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That you can use "creative tax accounting" to avoid paying your share hasn't been true for decades due to the AMT. The onus is really on you to explain what you

by maaku 10y ago

That you can use "creative tax accounting" to avoid paying your share hasn't been true for decades due to the AMT. The onus is really on you to explain what you mean, or cite a source here.

MaysonL 10y ago
How much is Jeff Bezos's share of Amazon worth? And how much income tax has he paid on it, or will ever pay on it? AMT doesn't touch that, and never will.
- maaku 10y ago
  If Jeff Bezos never sells, where's the income?
  - dgacmu 10y ago
    Loans secured using his shares in the company. He can shift the realization of the capital gains to far, far in the future -- see strategy #1: http://www.bloomberg.com/news/articles/2012-04-17/how-to-pay-no-taxes-10-strategies-used-by-the-rich http://www.bloomberg.com/news/articles/2012-04-17/how-to-pay...
Retric 10y ago
Compare the AMT with social security and the top really pay nex to noting in taxes. Donate to charity and you still need to pay every single cent of Soxial Security income tax. Only tax break is to just make more money when it suddenly stops.
- maaku 10y ago
  You get social security back.
  - Retric 10y ago
    No you don't. It has built in welfare so for example a married couple gets more from Social Security than a single person. Blind from birth? You to can get a social security check. Remember, there was no investing. Year 0 people got welfare without paying anything in and now wealthy people get to dog a welfare tax by saying it's not our problem.
dgacmu 10y ago
That's simply not true. The AMT, the extra medicare tax, and the NIIT taxes hit the 1% pretty hard, but when you make an absolute ton of money primarily through corporate ownership, you have a lot more avoidance mechanisms. Consider the famed Mitt Romney IRA (he's not alone - there are thousands of these): http://www.bloomberg.com/news/articles/2014-09-17/how-to-join-9-000-u-s-taxpayers-with-romney-sized-iras http://www.bloomberg.com/news/articles/2014-09-17/how-to-joi... leading to an effective tax rate of sub-14%: http://www.factcheck.org/2012/08/does-romney-pay-a-lower-rate-in-taxes-than-you/ http://www.factcheck.org/2012/08/does-romney-pay-a-lower-rat... There's a curve - up to perhaps $0.5-1m / year, it's not really feasible for most people to structure hyper-cleverly to avoid taxes. But after that, you can start to afford the extra lawyers and accountants (and corporate structures) to cut the rate back down by shifting everything to LTCG and having the corporate side of things cover little things like your private plane. :)
- rayiner 10y ago
  It's not really about being able to "afford lawyers and accountants." It's about our system preferentially taxing investment income on purpose. Some of those lawyers and accounts themselves make millions a year and pay 40%+ in income taxes, and there is little they can do to reduce that number because it's labor income.
  - dgacmu 10y ago
    You might be surprised - for example, a very-well-compensated trial lawyer can avoid substantial amounts of tax (and convert it into LTCG) by creating an offshore-registered captive insurance company: http://www.jdsupra.com/legalnews/tax-reduction-and-deferral-strategies-fo-67765/ http://www.jdsupra.com/legalnews/tax-reduction-and-deferral-... It's expensive to set up & maintain one of those, so it's not worthwhile in the sub-$1m/year regime. More: http://www.barthattorneys.com/Publications/Captive-Insurance-Protecting-and-Accumulating-We.aspx http://www.barthattorneys.com/Publications/Captive-Insurance... "As part of an asset protection plan, captive insurance helps shield your business while working to reduce your insurance costs. It can even help you save up to $1.2 million a year free of income tax. " (I love the "oh, and by the way, there might be this other little benefit, though we know you're just doing it to reduce insurance costs" tone of that one. :)

by maaku 10y ago

That you can use "creative tax accounting" to avoid paying your share hasn't been true for decades due to the AMT. The onus is really on you to explain what you mean, or cite a source here.

MaysonL 10y ago

How much is Jeff Bezos's share of Amazon worth? And how much income tax has he paid on it, or will ever pay on it? AMT doesn't touch that, and never will.

maaku 10y ago
If Jeff Bezos never sells, where's the income?
- dgacmu 10y ago
  Loans secured using his shares in the company. He can shift the realization of the capital gains to far, far in the future -- see strategy #1: http://www.bloomberg.com/news/articles/2012-04-17/how-to-pay-no-taxes-10-strategies-used-by-the-rich http://www.bloomberg.com/news/articles/2012-04-17/how-to-pay...

Retric 10y ago

Compare the AMT with social security and the top really pay nex to noting in taxes. Donate to charity and you still need to pay every single cent of Soxial Security income tax. Only tax break is to just make more money when it suddenly stops.

maaku 10y ago
You get social security back.
- Retric 10y ago
  No you don't. It has built in welfare so for example a married couple gets more from Social Security than a single person. Blind from birth? You to can get a social security check. Remember, there was no investing. Year 0 people got welfare without paying anything in and now wealthy people get to dog a welfare tax by saying it's not our problem.

dgacmu 10y ago

That's simply not true. The AMT, the extra medicare tax, and the NIIT taxes hit the 1% pretty hard, but when you make an absolute ton of money primarily through corporate ownership, you have a lot more avoidance mechanisms. Consider the famed Mitt Romney IRA (he's not alone - there are thousands of these): http://www.bloomberg.com/news/articles/2014-09-17/how-to-join-9-000-u-s-taxpayers-with-romney-sized-iras http://www.bloomberg.com/news/articles/2014-09-17/how-to-joi... leading to an effective tax rate of sub-14%: http://www.factcheck.org/2012/08/does-romney-pay-a-lower-rate-in-taxes-than-you/ http://www.factcheck.org/2012/08/does-romney-pay-a-lower-rat... There's a curve - up to perhaps $0.5-1m / year, it's not really feasible for most people to structure hyper-cleverly to avoid taxes. But after that, you can start to afford the extra lawyers and accountants (and corporate structures) to cut the rate back down by shifting everything to LTCG and having the corporate side of things cover little things like your private plane. :)

rayiner 10y ago
It's not really about being able to "afford lawyers and accountants." It's about our system preferentially taxing investment income on purpose. Some of those lawyers and accounts themselves make millions a year and pay 40%+ in income taxes, and there is little they can do to reduce that number because it's labor income.
- dgacmu 10y ago
  You might be surprised - for example, a very-well-compensated trial lawyer can avoid substantial amounts of tax (and convert it into LTCG) by creating an offshore-registered captive insurance company: http://www.jdsupra.com/legalnews/tax-reduction-and-deferral-strategies-fo-67765/ http://www.jdsupra.com/legalnews/tax-reduction-and-deferral-... It's expensive to set up & maintain one of those, so it's not worthwhile in the sub-$1m/year regime. More: http://www.barthattorneys.com/Publications/Captive-Insurance-Protecting-and-Accumulating-We.aspx http://www.barthattorneys.com/Publications/Captive-Insurance... "As part of an asset protection plan, captive insurance helps shield your business while working to reduce your insurance costs. It can even help you save up to $1.2 million a year free of income tax. " (I love the "oh, and by the way, there might be this other little benefit, though we know you're just doing it to reduce insurance costs" tone of that one. :)