14 ms·

Sports Owners Use Their Teams to Avoid Millions in Taxes

262 points by danso 5y ago

exabrial 5y ago
The only thing I dislike about this is these tools aren't available to the common person. Tax is extortion and theft: either pay or go to jail, and if you refuse, especially if you're a person of color, the police will show up with guns to harm you.
- deleted 5y ago
  [deleted]
- cainxinth 5y ago
  Extortion and theft implies you didn't voluntarily accept to be taxed and that you aren't getting anything in return. Don't want to pay high American taxes and enjoy our roads and such? No problem. Guatemala has very low tax rates. UAE has no income tax. Don't like regulations in general? Somalia will be right up your alley. No one is forcing you to stay in American and pay these taxes. That is your choice.
  - anm89 5y ago
    You are ill informed regarding the US tax code. Unlike a majority of the world's countries, the US will tax you even if you live abroad.
    - flarex 5y ago
      Not only that. If you renounce citizenship you are exit taxed on all your assets worth over 2 mil as a disincentive to high net worth individuals from jumping ship. Most aggressive tax regime in the world in many respects.
      - cainxinth 5y ago
        If you have over $2m, the argument that U.S. taxation is extortion is even less convincing. Such people have the means to hire lawyers and grease the wheels to emigrate to a wide swath of countries. The most desirable places often have high tax rates, though. Funny how it works out like that.
    - cainxinth 5y ago
      Not if you give up your citizenship. After all, why would you want to be a part of country if you think it's extorting and stealing from you?
      - avs733 5y ago
        its almost like that is WHY the US taxes overseas citizens...they don't want freeloaders relying on the benefits of their citizenship without understanding how it is paid for.
      - anm89 5y ago
        I'm assuming you have zero complaints or commentary about any piece of us politics or policy right? After all if you did you should move to Guatemala right? Guess we should have just remained a colony of Britain huh? If people didn't like the rules they should have just moved somewhere else. After all, the rules are the rules and if you don't like them the only thing you should do is go somewhere else right? What a hypocritical, disingenuous argument this is.
        bena 5y ago
        Your argument is disingenuous. You are trying to twist his argument into "if you have any complaint, you should leave". But that's not his argument. His argument is that if you disagree with taxation specifically, you should leave. He's fine with taxation. He probably believes that any other issues he may or may not have with his government can be fixed within that system without compromising the things he likes about it too much. He doesn't believe you can't remove taxes without compromising everything he likes about his country. Argue his point, not some make-believe exaggeration.
      - fortran77 5y ago
        See "Expatriation tax" https://www.irs.gov/individuals/international-taxpayers/expatriation-tax https://www.irs.gov/individuals/international-taxpayers/expa...
    - avs733 5y ago
      that is handle-able as well https://travel.state.gov/content/travel/en/legal/travel-legal-considerations/us-citizenship/Renunciation-US-Nationality-Abroad.html https://travel.state.gov/content/travel/en/legal/travel-lega... you could also opt to make no money, that gets you out of taxes. It isn't 'fraud' or 'theft' or 'extortion' its a social contract.
    - deleted 5y ago
      [deleted]
  - dexterdog 5y ago
    When did anybody voluntarily accept to be taxed? It was a law created via the slippery slope just as they are trying to do now with the wealth tax.
  - exabrial 5y ago
    It's sort of unbelievable to me that you advocate for the death of a person if they don't comply with giving you something that is rightfully theirs.
- bdcravens 5y ago
  If you're talking about income taxes in the US, that's a stretch. I worked my way into a bad place with regard to self-employment taxes owed, and I was able to set up a payment plan with a ridiculously low amount each month. Obviously if you intentionally refuse to pay, that's a different story.
nodesocket 5y ago
I find it somewhat funny that Propublica articles keep on making the front page, even though they have a clear very left leaning bias. Just look at the last hit piece on Peter Theil[1] and his use of a roth IRA (which is completely legal and just savvy finance). [1] https://news.ycombinator.com/item?id=27743427 https://news.ycombinator.com/item?id=27743427
- jhloa2 5y ago
  Just because it's legal doesn't make it ethical
  - voisin 5y ago
    I concur with this. The point of the article isn’t to say he doing anything illegal. It is to show the rest of the population how screwed up the tax code is to allow such things to occur. It would be trivial to fix. Put an upper limit on what can be held in a tax advantaged account. $5 million. $10 million. Whatever. Not $5 billion. That wasn’t the original intent of the program.
  - cortesoft 5y ago
    Right, and often it takes journalists describing the legal, unethical, behavior before we decide to make it illegal. If we aren't supposed to write negatively about anything someone does as long as it is legal, how would we ever come around to deciding to making something illegal?
- frankbreetz 5y ago
  They are not arguing that he did something illegal. They are arguing that the system is biased toward billionaires. "Savvy finance" is only available to those that can afford savvy accountants and tax people.
  - AmericanChopper 5y ago
    “Savvy finance” would be something like using standby letters of credit to perform off the books international asset transfers. Claiming depreciation on your tax return is something I do with all my home office equipment every year.
ed25519FUUU 5y ago
> Ballmer pays such a low rate, in part, because of a provision of the U.S. tax code. When someone buys a business, they’re often able to deduct almost the entire sale price against their income during the ensuing years. That allows them to pay less in taxes. The underlying logic is that the purchase price was composed of assets — buildings, equipment, patents and more — that degrade over time and should be counted as expenses. There’s the entire story for you. The owners took advantage of depreciation in the tax code.
- voisin 5y ago
  Depreciation only defers taxes. Their cost base declines and on a future sale they have greater capital gains. Jokes on them if the future tax rate is significantly higher than the rate they were writing off all along.
  - tantalor 5y ago
    No problem, just bequeath the asset to your heirs and the gains disappear.
    - gruez 5y ago
      ...but then you have to pay estate tax.
      - tantalor 5y ago
        only morons pay the estate tax
      - fallingfrog 5y ago
        No, you don’t. https://americansfortaxfairness.org/tax-fairness-briefing-booklet/fact-sheet-the-estate-inheritance-tax/ https://americansfortaxfairness.org/tax-fairness-briefing-bo...
        gruez 5y ago
anm89 5y ago
This is what I always find funny about people using billionaires as an example of failure of capitalism. Many of the ways that todays billionaires profit is more socialistic in nature than capitalistic. This isnt a story of some ruthless baron aggressively beating his competitors in the market. He's literally just having the money handed to him as a redistribution by the government.
- ed25519FUUU 5y ago
