10 ms·

A sociologist on the international wealth-management profession

118 points by jdub 11y ago

ucaetano 11y ago
"it’s important to realize that such a state of affairs doesn’t just happen by itself, or even through the actions of individual wealthy people" Wait, wasn't that the biggest conclusion from Piketty's book? That inequality will happen by itself due to difference between returns on capital and economic growth?
- yummyfajitas 11y ago
  Differences between returns on capital and economic growth alone will not result in any increase in inequality. If everyone achieves the same rate of return, inequality can only remain flat - bignum x exp(rt) / smallnum x exp(rt) = bignum / smallnum = const. If some people have income and save it inequality will go down: bignum x exp(rt) / smallnum x exp(rt) < (bignum x exp(rt) + k) / (smallnum x exp(rt) + k). All r > g directly implies is that the ratio of capital stock to income will increase. I.e., we'll move from a situation with one factory (worth $1M) producing $1000/month in income to a situation with two factories (worth $2M) producing $1500/month in income. In this case, r=100% but g = 50%.
parsnipsumthing 11y ago
I really dislike the title, tone and dramatic quality of this piece. I went to law school and got a job as a tax attorney. I don't consider my work or world particularly secretive. The barriers to entry are not peculiarly high and lawyers as a profession are a little too happy to talk about themselves. There's a great comment on the Atlantic that states this better than I can "If by secret, you mean extraordinarily complex, then yes. But... that's not the definition of secret. It's not secret. There are many classes on this (albeit from professional-level degrees) and it's all based on public statutes and court cases. All of which are freely available to any person. A large part of it being "secret" has to do with people's willingness to listen and understand. I'm a tax attorney, I understand these deals, and I can explain them rather well so even someone unfamiliar with tax law will understand it. However, it still does take a bit of active listening on behalf of an unfamiliar (as in, unfamiliar with tax law) listener to actually understand what I'm talking about, regardless of how much I simplify it." The most disappointing thing about international tax is how little even professional journalists understand it, or care to. It is simply easier to assert that international tax is a scam and since the general public can barely count to 10 using both hands, there's no way to disprove them.
- Retric 11y ago
  Secrets don't need to be actively hidden. It's reasonable to talk about the secret world of E.R. doctors not because there hiding, but because it's not widely known. Sure, the rules may be public the play is not.
- jmcmichael 11y ago
  No, I think what the author of the article means by 'secret' is not the very complex processes themselves, but the secrecy those complex processes provide to the wealthy - secrecy and privacy that the hoi polloi do not enjoy. Also, the secrecy that allows these people to remove themselves from social and democratic processes that the rest of us must follow, like taxes and the law.
- gozo 11y ago
  The title is, as usual, editorialized by the newspaper. The original title, as per the title tag, is "How Wealthy People Protect Their Money". There's a pretty big difference between being a tax attorney and being an offshore consultant where secrecy is one of the selling points. It's not a coincidence that voluntary corrections of tax statements go up significantly when new information sharing agreements are made. And again she's not a journalist, she has a PhD in Sociology from Harvard and is an associate professor of economic sociology.
  - Nrsolis 11y ago
    Secrecy isn't necessarily an indicator that there is law-breaking involved. Sometimes secrecy is desired for someone who has had negative attention focused on them by the general public for no other reason than they present a fat, juicy target for lawsuits. Many people I know who have significant assets bemoan the challenges that present themselves when trying to engage in anything resembling a negotiation involving finance. If one side KNOWS you have the capability to pay more, then you're at a disadvantage. And don't get me started with the lawsuits. People who have money seem to attract lawsuits the same way that children catch colds from kindergarten. As they say: "You know you're rich when you're finally sued frivolously."
jasonkester 11y ago
I find myself looking forward to reading the article that this author describes. But then it never appears. The author spends several pages telling us how clever and interesting he is, with his unique method of infiltrating this secret world, putting him in such company as [some important famous journalist we would be familiar with were we as educated and worldly as the author] and gaining the insight and ability to write this masterful piece of journalism that you, Reader, are about to witness. And then he spends a paragraph or two saying "it's secretive, and offshore". And we're done. I want my ten minutes back.
