5 ms·

> You can't appeal to the "spirit" of a soulless ruleset Here's a simple razor: if the people who wrote the rules, upon learning of what you are doing, would l

> You can't appeal to the "spirit" of a soulless ruleset Here's a simple razor: if the people who wrote the rules, upon learning of what you are doing, would likely have written the rules differently to make illegal what you are doing, it's against the "spirit" of the rules. Example: if some tax code says, people who make below $100k must pay $10k in taxes, and people who make above $100k must pay $20k, paying someone $99,999 to avoid extra taxes is a foreseeable consequence and therefore not an unethical loophole. However, paying someone exactly $100k so they fall in neither bracket and thus need not pay any taxes is probably not what the policymakers intended; they would surely have amended the rules had they had this pointed out to them before enacting this tax code. Of course, this requires being a judge of intent, but what ethical framework doesn't have grey areas?

kevin_thibedeau 8y ago
Even simpler test: If I as an individual can't use a double-Irish scheme to eliminate my personal income tax liability why should a corporation be able to?
- LoSboccacc 8y ago
  having taxes on earnings and not gains multiply taxes on products that have long manufacturing chains, or at least that's the theory. the result is that you can shift earnings and inflate costs to reduce gains dodging taxes. people should be able to claim expenses even for luxuries, but then nobody would have savings because those are capital inefficient. so there are two different drives that make the tax code asymmetrical, even in principle, before those schemes for dodging fair taxation.
  - deleted 8y ago
    [deleted]
- refurb 8y ago
  Because they are different entities with different needs? Should corporations be able take allowances for their dependents? Each entity is treated differently because they are different.
javagram 8y ago
Courts do judge intent in that way when needed though. If your tax avoidance can be successfully defended in court it seems completely ethical to me. Change the law if there is a problem with it.
- deleted 8y ago
  [deleted]
paulddraper 8y ago
> if the people who wrote the rules, upon learning of what you are doing, would likely have written the rules differently to make illegal what you are doing, it's against the "spirit" of the rules. Then perhaps the people writing the rules could tell us what they actually want? By writing it down?
- colanderman 8y ago
  We haven't even solved the problem of ensuring that implementations match requirements, or even that requirements are non-conflicting, for purely logical systems such as software. How would you propose to do so for the tax code, beside drastically simplifying it?
  - paulddraper 8y ago
    So if it can't be perfectly exact, we better not even try? Tax codes (or other laws) don't need to be executed by a computer. They need to be executed by an accountant/auditor/judge. So you can rely on well-defined but still human concepts like "security", "place of residence", "child care", "employment", "property improvement", "dependent", "exchange of goods", etc. Just because it can't be fully specified in x86 doesn't having a clearly defined tax code is an absurd idea.
refurb 8y ago
Well then anyone leveraging a 401k is doing something unethical then, because it was never intended for widespread use as a retirement scheme.
- colanderman 8y ago
  401ks fail the razor, because current practice has been widely known for decades, yet policymakers have chosen not to amend tax code to make them illegal. Current use may once have been against the spirit of the law, but is no longer. (Perhaps the razor would be better worded as "would rewrite" rather than "would have written differently".)
  - Wowfunhappy 8y ago
    This is why we have case law and precedent. Contrary to the old saying "two wrongs don't make a right", if everyone is doing something, it's reasonable to assume that behavior is acceptable.
Wowfunhappy 8y ago
> Example: if some tax code says, people who make below $100k must pay $10k in taxes, and people who make above $100k must pay $20k, paying someone $99,999 to avoid extra taxes is a foreseeable consequence and therefore not an unethical loophole. I know you're just making an example for demonstration, but you happened to choose a scenario that many believe is actually how tax brackets work. Thus, it's worth reiterating: in the American tax system (and I imagine almost everywhere), we use marginal rates for income tax. The first 100k you earn would get taxed at the lower rate, and every incremental dollar above that would get taxed at the higher rate.
- reducesuffering 8y ago
  But not capital gains. 0% -> 15% -> 20% are not marginal and require careful maneuvering to stay in the previous bracket. Why the oversight for such a hugely relevant tax?
  - lwhalen 8y ago
    Honestly, it was probably a compromise many years ago to get some other kind of legislation or tax-code pushed through. Last decade's "compromise" is this decade's "loophole".
  - CompelTechnic 8y ago
    Capital gains taxes are marginal. You are mistaken. There are no cliffs to maneuver. For example, play with this calculator: https://smartasset.com/investing/capital-gains-tax-calculator#ZFXwG6cA6V https://smartasset.com/investing/capital-gains-tax-calculato...
    - fatnoah 8y ago
      I think that calculator shows the opposite of what you're saying. There are different brackets depending on your overall income, but all of your capital gains are taxed at that rate. If the gains were truly taxed in a marginal fashion, some would be taxed at 0%, some at 15%, and the rest at 20%. I can also confirm this with my own taxes. I only had $10k in long term capital gains last year, but the entire amount was taxed at 23.8% by the federal government.
charlesdm 8y ago
> If the people who wrote the rules, upon learning of what you are doing, would likely have written the rules differently to make illegal what you are doing, it's against the "spirit" of the rules. If those people would find it a problem, then just change the rules AGAIN to close said loophole, and go on with your day. I get tired of people talking about the spirit of the law. Fact of the matter is, most politicians are incompetents and cannot make proper laws (everything is rushed through and hardly read twice). Make. proper. laws. and stop complaining. Nearly all tax avoidance is the price of having incompetent politicians. The remainder is the result of smart people who went ahead and understood the tax code well. They're to be applauded -- the pot of gold is waiting at the end of the rainbow for them, just like in any other profession.
MR4D 8y ago
So, what happens if I assume that Congress is not ethical (I.e. it’s members)? Do I still have to worry about the “spirit” of the law? If they can vote several times to get rid of Obamacare, and then when the vote actually matters and they don’t pass their vote, what is the “spirit”? Honestly, I used to feel your way, but when you see both sides pull as much shifty crap over the years, I’m following the letter. Screw the spirit - I prefer to donate to charity than give those guys one more dime.

kevin_thibedeau 8y ago

Even simpler test: If I as an individual can't use a double-Irish scheme to eliminate my personal income tax liability why should a corporation be able to?