  How is handing the government 6 dollars instead of 10 a redistribution by the government? The entire article is about using depreciation, which is an unbelievably common tax strategy when you buy a depreciating item (tools, computers, cars, etc). In fact I’d say it’s used by nearly 90% of small and large businesses. It’s definitely NOT something that only the rich know how to use.
  - voisin 5y ago
    I wonder in this case if they are impairing goodwill (the price paid in excess of the book value of the physical assets) or if it is truly depreciating physical assets that need to be replaced in the future. If the latter, this is what all businesses do and makes complete sense, but if the former it is just a tax deferral strategy and in the future they’ll sell to another billionaire at a higher price and have to recognize the capital gain.
  - anm89 5y ago
    When the government takes x percent of everyone's income but says that one class of people only has to pay .2x percent, it's a handout. For the people who understand this, understand how to leverage it, and have the resources to leverage it, it's the biggest handout of all time.
- xgulfie 5y ago
  > This isnt a story of some ruthless baron aggressively beating his competitors in the market. He's literally just having the money handed to him as a redistribution by the government. That is exactly why it's a failure of modern capitalism.
maxharris 5y ago
Why the switch from real dollars to income tax rates? When I pay for my meal at a restaurant, I pay for what I ordered, not a percentage of my income.
- mistrial9 5y ago
  .. because certain economic constructs are not available unless-until a mass of capital is involved. The whole point is that very significant changes in taxation are only available at the far ends of capital accumulation. Its not a problem that winners get more winnings, until the whole system tips into massive acceleration for say, less than one percent of the educated, voting population of a political economy. In the case of accelerating returns on investment and lowering tax liability, there might be no upper bound on how much money flows in one direction.
- londons_explore 5y ago
  Because the point the author wants to make doesn't really stand if you look at the dollar amounts rather than the percentages... The 'fair' way to do capitalism is everyone pays a fixed dollar value of taxes - since everyone gets equal benefit from the army, the courts, schools, etc. So they should pay equally. Yet for various reasons that doesn't lead to good outcomes... So having tax percentages, and even escalating tax percentages, is a 'hack' that doesn't really have a theoretical basis. And therefore it doesn't really seem like people should be criticising that this hack is unfairly implemented when the vast majority of people still are better off than the theoretical capitalistic approach.
  - kaibee 5y ago
    > since everyone gets equal benefit from the army, the courts, schools, etc. So they should pay equally. This isn't true. Bezos benefits a lot more than I do from all of those things. As an example, the court system will enforce his property claims, and he has a lot more of them that need enforcing than I do.
- Scoundreller 5y ago
  That’s where you’re doing it wrong. You buy a meal and you just pay for it, end of story. But you should buy a sports team and you can write off the $ against your earnings. Both are full of intangible value to you (a nice seat where people treat you like you’re important because you sign the cheque, the hard value accruing to you being minimal in either case). Maybe you could buy 1/10000th of the restaurant instead of the meal, and maybe pay for the ingredient cost while the rest could be a loss that was paid out to the staff.
Justin_K 5y ago
Why doesn't the author just call it depreciation, which is what it is? It's as if they're trying to make a story about some new mystery loophole....
- missedthecue 5y ago
  Every single one of these propublica articles has been preying on people's lack of financial knowledge to push a political agenda.
  - Crontab 5y ago
    Has ProPublica actually shown anyone to have broken the law in these articles? If not, then they are just trying to stoke the fires of class warfare.
    - llbeansandrice 5y ago
      Whether or not it's legal isn't the point of the article though. It even highlights how they're using recent changes in the tax code to claim depreciation on assets that either don't actually depreciate or the value is highly subjective. It's a lot more than just "Oh boo boo is us our asset lost value last year so now we don't have to pay taxes".
      - kristjansson 5y ago
        Its not that its lost value, its when a capital expense is recognized as an operating expense... Also, capital gains are assessed relative to the depreciated price of the asset, so if there is a wild divergence between that and market value, the owner will pay a huge tax bill on sale.
    - burkaman 5y ago
      Legal behavior is often worth writing about. I read these stories as reporting on class warfare, not stoking it.
    - 5y ago
literallyaduck 5y ago
We should call sports a religion and tax them the same. We could then remove sports from schools as a separation of church and state. We could also use this as an opportunity to correct our tax code.
- uptown 5y ago
  My local bookstore is already working on this: https://imgur.com/a/PSpOGn2 https://imgur.com/a/PSpOGn2
- bagacrap 5y ago
  isn't religion tax exempt?
  - anm89 5y ago
    yeah I'm not following this one either.
- schnable 5y ago
  Then they would pay no taxes.
a5seo 5y ago
This type of reporting is always confusing to me- the author cites precise tax rates for each— concession worker 14.1%, Lebron James 35.6%, and Steve Ballmer 12%— but then critiques the tax code for allowing Ballmer to take depreciation deductions without making clear if 12% is artificially low due to depreciation deductions or if his “real” tax rate (before allowing for specious depreciation deductions) is actually MUCH lower than 12%. I suspect it’s the latter, but if he author’s goal is to incite the reader’s sense of injustice, eliminating the depreciation deduction won’t radically change the disparity between these people’s tax rates.
- happytoexplain 5y ago
  >Ballmer reported making $656 million. The dollar figure he paid in taxes was ... $78 million ... his federal income tax rate was just 12% Am I misunderstanding, or is this not stating that 12% was his real tax rate?
  - 0goel0 5y ago
    I think OP just didn't read the article
- lsllc 5y ago
  I think Lebron is either being very altruistic in paying his share of taxes, or he needs to to hire Balmer's accountants!
  - Dma54rhs 5y ago
    There's no way he pays that much, professional athletes have very complicated tax schemes where they sell their likeness or branding under different companies and entities for a start.
mindslight 5y ago
I didn't see where the article describes the other side of the transaction. For one, all of the assets that were depreciated should then not count as capital gains basis when the team is sold [0]. Furthermore, if any new contract is created that is declared to have value beyond a player's salary (to continue the depreciation game after purchase), that should look like an immediate chunk of income at the time of signing, right? IMO the real tax inequality isn't "loopholes" of deductions that can be narrated into extravagances, but rather that the tax code deliberately privileges those with more wealth. Capital gains is limited to 15% regardless of income, instead of the same graduated scale as everything else. And even more harshly, individual taxpayers don't get to deduct their "personal" expenses (eg transportation, food, utilities, housing is limited, healthcare is limited) even though they're necessary expenses for performing whatever job gives them income. [0] I guess this is escapable by dying, which is perhaps the long term plan.