- sciurus 11y ago
  I suspect the authors hope is that you'll buy their upcoming book.
- gozo 11y ago
  There are a number of examples in the second part of the article (after “Everyone calls us the Crook Islands now”). Also it's a her and she is a not a journalist.
- RP_Joe 11y ago
  I agree. Btw the author is a she. She has many articles and any info on this topic by a subjective author is interesting. http://works.bepress.com/brooke_harrington/ http://works.bepress.com/brooke_harrington/ I hope she has a follow up article with more meat.
chollida1 11y ago
This happens on a smaller scale all the time with most professionals without having to resort ot offshoring. Anyone who works for a hedge fund will have their own company that will get paid thier bonus. Companies have two nice traits. 1) Their end of year can be any month 2) They have a lower tax rate than most high net-worth individuals do. So consider 2 fictional employee's. The first one gets paid a bonus of $500,000 at the end of the year(2014). His tax rate is 40% so he ends up with $300,000. He reinvests the $300,00 at his hedge fund that returns 20% in the year 2015. As of December 31st 2015 he has a net-worth of $360,000. Individual 2 gets the same $500,000 bonus at the end of 2014 but she has a company that gets the bonus. Now the companies year end is November so the tax year on on that bonus isn't until November 2015. That hedge fund also returns 20% so as of December 2015 she has $600,000 ($500,000 * 1.2) and then owes tax of $120,00 (the corporate tax rate is 20% on her $500,000 bonus) so she ends up with $480,000. Now when she pulls the money out of her corporation to spend she'll have to pay the dividend tax rate of %20. But she can let this money ride tax sheltered for any number of years. To recap, she essentially shelters her money in two ways: 1) her bonus is sheltered for 1 year from taxes allowing the full amount to grow 2) she pays the corporate rate at the end of the year allowing her to hang onto an additional %20 until she pulls it out for her own use. Any one can do this, the only preconditions you need to make it worth while are 1) a large bonus 2) a way to make the bonus money grow at a decent rate. Among Doctors, lawyers, etc this is a common practice. Now if you want t up the ante, you move your hedge fund to the Cayman Islands where you don't pay any tax on the gains until you repatriate the money back to the North America. When Renaissance Technologies finally has a tell all book written about then, their brilliance will be acknowledged but I'm going to guess that a very large portion of their returns comes from not paying tax. See: http://www.bloomberg.com/politics/articles/2015-07-08/irs-moves-against-hedge-fund-maneuver-once-used-by-renaissance http://www.bloomberg.com/politics/articles/2015-07-08/irs-mo... people worry about paying fees as a drag on their retirement earnings but paying tax is the single largest drag on creating wealth that the wealthy have. The above corporation sheltering is legal well tested under law and used in a very pervasive manner in the North American and the UK, I don't know anything about the rest of Europe but I'd imagine its the same.
- yummyfajitas 11y ago
vixen99 11y ago
Do you try to hold on to the money you make legally as against giving an even higher proportion of it to an organization that's managed (in one case) to run up a debt of $16 trillion rising.
walterbell 11y ago
Additional detail can be found in the author's 2012 paper in Sociological Forum, "Trust and Estate Planning: The Emergence of a Profession and Its Contribution to Socioeconomic Inequality" (pdf). http://works.bepress.com/cgi/viewcontent.cgi?article=1001&context=brooke_harrington http://works.bepress.com/cgi/viewcontent.cgi?article=1001&co... "... when knights of medieval Europe departed for the Crusades, leaving their lands vulnerable to seizure by the church, the state, or rival noblemen—some adopted the practice of putting their assets in trust. This involved transferring legal ownership of the property to a trusted kinsman or friend for the benefit of a third party: usually the wife and children of the original owner, who had no legal standing to own property themselves and were thus left vulnerable to dispossession."
lordnacho 11y ago