LoSboccacc 8y ago
having taxes on earnings and not gains multiply taxes on products that have long manufacturing chains, or at least that's the theory. the result is that you can shift earnings and inflate costs to reduce gains dodging taxes. people should be able to claim expenses even for luxuries, but then nobody would have savings because those are capital inefficient. so there are two different drives that make the tax code asymmetrical, even in principle, before those schemes for dodging fair taxation.
- deleted 8y ago
  [deleted]
refurb 8y ago
Because they are different entities with different needs? Should corporations be able take allowances for their dependents? Each entity is treated differently because they are different.

javagram 8y ago

Courts do judge intent in that way when needed though. If your tax avoidance can be successfully defended in court it seems completely ethical to me. Change the law if there is a problem with it.

deleted 8y ago
[deleted]

paulddraper 8y ago

> if the people who wrote the rules, upon learning of what you are doing, would likely have written the rules differently to make illegal what you are doing, it's against the "spirit" of the rules. Then perhaps the people writing the rules could tell us what they actually want? By writing it down?

colanderman 8y ago
We haven't even solved the problem of ensuring that implementations match requirements, or even that requirements are non-conflicting, for purely logical systems such as software. How would you propose to do so for the tax code, beside drastically simplifying it?
- paulddraper 8y ago
  So if it can't be perfectly exact, we better not even try? Tax codes (or other laws) don't need to be executed by a computer. They need to be executed by an accountant/auditor/judge. So you can rely on well-defined but still human concepts like "security", "place of residence", "child care", "employment", "property improvement", "dependent", "exchange of goods", etc. Just because it can't be fully specified in x86 doesn't having a clearly defined tax code is an absurd idea.

refurb 8y ago

Well then anyone leveraging a 401k is doing something unethical then, because it was never intended for widespread use as a retirement scheme.

colanderman 8y ago
401ks fail the razor, because current practice has been widely known for decades, yet policymakers have chosen not to amend tax code to make them illegal. Current use may once have been against the spirit of the law, but is no longer. (Perhaps the razor would be better worded as "would rewrite" rather than "would have written differently".)
- Wowfunhappy 8y ago
  This is why we have case law and precedent. Contrary to the old saying "two wrongs don't make a right", if everyone is doing something, it's reasonable to assume that behavior is acceptable.

Wowfunhappy 8y ago

> Example: if some tax code says, people who make below $100k must pay $10k in taxes, and people who make above $100k must pay $20k, paying someone $99,999 to avoid extra taxes is a foreseeable consequence and therefore not an unethical loophole. I know you're just making an example for demonstration, but you happened to choose a scenario that many believe is actually how tax brackets work. Thus, it's worth reiterating: in the American tax system (and I imagine almost everywhere), we use marginal rates for income tax. The first 100k you earn would get taxed at the lower rate, and every incremental dollar above that would get taxed at the higher rate.

reducesuffering 8y ago
But not capital gains. 0% -> 15% -> 20% are not marginal and require careful maneuvering to stay in the previous bracket. Why the oversight for such a hugely relevant tax?
- lwhalen 8y ago
  Honestly, it was probably a compromise many years ago to get some other kind of legislation or tax-code pushed through. Last decade's "compromise" is this decade's "loophole".
- CompelTechnic 8y ago
  Capital gains taxes are marginal. You are mistaken. There are no cliffs to maneuver. For example, play with this calculator: https://smartasset.com/investing/capital-gains-tax-calculator#ZFXwG6cA6V https://smartasset.com/investing/capital-gains-tax-calculato...
  - fatnoah 8y ago
    I think that calculator shows the opposite of what you're saying. There are different brackets depending on your overall income, but all of your capital gains are taxed at that rate. If the gains were truly taxed in a marginal fashion, some would be taxed at 0%, some at 15%, and the rest at 20%. I can also confirm this with my own taxes. I only had $10k in long term capital gains last year, but the entire amount was taxed at 23.8% by the federal government.

charlesdm 8y ago

> If the people who wrote the rules, upon learning of what you are doing, would likely have written the rules differently to make illegal what you are doing, it's against the "spirit" of the rules. If those people would find it a problem, then just change the rules AGAIN to close said loophole, and go on with your day. I get tired of people talking about the spirit of the law. Fact of the matter is, most politicians are incompetents and cannot make proper laws (everything is rushed through and hardly read twice). Make. proper. laws. and stop complaining. Nearly all tax avoidance is the price of having incompetent politicians. The remainder is the result of smart people who went ahead and understood the tax code well. They're to be applauded -- the pot of gold is waiting at the end of the rainbow for them, just like in any other profession.

MR4D 8y ago

So, what happens if I assume that Congress is not ethical (I.e. it’s members)? Do I still have to worry about the “spirit” of the law? If they can vote several times to get rid of Obamacare, and then when the vote actually matters and they don’t pass their vote, what is the “spirit”? Honestly, I used to feel your way, but when you see both sides pull as much shifty crap over the years, I’m following the letter. Screw the spirit - I prefer to donate to charity than give those guys one more dime.