sumobob2112 5y ago
"when owners sell their teams, they have to pay back the taxes they avoided by using amortization"
- a5seo 5y ago
  Well that’s an inconvenient fact. So what the article should really say is “loophole allows team owners to delay paying tax until sale.” Snooze.
  - gruez 5y ago
    Isn't this literally the same thing with the "jeff bezos isn't paying tax" story? He's not taxed, because the tax system doesn't tax on unrealized gains, and he'll eventually get taxed?
    - long_time_gone 5y ago
      Except for all the loopholes created to help people like Bezos to avoid "eventually getting taxed". Estate Tax laws are one area, trusts are another (they even call it the "Trust Fund Loophole"), non-profits are a third, carried interest is a fourth.
      - gruez 5y ago
        >Estate Tax laws are one area, trusts are another (they even call it the "Trust Fund Loophole"), You can't combine both. If you use one you lose the benefits of the other, see my sibling comment. >non-profits are a third Sure, moving your wealth to a nonprofit is tax free. But then what? If you want to spend it (on personal stuff, not curing the word of malaria or whatever), you still get taxed. >carried interest is a fourth I skimmed the wikipedia article and it looks like it's just like ISOs, but for investment managers? >The logic was that the non-financial partner's "sweat equity" was also an investment, since it entailed the risk of loss if the exploration was unsuccessful
        5y ago
nateberkopec 5y ago
A $2 billion sports franchise is so obviously not a 90% amortizable asset. The Clippers don’t even own their stadium.
sabujp 5y ago
Lebron is trying to do the same thing, he's set to become a billionaire himself and is a minority owner in Fenway sports group : https://www.beaconjournal.com/story/sports/2021/03/16/lebron-red-sox-could-billionaire-thanks-nike-other-businesses/4723050001/ https://www.beaconjournal.com/story/sports/2021/03/16/lebron...
- mprovost 5y ago
  "Shaq is rich. The white man that signs his check, is wealthy." - Chris Rock
kwthrows 5y ago
2 minutes of hate. Flag, shame the person who posted this to incite the hate, and move on.
sakopov 5y ago
About a month ago I discovered Mark Kohler on YouTube [1] who runs a little channel talking about wealth management. Once you watch a couple of videos you quickly see the pattern - the biggest cheat code to the US tax system is entrepreneurship and business ownership. But aside from that, it's shocking and eye-opening how many schemes (aka "legal structures") you can employ to preserve your wealth and reduce taxation which are available to everyone regardless of their social status. It's just that... most of us mere mortals don't know anything about them. In fact, some of this stuff seems borderline illegal, but it's not and it's been used by the wealthy to transfer wealth for generations. I think this just demonstrates yet another failure of the education system in the US. [1] https://www.youtube.com/channel/UCHYeaAH3D-wzQyDiXndSfMA https://www.youtube.com/channel/UCHYeaAH3D-wzQyDiXndSfMA
- happytoexplain 5y ago
  I agree - practical financial education is a huge, glaring omission from most curriculums. However, even if it wasn't, universal availability isn't a good argument for the societal benefit, morality, or legality of these practices, since to say they would still disproportionately benefit the wealthy would be an understatement.
- Retric 5y ago
  Schemes that get more widely used are removed from the tax code and something else is put in their place. The fact their only used by a small percentage of the population is a feature not a bug. Governments spend mind boggling amounts of money, most people need to hand over a large fraction of their earnings or the system fails.
  - oarsinsync 5y ago
    Apologies if the below comes across as inflammatory. It's not the intention, however it's largely the same as what you're saying, only how things actually play out in reality today. It doesn't need to be this way. It shouldn't be this way. Unfortunately, it is this way. > Schemes that get more widely used are removed from the tax code and something else is put in their place. Schemes that benefit the income-class are removed from the tax code > The fact their only used by a small percentage of the population is a feature not a bug. The fact they're only used by the very wealthy is a feature, not a bug. > Governments spend mind boggling amounts of money, most people need to hand over a large fraction of their earnings or the system fails. Governments are paid by the ultra weathly to siphon more money their way, most non-ultra-wealthy people need to hand over a large fraction of their earnings or the system fails.
dfilppi 5y ago
In the plus side at least the government doesnt get the money
jagtesh 5y ago
TL;DR Treat sports franchises differently from other businesses. “Please excuse any typos, wrote this on my phone in a hurry” It’s less about sports owners vs person on the street than it is about any business owner and their employees. The business owner most likely does pay an overall lower tax rate. It is a broader philosophical conundrum. On the one hand, you want to encourage entrepreneurship. Without a disproportionate reward, why would anyone be willing to take on the regulatory burden of a owning a business. On the other hand, we wish to promote equal treatment. Same laws for everyone. So maybe, the real conversation should be about simplification of tax law to promote a less disproportionate divide between being an employer and an employee. The compliance frameworks and tax laws are as it is horrendously complicated in every country I’ve ever worked in. How about simplifying them? Have income > X? Pay Y tax. Not only will this promote egalitarianism, it will ease the complexity of running a business. A good compromise then? In theory. In practice, that’s never going to happen. Governments are not autocratic. They need consensus to move forward. Making a change like this will involve appealing to all kinds of govt. leaders with differing vested interests. It’s the very reason behind our (US/Canada) countless tax rebates clauses and provisions. Local leaders creating new subsidy programs to attract more businesses (that translates into jobs) for their constituents. Hmm..what can we do then? Treat sports franchises differently from other businesses. Somewhere in the countless points the author makes, they brought this up. I think there’s some real substance here.
- nicoburns 5y ago
  I feel like the tax code ought to be biased towards benefitting small businesses, but super-tight on those processing larger amounts of money. And it ought to all be tied back to a person who controls the business so you can't just game this by creating more legal entities.
- kristjansson 5y ago
  All those sorts of flat tax ideas tend to fall down when considering how 'income' is calculated. Unless the policy says the state gets x% of every dollar of revenue, which creates wild disparities between industries with different margins and generally upends the idea of 'income', such a policy is quickly in the business of deciding what expenses can be netted against which sources of income by whom ...
yalogin 5y ago