Well there's various degrees of tax optimization. Here's some things I've come across: - In most countries you can set yourself up as a company. This means you can write off certain things and adjust the proportion of revenue that ends up as salary, which has implications for various types of tax. For instance in the UK NHS contributions are dependent on salary, so you can give yourself a minimal salary and lots of dividends. This is a pretty standard play, probably done by everyone in the country who has a business, eg. doctors and plumbers. I don't think there's anything wrong with this. - At some point a guy will phone you. He finds your name on lists of likely people. He shows up at your office draws you a box diagram of corporations, with lots of little arrows. He quotes tax legal terms you won't understand, but they are always some sort of loophole. In one case I was offered to do a company with P Diddy (or whatever he's called now) in which I was to critique his new music. I had to produce evidence that I'd spent at least 10 hours a week or so on this. Now keep in mind I can't even read sheet music, have zero appreciation of Diddy's genre, and generally have no interest in him as a musician. I suppose this was mutual, as I've never heard of him being associated with quantitative developers either. - A friend told me about what he'd been offered. Along similar lines, he'd been told there was an opening in poetry. Another box diagram with arrows, and it boils down to that you can get a tax benefit if you publish your own book of poetry. The guy in question was an old school Essex local (shoutey trader). I doubt he'd spent much time reading Sylvia Plath. So anyway, the organisers had all their City connections write crappy (who am I to judge?) poetry, print up a few hundred books, and distribute it to everyone. - I never did any of these last two schemes. If something sounds ridiculous, you know it's a tax dodge. They tend to end up in court, where they are decided on arcane points if tax law, eating up the productive time of many people. If it goes wrong, you lose the money, a long while after you thought you had it. If it goes right, you are abusing the law in some sense. The other way you can tell is there are some plays every accountant in the whole country will tell you. Other will require a somewhat more entrepreneurial accountant, one that requires a sales operation.
- chollida1 11y ago
  I don't normally do meta comments but I accidentally down voted you. Sorry, good comment.
- 11y ago
GPGPU 11y ago
Of course, the United States contributes to this, too, by having the most complicated tax code, and the highest corporate income tax rate in the world. Combine this with a 30% ex-patriation tax* (yes, they tax you for giving up your citizenship), it's no wonder people create and keep wealth overseas. https://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax https://www.irs.gov/Individuals/International-Taxpayers/Expa...
- sgc 11y ago
  Highest corporate rate, but far from the highest effective corporate tax, Where much of Europe, Australia, Japan, etc. have higher rates. http://data.worldbank.org/indicator/IC.TAX.TOTL.CP.ZS?order=wbapi_data_value_2014%20wbapi_data_value%20wbapi_data_value-last&sort=asc&display=default http://data.worldbank.org/indicator/IC.TAX.TOTL.CP.ZS?order=...
  - njharman 11y ago
    That's the point. USA "advertises" high corp tax so it sounds like government is big and evil and taking all poor corporations profits. But the tax law is so complex and full of holes. Corps actually pay very little. Rich people pay little. The brunt is borne by the masses who don't have the assets/wealth to take advantage of all the loopholes. It's really rather ingenious.
    - GPGPU 11y ago
      For every additional dollar I earn, I am taxed at a rate (Federal and State combined) of 52.9%. "Rich" people do pay taxes. In fact, they pay most of the taxes.
ZenoArrow 11y ago
Sharing this in case anyone is interested. http://taxodus.net http://taxodus.net It's a game that let's you play out the role of a company engaging in tax avoidance. The tax dodges in-game are meant to mirror those available in the current business world.
- NKCSS 11y ago
  Thank you so much for posting this comment; I actually posted an Ask HN a while back to get that url, but I couldn't find it for the life of me.
  - ZenoArrow 11y ago
    You're welcome. I found it after watching this documentary: Taxodus - Playing The Global Tax Avoidance Game https://www.youtube.com/watch?v=tvlLO_pTmeY https://www.youtube.com/watch?v=tvlLO_pTmeY
Shivetya 11y ago
Governments all over could circumvent this issue provided they are willing to not use the tax code in a punitive means. By that I mean that so much of the code is written to benefit and penalize that it begs abuse by both those writing the code and those subject to it. Considering the number of pages of the US tax code how can anyone reasonably be expected to adhere to it let alone not circumvent parts of it even accidentally? If you want the "rich" to pay their fair share; they already pay the bulk of all taxes; then the tax system has to be fair. That means it has to minimalist as possible so that everyone with standard education can comprehend it.
draysmatter 11y ago
