulted amount. Either way, the taxes get paid.

This does not take into account trusts/et. al., and I am not knowledgable enough to know how that works with regards to inheritances and taxes, but I believe an estate that has its assets in a trust still has to pay the debts. The one exception category for debt payment is 401K/IRAs where the beneficiaries are defined - I have as much in those, with my daughter as the beneficiary as I have in my real estate assets - more actually, and both are appreciating at about the same rate. I plan to have my next real estate asset and all other assets (except the 401k/IRA?) held by a revocable trust with my daughter as one of the trustees, hopefully with no debt owed on the property.

The thing is......

#1. You're dead. What do you care?

Say that you bought a property at $x. Then, you take a loan (borrow on the value of the property). So, assuming you get the loan, you get to spend the money (buying more assets- property, business, etc...). Maybe even while repaying the loan? Maybe, it's an interest only loan? Anyway, meanwhile, you also get to write off the mortgage interest. Or the business gets to write off the interest costs against income. Thus, reducing your "taxable income".

All the while, the value is probably increasing.

Years later (when you die) the value of the property is worth $XXX. So, the outstanding debts can be paid off.

Or, if there isn't enough money? Refer to #1. If the heirs get nothing....so what. Besides, it's not your problem anymore.

Remember the old sayings?

"You cannot squeeze blood from a stone."
"The sins of the father shall not be visited upon the son."

And if you happen to still be alive (say in a coma, in the hospital)......
Rrrrright......the bankruptcy laws.

Aloha, Mark

PS.....think about it...even Bernie Madoff's wife got to keep about $2M with the Govt's approval.

 

[RicInOR]

What if......we were able to cut the amount of WASTE, FRAUD and ABUSE from a Govt Program(s)?

 

[albin25]

"HALF OF PANDEMIC"S UNEMPLOYMENT MONEY MAY HAVE BEEN STOLEN"

Reminds me of the now seldom heard warning....
.... "computers now have the ability, when programmed by a single idiot, to perform millions of mistakes per second!"

Maybe they should have required a personal appearance at the unemployment office every time a check was issued.... it wouldn't have stopped all fraud, but it sure woulda slowed it to a trickle.


Makes ya wonder .... were these "recipients" also "voters" ?

 

[RicInOR]

"
>1. Create a charitable foundation in your own name and donate 98% of your wealth to get it off the ground and never pay a dime of taxes again, AND get worshipped as a hero for being so generous.

>1a. Oh, by the way, that "Wealth" is all your stocks and bonds and real estate holdings so any capital gains on that go right to the charitable foundation and don't get taxed. Then you can pay yourself a salary of whatever you want and only pay income tax on that part while using any and all of the foundation's property for whatever you want. Buy a 20 Million dollar mansion on a hill, use it for quarterly board meetings and week-long team building events and you can live in it by yourself the rest of the year, and when you die your children can take over the foundation without having to pay a dime of inheritance tax on any of that property.
"

Bill Gates Foundation.

 

[03A3Sporter]

The myth of paying your fair share has been perpetuated for decades by those who don't and want a larger slice of the pie.

Not matter how you argue it , The top 10% of tax payers pay the overwhelming majority of the income taxes paid in the United States. Those same people who love to spout the paying of a fair share by the Top earners always seem to conveniently forget that over half of all people in the US who file tax returns do not pay any income taxes at all.

No matter how you slice it Warren Buffet has paid more income tax than I will ever see in my life time as earnings . Using the percentage game to decry foul in this case is just a way to get the no loads who are net beneficiaries in our society more stirred up.

We all "game the tax system" to one degree or another - assuming all of us file tax returns. Not taking advantage of every possible option to reduce the taxes we pay would be unwise. The wealthier you are the more you can afford to take advantage of the system. Some people at the other end of the scale not only do not pay taxes, they get refunds/credits/etc. such that they are paid by the government.

This doesn't make anybody evil or greedy or what not, as long as they do not lie or evade taxes illegally. It means they are not stupid.

 

[The Heretic]

As long as the wealthy got their wealth legally and what I consider to be ethically (they did not cheat or steal or defraud someone), I don't begrudge them their wealth. I consider a "fair share" to be proportional to how much gov cost they incur by their actions. So if someone lives in a shack and lives frugally, they should not have to pay more taxes just because they have billions in wealth or make billions in income.

I live fairly frugally, but some people would consider me to be wealthy due to my net worth, and/or because I used to make a 6 figure income. I don't consider it fair that my taxes are based on my income when I incur less gov expense than someone who makes half what I do.

When someone says it isn't "fair" for a person who makes $20K to pay the same tax rate as someone who makes $2M, they mean that they want to forcibly take $ from someone who earned it, and give it to someone who did not earn it. That isn't fairness, that is theft, even if it is legal. So no, I don't blame the wealthy for using every legal advantage they can to keep whatever they legally earned (even if it was passively earned).

 

[The Heretic]

"
>1. Create a charitable foundation in your own name and donate 98% of your wealth to get it off the ground and never pay a dime of taxes again, AND get worshipped as a hero for being so generous.