Aren't these deductions built into the tax code? They are there to take advantage of and these people are using them. As long as they are not doing illegal and shady things like it was claimed about a recent popular figure, I don't see anything wrong with it. Would anyone not deduct their children's day care work because it's not fair to people below them in the economic ladder? We can have a conversation about whether all those deductions are fair or not but saying they are taking advantage of the system purposely built for them is unnecessary. There is no political will to change the tax code and may be these kind of perverse arguments will finally change the landscape and give our cowardly politicians the push they need.
- ModernMech 5y ago
  > Aren't these deductions built into the tax code? They are there to take advantage of and these people are using them. There is no political will to change the tax code You have to ask yourself: how did these deductions get into the tax code in the first place, and why is there no political will to change it? I mean, they didn't just appear there. So who put them there and why? The tax code was just changed in 2017. There was plenty of political will to pass a $2T tax bill that sent 80% of the benefits to the wealthiest Americans and corporations. That happened. It included all kinds of benefits for the wealthy, including lowering the estate tax and corporate tax rate. The corporate tax cuts were permanent, while the individual tax cuts we all got will expire soon. If Congress can do that, isn't there any political will to allow me to deduct my children's day care? If I had a billion dollars, I'd send a pack of lobbyists to DC just like AT&T and maybe they could muster up some "political will" to change the tax code too. In short, when the wealthiest Americans use their wealth to leverage Congress to perpetuate their wealth, it's not enough to say "Well, what they're doing is 100% legal, so I guess there's nothing shady and illegal going on here." If "legal" just means "whatever money can buy", then what's even the point of law?
  - yalogin 5y ago
    You are right. I was coming to the same conclusion myself towards the end of my comment above.
Bukhmanizer 5y ago
I’m by no means an anti-taxxer, but can we stop with these articles that suggest they’ve discovered some shadowy billionaire tax fraud, but then go on to explain the literal tax code?
w0mbat 5y ago
A sports team is a business, all businesses deduct their costs in order to calculate the profit, on which they pay tax. That is exactly what is happening here. The biased snide tone of the article pretends their is something unusual about this and says right in the headline that taxes are being avoided. In fact the correct amount of tax is being paid, it’s millions and millions of dollars, and hundreds of people are being employed.
- ianhawes 5y ago
  ProPublica is just working within the bounds of the tax returns that were stolen from the IRS.
deleted 5y ago
[deleted]
rubyist5eva 5y ago
Hunting down every possible tax deduction should be a national sport. Everyone should be using every legal means possible to reduce their tax burden.
javier10e6 5y ago
In elementary school we played soccer during recess. The kid who owned the ball wanted to play striker. We wanted him to play defense because he sucked. He played striker because it was his ball. The government treats Ballmer the same way. We don't want Ballmer to take his ball elsewhere.
- david927 5y ago
  Let him try to take his ball elsewhere. We're more powerful than we're being led to believe. I can't stand the notion, "What can we do? We have to let the rich pay little to no taxes!"
david927 5y ago
We need a minimum tax.
libtard323 5y ago
I remember a time when liberal garbage like this was outlawed on HN. In case you forgot - ALL POLITICS, even covid - is explicitly OFF FUCKING TOPIC!
cde-v 5y ago
Rich people use their various assets to avoid millions of taxes in every industry.
toddh 5y ago
This is just depreciation. It's an accounting thing, not a tax thing. Everyone gets depreciation. Any dollar you spend to make money you usually get to deduct. Propublica seems to hate depreciation. These articles are hard to read sometimes. Depreciation is a real thing. It reflects the use of the underlying asset.
lemoncookiechip 5y ago
>Khan responded: “We’re a nation of laws. U.S. Congress passes them. In the case of tax laws, the IRS applies and enforces the regulations, which are absolute. We simply and fully comply with those very IRS regulations.” I think this says everything that needed to be said. The core of the issue with all rich tax evasion, are the laws themselves allowing for it to happen legally, albeit not morally.
jedberg 5y ago
This article is another rehash of "businesses get better tax breaks than you do". I don't think this is very revelatory -- we already knew this. Also interesting is this particular article is talking about carry forward losses. Regular people can carry forward losses too, it just doesn't happen very much because it only applies to investments. But if have a big investment loss, you can carry that forward as well. You can also depreciate your assets like Ballmer does. It's just that you probably don't have enough to deduct to get beyond the standard deduction. The real problem with our tax code is that it favors capital over labor. Losses tied to capital can be written off, but losses tied to labor cannot (like the food, shelter, and clothing you need so you can live to work another day). Imagine how our world would change if you could write off your rent, meals, and clothes. Anyone living paycheck to paycheck wouldn't pay any taxes at all. Of course it would also discourage savings, so we'd have to find a balance somewhere.
- kristjansson 5y ago
  > Losses tied to capital can be written off, but losses tied to labor cannot An even better word here is 'expenses'. Businesses pay tax revenue net of expenses, people pay tax on revenue, and Propublica is shocked - shocked! - by what businesses can count as expenses. I suppose there's an argument that standard exemption/deduction are an estimate of baseline expenses to sustain labor, and additional costs over that are consumption that shouldn't be allowed to be netted against revenue (labor income). Does one's _entire_ rent go toward sustaining their productive capacity, or does is some part of that accrue to personal enjoyment? Of course, for most workers, even the 12k deduction probably doesn't feel anywhere close to basic living expenses, It is nice to imagine a fairer system that would allow the high cost of living in most US cities to be reflected in the treatment of labor income, but that sounds like even more complexity to add to the tax code.
Sr_developer 5y ago
Either this the biggest concentration of actual multi-millionaires in the history of a forum thread or they can pat themselves in their backs and laugh all the way to the bank since the hoi-polloi fiercely fight the ideological battle for them. I suppose from the misguided belief they will soon join the club.
compsciphd 5y ago
yes, one depreciates a sports teams asset, but it will eventually depreciate to zero. then when you sell it, 100% will be capital gain (still less than income tax, but a bit closer, especially on these high wealth individuals). the bigger deal would be the fact that if held to death (much like with other assets) the cost basis resets to. so what was once depreciated to 0% of value, is now cost basis as value at time of inheritance. I'm sort of leaning towards the belief that the reset of the cost basis should perhaps be limited to normal tax free estate limits, and anything above that, does not get reset.