Also, see UK non-domiciled status. - Suppose someone has significant assets in, say, Canada. - They move to the UK and claim non-domiciled status on their taxes, which means they only need to pay taxes on income which is moved into the UK. - They stay in the UK for 7 years, leaving their assets in Canada. - They then move back to Canada Because the assets were never moved into the UK, there is no need to pay UK taxes on the capital gains/income, under the non-domiciled rules of the UK. Because they were non-Canadian residents, there is no need to pay Canadian taxes on the capital gains/income. (Only the US taxes non-resident citizens) In other words, they get 7 years of gains/income which get 0 taxes. I use Canada in this example, but this works for a large number of source countries. No wonder certain neighborhoods in London are filled with Russian oligarchs...
- chinathrow 11y ago
  And again, the UK's hypocrisy is unbelievable. Trying to shut down other tax heavens while one of the biggest is right there...
- Demoneeri 11y ago
  I'm not sure that will work, at least in Canada. In Canada, if you have sizable assets, you will still be considered resident even if you leave the country for many years. To be considered non resident in Canada, you need to sell everything. Even having a storage locker could trigger you as a resident because it means you are not leaving for real.
- lordnacho 11y ago
  Are you sure about the Canada side? I heard most countries tax it as long as the money is made there. I actually think the UK non-dom thing is reasonable. You pay tax to support a state, which in turn protects your assets and provides various services. If you can't bring your money in, it's not protected by that state. You're also not using it for any kind of gain (pleasure, investment, etc) in the UK, so why it any of their business? On the other hand of course whatever state it is in should be allowed to tax you.
- _delirium 11y ago
  I thought something was actually going to get done about this a few years ago when a high-profile controversy came up over Parliamentarians holding non-dom status. But instead the change ended up really narrow [1]. Members of Parliament can't have non-dom status anymore, presumably because that looks particularly bad, but the ~100,000 or so non-doms who aren't in Parliament were unaffected. [1] http://www.legislation.gov.uk/ukpga/2010/25/part/4 http://www.legislation.gov.uk/ukpga/2010/25/part/4
squozzer 11y ago
The article should have been named, "This Is The Enemy: 1 Percenters + Wealth Managers = Your Child's Empty Belly." The author strapped on the bomb-vest of moral superiority like a devout social jihadist and robbed the readers of Novo Pravda, I mean The Atlantic, of something substantive and maybe even actionable. I especially like how she used the magic phrase "rule of law" to sanctify what essentially is a gossip piece. 1 Percenters are bored, decadent adulterers? Gee what news, I think I saw a TV show about that called Dynasty. Not as entertaining as its successor, The Jerry Springer Show. The author assumes those who use the services of wealth managers to have nefarious aims. Maybe some of them do. I bet a lot of people who suddenly found themselves rich - for example, professional athletes - end up wishing they knew a wealth manager, if only to lessen the blow of "obligations the rest of us take for granted." Lest I forget the tale of Sir Paul McCartney, happily fleeced by the country whose slide into irrelevance he helped forestall by at least a decade. When the author feels ready to write a quality piece, I humbly suggest she look up her elected representatives and their donors, and start digging there. A wise man once told me, "if you want to pay lower taxes, take a look at your congressman's tax return - they don't like paying taxes either."
Frothy23 11y ago
I used to hear "we're talking about equality of _opportunity_ not of _outcome_" when it sounded like people were trying to equalize incomes. Seems like all pretense has been dropped now.
Frothy23 11y ago
I used to hear "we're talking about equality of _opportunity_ not of _outcome_" when it sounded like people were trying to equalize incomes. Seems like all pretense has been dropped now.
peter303 11y ago
Drastic simplification should be the answer. I like Colorados one-rate, five-line tax returns for all classes of income. Takes all of ten minutes to file most years. Legislatures like complex tax codes for political and social reasons. Lawyers and computers can manage the complexity fairly OK so far at a cost. I skimmed the Oct 27 new budget bill and it contains about 100 pages of mysterious tax code changes. The language is very opaque with referring to line changes in previous laws. I can gleen that farmers, drug makers, hospitals, and hedge funds are the recipients of these changes. But lack the time to figure them out.
pjlegato 11y ago
The fundamental premise is flawed: inequality is not created by helping some people aggregate more wealth, since wealth is not a zero-sum game. New wealth is continually being created through economic activity.