>1a. Oh, by the way, that "Wealth" is all your stocks and bonds and real estate holdings so any capital gains on that go right to the charitable foundation and don't get taxed. Then you can pay yourself a salary of whatever you want and only pay income tax on that part while using any and all of the foundation's property for whatever you want. Buy a 20 Million dollar mansion on a hill, use it for quarterly board meetings and week-long team building events and you can live in it by yourself the rest of the year, and when you die your children can take over the foundation without having to pay a dime of inheritance tax on any of that property.
"

Bill Gates Foundation.

Or you can just start a church/religion, declare yourself the minister/pastor/prophet/messiah/whatever, build a big mansion/etc. and live off the proceeds. You don't even really need to donate anything to it, you get other suckers to donate. I have personally met someone who did that and sucked in some members of my family. There are more famous "leaders" who have done that. Everything is tax free because it is "non-profit" and a religion/charity/etc.

My philosophy is that everybody should pay taxes because everybody incurs governmental expenses. Everybody. No exceptions.

 

[ma96782]

Another take on the issue......

Aloha, Mark

PS....even if we had a "10% flat tax rate" we would still have the problem of defining "taxable income". And YOU KNOW there will be carve-outs for Deductions, Certain Investments, etc.....

Then, the POOR will get exemptions and/or even Tax Credits.

So....IMHO, we're back to square one in no time flat. Perhaps, an "alternative min tax" would help? At least until they figure out how to GAME that too.

 

[The Heretic]

The thing is......

#1. You're dead. What do you care?

I care and I care a lot, because it is my daughter that will benefit from my work. I am responsible for her well being and always will be, even after I am long gone.

If I didn't have a daughter or son, or a parent to care for, then I would not care much about leaving behind wealth, but I would not want to leave anybody with an unpaid debt, whether it was the person I owed, or the person who inherited the debt.

 

[The Heretic]

PS....even if we had a "10% flat tax rate" we would still have the problem of defining "taxable income". And YOU KNOW there will be carve-outs for Deductions, Certain Investments, etc.....

Then, the POOR will get exemptions and/or even Tax Credits.

So....IMHO, we're back to square one in no time flat.

That is why I would want it to be a sales tax and not an income tax, and why I said "no exceptions"/etc.

 

[RicInOR]

My philosophy is that everybody should pay taxes because everybody incurs governmental expenses. Everybody. No exceptions.

Agreed.



All a question of how you pay taxes.

Do we tax businesses? Or individuals?

To get this, the "sales" tax, or VAT. Then if you are frugal, you pay less, and if you live ostentatiously, you pay more.

 

[ma96782]

Then, like now.....
Sales taxes present no problem. Imagine, just hide your personal purchases through your business.

Example.
Almost every family is confronted with the high cost of food. Right. So say that I own a restaurant. I buy food through my business. The samples, extras, even the so called "waste and spoilage" etc..... get taken home with me to feed the family. Thus, I have avoided the tax (not to mention the initial cost). Yeah.....if it must be accounted for......it's a "business loss."

But wait.....
The business has to pay the tax at the wholesale level. Yup.....wholesale rate prices and taxes.

Humm.

Aloha, Mark

PS.....I'm not picking on the family restaurant owners. I just know from seeing it before. Rrrrright.....mostly from Chinese Restaurant Owners (when I lived in Hawaii). Yup.....some people just know how to do things. AND....they still managed to collect many Govt benefits too. BTW, I was married to a half Chinese woman at one point too. So forget about calling me an Anti-Asian Racist.

 

[The Heretic]

Agreed.



All a question of how you pay taxes.

Do we tax businesses? Or individuals?

To get this, the "sales" tax, or VAT. Then if you are frugal, you pay less, and if you live ostentatiously, you pay more.

Any legal taxable entity should pay taxes. Otherwise, some will find a way to make their purchases via whatever entity is exempt.

 

[The Heretic]

Then, like now.....
Sales taxes present no problem. Imagine, just hide your personal purchases through your business.

Example.
Almost every family is confronted with the high cost of food. Right. So say that I own a restaurant. I buy food through my business. The samples, extras, even the so called "waste and spoilage" etc..... get taken home with me to feed the family. Thus, I have avoided the tax (not to mention the initial cost). Yeah.....if it must be accounted for......it's a "business loss."

But wait.....
The business has to pay the tax at the wholesale level. Yup.....wholesale rate prices and taxes.

Humm.

Aloha, Mark

PS.....I'm not picking on the family restaurant owners. I just know from seeing it before. Rrrrright.....mostly from Chinese Restaurant Owners (when I lived in Hawaii). Yup.....some people just know how to do things. AND....they still managed to collect many Govt benefits too. BTW, I was married to a half Chinese woman at one point too. So forget about calling me an Anti-Asian Racist.

Already asked and answered - even using the same example (restaurant).

If you are able to purchase an item wholesale, then fine. A lot of people do this now to get lower prices. The difference between the food a restaurant purchases and the food it sells, is the preparation and ambience - that is what you are paying for above and beyond the cost of the raw ingredients. It adds up; if there is a sales tax at every level when some good or services is purchased, then it adds up to more than 10% because each purchase point is taxed and that tax is passed on to the end consumer. So saying 10% is not enough to give the government the necessary revenue is not true - the actual amount is higher than that.

The next step would be to reduction and eventual discontinuation, gradually, of social programs/subsidies/etc., which are not properly within the aegis of the government (the proper coverage would be national defense, administration (the different branches of government), law enforcement/judiciary, infrastructure, safety (FDA, etc.) and a few others).