262 points by danso 5y ago

The only thing I dislike about this is these tools aren't available to the common person. Tax is extortion and theft: either pay or go to jail, and if you refuse, especially if you're a person of color, the police will show up with guns to harm you.

deleted 5y ago
[deleted]
cainxinth 5y ago
Extortion and theft implies you didn't voluntarily accept to be taxed and that you aren't getting anything in return. Don't want to pay high American taxes and enjoy our roads and such? No problem. Guatemala has very low tax rates. UAE has no income tax. Don't like regulations in general? Somalia will be right up your alley. No one is forcing you to stay in American and pay these taxes. That is your choice.
- anm89 5y ago
  You are ill informed regarding the US tax code. Unlike a majority of the world's countries, the US will tax you even if you live abroad.
  - flarex 5y ago
    Not only that. If you renounce citizenship you are exit taxed on all your assets worth over 2 mil as a disincentive to high net worth individuals from jumping ship. Most aggressive tax regime in the world in many respects.
    - cainxinth 5y ago
      If you have over $2m, the argument that U.S. taxation is extortion is even less convincing. Such people have the means to hire lawyers and grease the wheels to emigrate to a wide swath of countries. The most desirable places often have high tax rates, though. Funny how it works out like that.
  - cainxinth 5y ago
    Not if you give up your citizenship. After all, why would you want to be a part of country if you think it's extorting and stealing from you?
    - avs733 5y ago
      its almost like that is WHY the US taxes overseas citizens...they don't want freeloaders relying on the benefits of their citizenship without understanding how it is paid for.
    - anm89 5y ago
      I'm assuming you have zero complaints or commentary about any piece of us politics or policy right? After all if you did you should move to Guatemala right? Guess we should have just remained a colony of Britain huh? If people didn't like the rules they should have just moved somewhere else. After all, the rules are the rules and if you don't like them the only thing you should do is go somewhere else right? What a hypocritical, disingenuous argument this is.
      - bena 5y ago
        Your argument is disingenuous. You are trying to twist his argument into "if you have any complaint, you should leave". But that's not his argument. His argument is that if you disagree with taxation specifically, you should leave. He's fine with taxation. He probably believes that any other issues he may or may not have with his government can be fixed within that system without compromising the things he likes about it too much. He doesn't believe you can't remove taxes without compromising everything he likes about his country. Argue his point, not some make-believe exaggeration.
    - fortran77 5y ago
      See "Expatriation tax" https://www.irs.gov/individuals/international-taxpayers/expatriation-tax https://www.irs.gov/individuals/international-taxpayers/expa...
  - avs733 5y ago
    that is handle-able as well https://travel.state.gov/content/travel/en/legal/travel-legal-considerations/us-citizenship/Renunciation-US-Nationality-Abroad.html https://travel.state.gov/content/travel/en/legal/travel-lega... you could also opt to make no money, that gets you out of taxes. It isn't 'fraud' or 'theft' or 'extortion' its a social contract.
  - deleted 5y ago
    [deleted]
- dexterdog 5y ago
  When did anybody voluntarily accept to be taxed? It was a law created via the slippery slope just as they are trying to do now with the wealth tax.
- exabrial 5y ago
  It's sort of unbelievable to me that you advocate for the death of a person if they don't comply with giving you something that is rightfully theirs.
bdcravens 5y ago
If you're talking about income taxes in the US, that's a stretch. I worked my way into a bad place with regard to self-employment taxes owed, and I was able to set up a payment plan with a ridiculously low amount each month. Obviously if you intentionally refuse to pay, that's a different story.

nodesocket 5y ago

I find it somewhat funny that Propublica articles keep on making the front page, even though they have a clear very left leaning bias. Just look at the last hit piece on Peter Theil[1] and his use of a roth IRA (which is completely legal and just savvy finance). [1] https://news.ycombinator.com/item?id=27743427 https://news.ycombinator.com/item?id=27743427

jhloa2 5y ago
Just because it's legal doesn't make it ethical
- voisin 5y ago
  I concur with this. The point of the article isn’t to say he doing anything illegal. It is to show the rest of the population how screwed up the tax code is to allow such things to occur. It would be trivial to fix. Put an upper limit on what can be held in a tax advantaged account. $5 million. $10 million. Whatever. Not $5 billion. That wasn’t the original intent of the program.
- cortesoft 5y ago
  Right, and often it takes journalists describing the legal, unethical, behavior before we decide to make it illegal. If we aren't supposed to write negatively about anything someone does as long as it is legal, how would we ever come around to deciding to making something illegal?
frankbreetz 5y ago
They are not arguing that he did something illegal. They are arguing that the system is biased toward billionaires. "Savvy finance" is only available to those that can afford savvy accountants and tax people.
- AmericanChopper 5y ago
  “Savvy finance” would be something like using standby letters of credit to perform off the books international asset transfers. Claiming depreciation on your tax return is something I do with all my home office equipment every year.