118 points by jdub 11y ago

"it’s important to realize that such a state of affairs doesn’t just happen by itself, or even through the actions of individual wealthy people" Wait, wasn't that the biggest conclusion from Piketty's book? That inequality will happen by itself due to difference between returns on capital and economic growth?

yummyfajitas 11y ago
Differences between returns on capital and economic growth alone will not result in any increase in inequality. If everyone achieves the same rate of return, inequality can only remain flat - bignum x exp(rt) / smallnum x exp(rt) = bignum / smallnum = const. If some people have income and save it inequality will go down: bignum x exp(rt) / smallnum x exp(rt) < (bignum x exp(rt) + k) / (smallnum x exp(rt) + k). All r > g directly implies is that the ratio of capital stock to income will increase. I.e., we'll move from a situation with one factory (worth $1M) producing $1000/month in income to a situation with two factories (worth $2M) producing $1500/month in income. In this case, r=100% but g = 50%.

parsnipsumthing 11y ago

I really dislike the title, tone and dramatic quality of this piece. I went to law school and got a job as a tax attorney. I don't consider my work or world particularly secretive. The barriers to entry are not peculiarly high and lawyers as a profession are a little too happy to talk about themselves. There's a great comment on the Atlantic that states this better than I can "If by secret, you mean extraordinarily complex, then yes. But... that's not the definition of secret. It's not secret. There are many classes on this (albeit from professional-level degrees) and it's all based on public statutes and court cases. All of which are freely available to any person. A large part of it being "secret" has to do with people's willingness to listen and understand. I'm a tax attorney, I understand these deals, and I can explain them rather well so even someone unfamiliar with tax law will understand it. However, it still does take a bit of active listening on behalf of an unfamiliar (as in, unfamiliar with tax law) listener to actually understand what I'm talking about, regardless of how much I simplify it." The most disappointing thing about international tax is how little even professional journalists understand it, or care to. It is simply easier to assert that international tax is a scam and since the general public can barely count to 10 using both hands, there's no way to disprove them.

Retric 11y ago
Secrets don't need to be actively hidden. It's reasonable to talk about the secret world of E.R. doctors not because there hiding, but because it's not widely known. Sure, the rules may be public the play is not.
jmcmichael 11y ago
No, I think what the author of the article means by 'secret' is not the very complex processes themselves, but the secrecy those complex processes provide to the wealthy - secrecy and privacy that the hoi polloi do not enjoy. Also, the secrecy that allows these people to remove themselves from social and democratic processes that the rest of us must follow, like taxes and the law.
gozo 11y ago
The title is, as usual, editorialized by the newspaper. The original title, as per the title tag, is "How Wealthy People Protect Their Money". There's a pretty big difference between being a tax attorney and being an offshore consultant where secrecy is one of the selling points. It's not a coincidence that voluntary corrections of tax statements go up significantly when new information sharing agreements are made. And again she's not a journalist, she has a PhD in Sociology from Harvard and is an associate professor of economic sociology.
- Nrsolis 11y ago
  Secrecy isn't necessarily an indicator that there is law-breaking involved. Sometimes secrecy is desired for someone who has had negative attention focused on them by the general public for no other reason than they present a fat, juicy target for lawsuits. Many people I know who have significant assets bemoan the challenges that present themselves when trying to engage in anything resembling a negotiation involving finance. If one side KNOWS you have the capability to pay more, then you're at a disadvantage. And don't get me started with the lawsuits. People who have money seem to attract lawsuits the same way that children catch colds from kindergarten. As they say: "You know you're rich when you're finally sued frivolously."

jasonkester 11y ago

I find myself looking forward to reading the article that this author describes. But then it never appears. The author spends several pages telling us how clever and interesting he is, with his unique method of infiltrating this secret world, putting him in such company as [some important famous journalist we would be familiar with were we as educated and worldly as the author] and gaining the insight and ability to write this masterful piece of journalism that you, Reader, are about to witness. And then he spends a paragraph or two saying "it's secretive, and offshore". And we're done. I want my ten minutes back.

sciurus 11y ago
I suspect the authors hope is that you'll buy their upcoming book.
gozo 11y ago
There are a number of examples in the second part of the article (after “Everyone calls us the Crook Islands now”). Also it's a her and she is a not a journalist.
RP_Joe 11y ago
I agree. Btw the author is a she. She has many articles and any info on this topic by a subjective author is interesting. http://works.bepress.com/brooke_harrington/ http://works.bepress.com/brooke_harrington/ I hope she has a follow up article with more meat.

chollida1 11y ago

This happens on a smaller scale all the time with most professionals without having to resort ot offshoring. Anyone who works for a hedge fund will have their own company that will get paid thier bonus. Companies have two nice traits. 1) Their end of year can be any month 2) They have a lower tax rate than most high net-worth individuals do. So consider 2 fictional employee's. The first one gets paid a bonus of $500,000 at the end of the year(2014). His tax rate is 40% so he ends up with $300,000. He reinvests the $300,00 at his hedge fund that returns 20% in the year 2015. As of December 31st 2015 he has a net-worth of $360,000. Individual 2 gets the same $500,000 bonus at the end of 2014 but she has a company that gets the bonus. Now the companies year end is November so the tax year on on that bonus isn't until November 2015. That hedge fund also returns 20% so as of December 2015 she has $600,000 ($500,000 * 1.2) and then owes tax of $120,00 (the corporate tax rate is 20% on her $500,000 bonus) so she ends up with $480,000. Now when she pulls the money out of her corporation to spend she'll have to pay the dividend tax rate of %20. But she can let this money ride tax sheltered for any number of years. To recap, she essentially shelters her money in two ways: 1) her bonus is sheltered for 1 year from taxes allowing the full amount to grow 2) she pays the corporate rate at the end of the year allowing her to hang onto an additional %20 until she pulls it out for her own use. Any one can do this, the only preconditions you need to make it worth while are 1) a large bonus 2) a way to make the bonus money grow at a decent rate. Among Doctors, lawyers, etc this is a common practice. Now if you want t up the ante, you move your hedge fund to the Cayman Islands where you don't pay any tax on the gains until you repatriate the money back to the North America. When Renaissance Technologies finally has a tell all book written about then, their brilliance will be acknowledged but I'm going to guess that a very large portion of their returns comes from not paying tax. See: http://www.bloomberg.com/politics/articles/2015-07-08/irs-moves-against-hedge-fund-maneuver-once-used-by-renaissance http://www.bloomberg.com/politics/articles/2015-07-08/irs-mo... people worry about paying fees as a drag on their retirement earnings but paying tax is the single largest drag on creating wealth that the wealthy have. The above corporation sheltering is legal well tested under law and used in a very pervasive manner in the North American and the UK, I don't know anything about the rest of Europe but I'd imagine its the same.

yummyfajitas 11y ago

vixen99 11y ago

Do you try to hold on to the money you make legally as against giving an even higher proportion of it to an organization that's managed (in one case) to run up a debt of $16 trillion rising.

walterbell 11y ago

Additional detail can be found in the author's 2012 paper in Sociological Forum, "Trust and Estate Planning: The Emergence of a Profession and Its Contribution to Socioeconomic Inequality" (pdf). http://works.bepress.com/cgi/viewcontent.cgi?article=1001&context=brooke_harrington http://works.bepress.com/cgi/viewcontent.cgi?article=1001&co... "... when knights of medieval Europe departed for the Crusades, leaving their lands vulnerable to seizure by the church, the state, or rival noblemen—some adopted the practice of putting their assets in trust. This involved transferring legal ownership of the property to a trusted kinsman or friend for the benefit of a third party: usually the wife and children of the original owner, who had no legal standing to own property themselves and were thus left vulnerable to dispossession."