ed25519FUUU 5y ago

> Ballmer pays such a low rate, in part, because of a provision of the U.S. tax code. When someone buys a business, they’re often able to deduct almost the entire sale price against their income during the ensuing years. That allows them to pay less in taxes. The underlying logic is that the purchase price was composed of assets — buildings, equipment, patents and more — that degrade over time and should be counted as expenses. There’s the entire story for you. The owners took advantage of depreciation in the tax code.

voisin 5y ago
Depreciation only defers taxes. Their cost base declines and on a future sale they have greater capital gains. Jokes on them if the future tax rate is significantly higher than the rate they were writing off all along.
- tantalor 5y ago
  No problem, just bequeath the asset to your heirs and the gains disappear.
  - gruez 5y ago
    ...but then you have to pay estate tax.
    - tantalor 5y ago
      only morons pay the estate tax
    - fallingfrog 5y ago
      No, you don’t. https://americansfortaxfairness.org/tax-fairness-briefing-booklet/fact-sheet-the-estate-inheritance-tax/ https://americansfortaxfairness.org/tax-fairness-briefing-bo...
      - gruez 5y ago

anm89 5y ago

This is what I always find funny about people using billionaires as an example of failure of capitalism. Many of the ways that todays billionaires profit is more socialistic in nature than capitalistic. This isnt a story of some ruthless baron aggressively beating his competitors in the market. He's literally just having the money handed to him as a redistribution by the government.

ed25519FUUU 5y ago
How is handing the government 6 dollars instead of 10 a redistribution by the government? The entire article is about using depreciation, which is an unbelievably common tax strategy when you buy a depreciating item (tools, computers, cars, etc). In fact I’d say it’s used by nearly 90% of small and large businesses. It’s definitely NOT something that only the rich know how to use.
- voisin 5y ago
  I wonder in this case if they are impairing goodwill (the price paid in excess of the book value of the physical assets) or if it is truly depreciating physical assets that need to be replaced in the future. If the latter, this is what all businesses do and makes complete sense, but if the former it is just a tax deferral strategy and in the future they’ll sell to another billionaire at a higher price and have to recognize the capital gain.
- anm89 5y ago
  When the government takes x percent of everyone's income but says that one class of people only has to pay .2x percent, it's a handout. For the people who understand this, understand how to leverage it, and have the resources to leverage it, it's the biggest handout of all time.
xgulfie 5y ago
> This isnt a story of some ruthless baron aggressively beating his competitors in the market. He's literally just having the money handed to him as a redistribution by the government. That is exactly why it's a failure of modern capitalism.

maxharris 5y ago

Why the switch from real dollars to income tax rates? When I pay for my meal at a restaurant, I pay for what I ordered, not a percentage of my income.

mistrial9 5y ago
.. because certain economic constructs are not available unless-until a mass of capital is involved. The whole point is that very significant changes in taxation are only available at the far ends of capital accumulation. Its not a problem that winners get more winnings, until the whole system tips into massive acceleration for say, less than one percent of the educated, voting population of a political economy. In the case of accelerating returns on investment and lowering tax liability, there might be no upper bound on how much money flows in one direction.
londons_explore 5y ago
Because the point the author wants to make doesn't really stand if you look at the dollar amounts rather than the percentages... The 'fair' way to do capitalism is everyone pays a fixed dollar value of taxes - since everyone gets equal benefit from the army, the courts, schools, etc. So they should pay equally. Yet for various reasons that doesn't lead to good outcomes... So having tax percentages, and even escalating tax percentages, is a 'hack' that doesn't really have a theoretical basis. And therefore it doesn't really seem like people should be criticising that this hack is unfairly implemented when the vast majority of people still are better off than the theoretical capitalistic approach.
- kaibee 5y ago
  > since everyone gets equal benefit from the army, the courts, schools, etc. So they should pay equally. This isn't true. Bezos benefits a lot more than I do from all of those things. As an example, the court system will enforce his property claims, and he has a lot more of them that need enforcing than I do.
Scoundreller 5y ago
That’s where you’re doing it wrong. You buy a meal and you just pay for it, end of story. But you should buy a sports team and you can write off the $ against your earnings. Both are full of intangible value to you (a nice seat where people treat you like you’re important because you sign the cheque, the hard value accruing to you being minimal in either case). Maybe you could buy 1/10000th of the restaurant instead of the meal, and maybe pay for the ingredient cost while the rest could be a loss that was paid out to the staff.

Justin_K 5y ago

Why doesn't the author just call it depreciation, which is what it is? It's as if they're trying to make a story about some new mystery loophole....

missedthecue 5y ago
Every single one of these propublica articles has been preying on people's lack of financial knowledge to push a political agenda.
- Crontab 5y ago
  Has ProPublica actually shown anyone to have broken the law in these articles? If not, then they are just trying to stoke the fires of class warfare.
  - llbeansandrice 5y ago
    Whether or not it's legal isn't the point of the article though. It even highlights how they're using recent changes in the tax code to claim depreciation on assets that either don't actually depreciate or the value is highly subjective. It's a lot more than just "Oh boo boo is us our asset lost value last year so now we don't have to pay taxes".
    - kristjansson 5y ago
      Its not that its lost value, its when a capital expense is recognized as an operating expense... Also, capital gains are assessed relative to the depreciated price of the asset, so if there is a wild divergence between that and market value, the owner will pay a huge tax bill on sale.
  - burkaman 5y ago
    Legal behavior is often worth writing about. I read these stories as reporting on class warfare, not stoking it.
  - 5y ago

literallyaduck 5y ago

We should call sports a religion and tax them the same. We could then remove sports from schools as a separation of church and state. We could also use this as an opportunity to correct our tax code.

uptown 5y ago
My local bookstore is already working on this: https://imgur.com/a/PSpOGn2 https://imgur.com/a/PSpOGn2
bagacrap 5y ago
isn't religion tax exempt?
- anm89 5y ago
  yeah I'm not following this one either.
schnable 5y ago
Then they would pay no taxes.