lordnacho 11y ago

Well there's various degrees of tax optimization. Here's some things I've come across: - In most countries you can set yourself up as a company. This means you can write off certain things and adjust the proportion of revenue that ends up as salary, which has implications for various types of tax. For instance in the UK NHS contributions are dependent on salary, so you can give yourself a minimal salary and lots of dividends. This is a pretty standard play, probably done by everyone in the country who has a business, eg. doctors and plumbers. I don't think there's anything wrong with this. - At some point a guy will phone you. He finds your name on lists of likely people. He shows up at your office draws you a box diagram of corporations, with lots of little arrows. He quotes tax legal terms you won't understand, but they are always some sort of loophole. In one case I was offered to do a company with P Diddy (or whatever he's called now) in which I was to critique his new music. I had to produce evidence that I'd spent at least 10 hours a week or so on this. Now keep in mind I can't even read sheet music, have zero appreciation of Diddy's genre, and generally have no interest in him as a musician. I suppose this was mutual, as I've never heard of him being associated with quantitative developers either. - A friend told me about what he'd been offered. Along similar lines, he'd been told there was an opening in poetry. Another box diagram with arrows, and it boils down to that you can get a tax benefit if you publish your own book of poetry. The guy in question was an old school Essex local (shoutey trader). I doubt he'd spent much time reading Sylvia Plath. So anyway, the organisers had all their City connections write crappy (who am I to judge?) poetry, print up a few hundred books, and distribute it to everyone. - I never did any of these last two schemes. If something sounds ridiculous, you know it's a tax dodge. They tend to end up in court, where they are decided on arcane points if tax law, eating up the productive time of many people. If it goes wrong, you lose the money, a long while after you thought you had it. If it goes right, you are abusing the law in some sense. The other way you can tell is there are some plays every accountant in the whole country will tell you. Other will require a somewhat more entrepreneurial accountant, one that requires a sales operation.

chollida1 11y ago
I don't normally do meta comments but I accidentally down voted you. Sorry, good comment.
11y ago

GPGPU 11y ago

Of course, the United States contributes to this, too, by having the most complicated tax code, and the highest corporate income tax rate in the world. Combine this with a 30% ex-patriation tax* (yes, they tax you for giving up your citizenship), it's no wonder people create and keep wealth overseas. https://www.irs.gov/Individuals/International-Taxpayers/Expatriation-Tax https://www.irs.gov/Individuals/International-Taxpayers/Expa...

sgc 11y ago
Highest corporate rate, but far from the highest effective corporate tax, Where much of Europe, Australia, Japan, etc. have higher rates. http://data.worldbank.org/indicator/IC.TAX.TOTL.CP.ZS?order=wbapi_data_value_2014%20wbapi_data_value%20wbapi_data_value-last&sort=asc&display=default http://data.worldbank.org/indicator/IC.TAX.TOTL.CP.ZS?order=...
- njharman 11y ago
  That's the point. USA "advertises" high corp tax so it sounds like government is big and evil and taking all poor corporations profits. But the tax law is so complex and full of holes. Corps actually pay very little. Rich people pay little. The brunt is borne by the masses who don't have the assets/wealth to take advantage of all the loopholes. It's really rather ingenious.
  - GPGPU 11y ago
    For every additional dollar I earn, I am taxed at a rate (Federal and State combined) of 52.9%. "Rich" people do pay taxes. In fact, they pay most of the taxes.

ZenoArrow 11y ago

Sharing this in case anyone is interested. http://taxodus.net http://taxodus.net It's a game that let's you play out the role of a company engaging in tax avoidance. The tax dodges in-game are meant to mirror those available in the current business world.

NKCSS 11y ago
Thank you so much for posting this comment; I actually posted an Ask HN a while back to get that url, but I couldn't find it for the life of me.
- ZenoArrow 11y ago
  You're welcome. I found it after watching this documentary: Taxodus - Playing The Global Tax Avoidance Game https://www.youtube.com/watch?v=tvlLO_pTmeY https://www.youtube.com/watch?v=tvlLO_pTmeY

Shivetya 11y ago

Governments all over could circumvent this issue provided they are willing to not use the tax code in a punitive means. By that I mean that so much of the code is written to benefit and penalize that it begs abuse by both those writing the code and those subject to it. Considering the number of pages of the US tax code how can anyone reasonably be expected to adhere to it let alone not circumvent parts of it even accidentally? If you want the "rich" to pay their fair share; they already pay the bulk of all taxes; then the tax system has to be fair. That means it has to minimalist as possible so that everyone with standard education can comprehend it.