a5seo 5y ago

This type of reporting is always confusing to me- the author cites precise tax rates for each— concession worker 14.1%, Lebron James 35.6%, and Steve Ballmer 12%— but then critiques the tax code for allowing Ballmer to take depreciation deductions without making clear if 12% is artificially low due to depreciation deductions or if his “real” tax rate (before allowing for specious depreciation deductions) is actually MUCH lower than 12%. I suspect it’s the latter, but if he author’s goal is to incite the reader’s sense of injustice, eliminating the depreciation deduction won’t radically change the disparity between these people’s tax rates.

happytoexplain 5y ago
>Ballmer reported making $656 million. The dollar figure he paid in taxes was ... $78 million ... his federal income tax rate was just 12% Am I misunderstanding, or is this not stating that 12% was his real tax rate?
- 0goel0 5y ago
  I think OP just didn't read the article
lsllc 5y ago
I think Lebron is either being very altruistic in paying his share of taxes, or he needs to to hire Balmer's accountants!
- Dma54rhs 5y ago
  There's no way he pays that much, professional athletes have very complicated tax schemes where they sell their likeness or branding under different companies and entities for a start.

mindslight 5y ago

I didn't see where the article describes the other side of the transaction. For one, all of the assets that were depreciated should then not count as capital gains basis when the team is sold [0]. Furthermore, if any new contract is created that is declared to have value beyond a player's salary (to continue the depreciation game after purchase), that should look like an immediate chunk of income at the time of signing, right? IMO the real tax inequality isn't "loopholes" of deductions that can be narrated into extravagances, but rather that the tax code deliberately privileges those with more wealth. Capital gains is limited to 15% regardless of income, instead of the same graduated scale as everything else. And even more harshly, individual taxpayers don't get to deduct their "personal" expenses (eg transportation, food, utilities, housing is limited, healthcare is limited) even though they're necessary expenses for performing whatever job gives them income. [0] I guess this is escapable by dying, which is perhaps the long term plan.

sumobob2112 5y ago

"when owners sell their teams, they have to pay back the taxes they avoided by using amortization"

a5seo 5y ago
Well that’s an inconvenient fact. So what the article should really say is “loophole allows team owners to delay paying tax until sale.” Snooze.
- gruez 5y ago
  Isn't this literally the same thing with the "jeff bezos isn't paying tax" story? He's not taxed, because the tax system doesn't tax on unrealized gains, and he'll eventually get taxed?
  - long_time_gone 5y ago
    Except for all the loopholes created to help people like Bezos to avoid "eventually getting taxed". Estate Tax laws are one area, trusts are another (they even call it the "Trust Fund Loophole"), non-profits are a third, carried interest is a fourth.
    - gruez 5y ago
      >Estate Tax laws are one area, trusts are another (they even call it the "Trust Fund Loophole"), You can't combine both. If you use one you lose the benefits of the other, see my sibling comment. >non-profits are a third Sure, moving your wealth to a nonprofit is tax free. But then what? If you want to spend it (on personal stuff, not curing the word of malaria or whatever), you still get taxed. >carried interest is a fourth I skimmed the wikipedia article and it looks like it's just like ISOs, but for investment managers? >The logic was that the non-financial partner's "sweat equity" was also an investment, since it entailed the risk of loss if the exploration was unsuccessful
      - 5y ago

nateberkopec 5y ago

A $2 billion sports franchise is so obviously not a 90% amortizable asset. The Clippers don’t even own their stadium.

sabujp 5y ago

Lebron is trying to do the same thing, he's set to become a billionaire himself and is a minority owner in Fenway sports group : https://www.beaconjournal.com/story/sports/2021/03/16/lebron-red-sox-could-billionaire-thanks-nike-other-businesses/4723050001/ https://www.beaconjournal.com/story/sports/2021/03/16/lebron...

mprovost 5y ago
"Shaq is rich. The white man that signs his check, is wealthy." - Chris Rock

kwthrows 5y ago

2 minutes of hate. Flag, shame the person who posted this to incite the hate, and move on.

sakopov 5y ago

About a month ago I discovered Mark Kohler on YouTube [1] who runs a little channel talking about wealth management. Once you watch a couple of videos you quickly see the pattern - the biggest cheat code to the US tax system is entrepreneurship and business ownership. But aside from that, it's shocking and eye-opening how many schemes (aka "legal structures") you can employ to preserve your wealth and reduce taxation which are available to everyone regardless of their social status. It's just that... most of us mere mortals don't know anything about them. In fact, some of this stuff seems borderline illegal, but it's not and it's been used by the wealthy to transfer wealth for generations. I think this just demonstrates yet another failure of the education system in the US. [1] https://www.youtube.com/channel/UCHYeaAH3D-wzQyDiXndSfMA https://www.youtube.com/channel/UCHYeaAH3D-wzQyDiXndSfMA

happytoexplain 5y ago
I agree - practical financial education is a huge, glaring omission from most curriculums. However, even if it wasn't, universal availability isn't a good argument for the societal benefit, morality, or legality of these practices, since to say they would still disproportionately benefit the wealthy would be an understatement.
Retric 5y ago
Schemes that get more widely used are removed from the tax code and something else is put in their place. The fact their only used by a small percentage of the population is a feature not a bug. Governments spend mind boggling amounts of money, most people need to hand over a large fraction of their earnings or the system fails.
- oarsinsync 5y ago
  Apologies if the below comes across as inflammatory. It's not the intention, however it's largely the same as what you're saying, only how things actually play out in reality today. It doesn't need to be this way. It shouldn't be this way. Unfortunately, it is this way. > Schemes that get more widely used are removed from the tax code and something else is put in their place. Schemes that benefit the income-class are removed from the tax code > The fact their only used by a small percentage of the population is a feature not a bug. The fact they're only used by the very wealthy is a feature, not a bug. > Governments spend mind boggling amounts of money, most people need to hand over a large fraction of their earnings or the system fails. Governments are paid by the ultra weathly to siphon more money their way, most non-ultra-wealthy people need to hand over a large fraction of their earnings or the system fails.