draysmatter 11y ago

Also, see UK non-domiciled status. - Suppose someone has significant assets in, say, Canada. - They move to the UK and claim non-domiciled status on their taxes, which means they only need to pay taxes on income which is moved into the UK. - They stay in the UK for 7 years, leaving their assets in Canada. - They then move back to Canada Because the assets were never moved into the UK, there is no need to pay UK taxes on the capital gains/income, under the non-domiciled rules of the UK. Because they were non-Canadian residents, there is no need to pay Canadian taxes on the capital gains/income. (Only the US taxes non-resident citizens) In other words, they get 7 years of gains/income which get 0 taxes. I use Canada in this example, but this works for a large number of source countries. No wonder certain neighborhoods in London are filled with Russian oligarchs...

chinathrow 11y ago
And again, the UK's hypocrisy is unbelievable. Trying to shut down other tax heavens while one of the biggest is right there...
Demoneeri 11y ago
I'm not sure that will work, at least in Canada. In Canada, if you have sizable assets, you will still be considered resident even if you leave the country for many years. To be considered non resident in Canada, you need to sell everything. Even having a storage locker could trigger you as a resident because it means you are not leaving for real.
lordnacho 11y ago
Are you sure about the Canada side? I heard most countries tax it as long as the money is made there. I actually think the UK non-dom thing is reasonable. You pay tax to support a state, which in turn protects your assets and provides various services. If you can't bring your money in, it's not protected by that state. You're also not using it for any kind of gain (pleasure, investment, etc) in the UK, so why it any of their business? On the other hand of course whatever state it is in should be allowed to tax you.
_delirium 11y ago
I thought something was actually going to get done about this a few years ago when a high-profile controversy came up over Parliamentarians holding non-dom status. But instead the change ended up really narrow [1]. Members of Parliament can't have non-dom status anymore, presumably because that looks particularly bad, but the ~100,000 or so non-doms who aren't in Parliament were unaffected. [1] http://www.legislation.gov.uk/ukpga/2010/25/part/4 http://www.legislation.gov.uk/ukpga/2010/25/part/4

squozzer 11y ago

The article should have been named, "This Is The Enemy: 1 Percenters + Wealth Managers = Your Child's Empty Belly." The author strapped on the bomb-vest of moral superiority like a devout social jihadist and robbed the readers of Novo Pravda, I mean The Atlantic, of something substantive and maybe even actionable. I especially like how she used the magic phrase "rule of law" to sanctify what essentially is a gossip piece. 1 Percenters are bored, decadent adulterers? Gee what news, I think I saw a TV show about that called Dynasty. Not as entertaining as its successor, The Jerry Springer Show. The author assumes those who use the services of wealth managers to have nefarious aims. Maybe some of them do. I bet a lot of people who suddenly found themselves rich - for example, professional athletes - end up wishing they knew a wealth manager, if only to lessen the blow of "obligations the rest of us take for granted." Lest I forget the tale of Sir Paul McCartney, happily fleeced by the country whose slide into irrelevance he helped forestall by at least a decade. When the author feels ready to write a quality piece, I humbly suggest she look up her elected representatives and their donors, and start digging there. A wise man once told me, "if you want to pay lower taxes, take a look at your congressman's tax return - they don't like paying taxes either."

Frothy23 11y ago

I used to hear "we're talking about equality of _opportunity_ not of _outcome_" when it sounded like people were trying to equalize incomes. Seems like all pretense has been dropped now.

Frothy23 11y ago

I used to hear "we're talking about equality of _opportunity_ not of _outcome_" when it sounded like people were trying to equalize incomes. Seems like all pretense has been dropped now.

peter303 11y ago

Drastic simplification should be the answer. I like Colorados one-rate, five-line tax returns for all classes of income. Takes all of ten minutes to file most years. Legislatures like complex tax codes for political and social reasons. Lawyers and computers can manage the complexity fairly OK so far at a cost. I skimmed the Oct 27 new budget bill and it contains about 100 pages of mysterious tax code changes. The language is very opaque with referring to line changes in previous laws. I can gleen that farmers, drug makers, hospitals, and hedge funds are the recipients of these changes. But lack the time to figure them out.

pjlegato 11y ago

The fundamental premise is flawed: inequality is not created by helping some people aggregate more wealth, since wealth is not a zero-sum game. New wealth is continually being created through economic activity.