dfilppi 5y ago

In the plus side at least the government doesnt get the money

jagtesh 5y ago

TL;DR Treat sports franchises differently from other businesses. “Please excuse any typos, wrote this on my phone in a hurry” It’s less about sports owners vs person on the street than it is about any business owner and their employees. The business owner most likely does pay an overall lower tax rate. It is a broader philosophical conundrum. On the one hand, you want to encourage entrepreneurship. Without a disproportionate reward, why would anyone be willing to take on the regulatory burden of a owning a business. On the other hand, we wish to promote equal treatment. Same laws for everyone. So maybe, the real conversation should be about simplification of tax law to promote a less disproportionate divide between being an employer and an employee. The compliance frameworks and tax laws are as it is horrendously complicated in every country I’ve ever worked in. How about simplifying them? Have income > X? Pay Y tax. Not only will this promote egalitarianism, it will ease the complexity of running a business. A good compromise then? In theory. In practice, that’s never going to happen. Governments are not autocratic. They need consensus to move forward. Making a change like this will involve appealing to all kinds of govt. leaders with differing vested interests. It’s the very reason behind our (US/Canada) countless tax rebates clauses and provisions. Local leaders creating new subsidy programs to attract more businesses (that translates into jobs) for their constituents. Hmm..what can we do then? Treat sports franchises differently from other businesses. Somewhere in the countless points the author makes, they brought this up. I think there’s some real substance here.

nicoburns 5y ago
I feel like the tax code ought to be biased towards benefitting small businesses, but super-tight on those processing larger amounts of money. And it ought to all be tied back to a person who controls the business so you can't just game this by creating more legal entities.
kristjansson 5y ago
All those sorts of flat tax ideas tend to fall down when considering how 'income' is calculated. Unless the policy says the state gets x% of every dollar of revenue, which creates wild disparities between industries with different margins and generally upends the idea of 'income', such a policy is quickly in the business of deciding what expenses can be netted against which sources of income by whom ...

yalogin 5y ago

Aren't these deductions built into the tax code? They are there to take advantage of and these people are using them. As long as they are not doing illegal and shady things like it was claimed about a recent popular figure, I don't see anything wrong with it. Would anyone not deduct their children's day care work because it's not fair to people below them in the economic ladder? We can have a conversation about whether all those deductions are fair or not but saying they are taking advantage of the system purposely built for them is unnecessary. There is no political will to change the tax code and may be these kind of perverse arguments will finally change the landscape and give our cowardly politicians the push they need.

ModernMech 5y ago
> Aren't these deductions built into the tax code? They are there to take advantage of and these people are using them. There is no political will to change the tax code You have to ask yourself: how did these deductions get into the tax code in the first place, and why is there no political will to change it? I mean, they didn't just appear there. So who put them there and why? The tax code was just changed in 2017. There was plenty of political will to pass a $2T tax bill that sent 80% of the benefits to the wealthiest Americans and corporations. That happened. It included all kinds of benefits for the wealthy, including lowering the estate tax and corporate tax rate. The corporate tax cuts were permanent, while the individual tax cuts we all got will expire soon. If Congress can do that, isn't there any political will to allow me to deduct my children's day care? If I had a billion dollars, I'd send a pack of lobbyists to DC just like AT&T and maybe they could muster up some "political will" to change the tax code too. In short, when the wealthiest Americans use their wealth to leverage Congress to perpetuate their wealth, it's not enough to say "Well, what they're doing is 100% legal, so I guess there's nothing shady and illegal going on here." If "legal" just means "whatever money can buy", then what's even the point of law?
- yalogin 5y ago
  You are right. I was coming to the same conclusion myself towards the end of my comment above.

Bukhmanizer 5y ago

I’m by no means an anti-taxxer, but can we stop with these articles that suggest they’ve discovered some shadowy billionaire tax fraud, but then go on to explain the literal tax code?

w0mbat 5y ago

A sports team is a business, all businesses deduct their costs in order to calculate the profit, on which they pay tax. That is exactly what is happening here. The biased snide tone of the article pretends their is something unusual about this and says right in the headline that taxes are being avoided. In fact the correct amount of tax is being paid, it’s millions and millions of dollars, and hundreds of people are being employed.

ianhawes 5y ago
ProPublica is just working within the bounds of the tax returns that were stolen from the IRS.

deleted 5y ago

[deleted]

rubyist5eva 5y ago

Hunting down every possible tax deduction should be a national sport. Everyone should be using every legal means possible to reduce their tax burden.

javier10e6 5y ago

In elementary school we played soccer during recess. The kid who owned the ball wanted to play striker. We wanted him to play defense because he sucked. He played striker because it was his ball. The government treats Ballmer the same way. We don't want Ballmer to take his ball elsewhere.

david927 5y ago
Let him try to take his ball elsewhere. We're more powerful than we're being led to believe. I can't stand the notion, "What can we do? We have to let the rich pay little to no taxes!"

david927 5y ago

We need a minimum tax.

libtard323 5y ago

I remember a time when liberal garbage like this was outlawed on HN. In case you forgot - ALL POLITICS, even covid - is explicitly OFF FUCKING TOPIC!

cde-v 5y ago

Rich people use their various assets to avoid millions of taxes in every industry.

toddh 5y ago

This is just depreciation. It's an accounting thing, not a tax thing. Everyone gets depreciation. Any dollar you spend to make money you usually get to deduct. Propublica seems to hate depreciation. These articles are hard to read sometimes. Depreciation is a real thing. It reflects the use of the underlying asset.

lemoncookiechip 5y ago

>Khan responded: “We’re a nation of laws. U.S. Congress passes them. In the case of tax laws, the IRS applies and enforces the regulations, which are absolute. We simply and fully comply with those very IRS regulations.” I think this says everything that needed to be said. The core of the issue with all rich tax evasion, are the laws themselves allowing for it to happen legally, albeit not morally.

jedberg 5y ago

This article is another rehash of "businesses get better tax breaks than you do". I don't think this is very revelatory -- we already knew this. Also interesting is this particular article is talking about carry forward losses. Regular people can carry forward losses too, it just doesn't happen very much because it only applies to investments. But if have a big investment loss, you can carry that forward as well. You can also depreciate your assets like Ballmer does. It's just that you probably don't have enough to deduct to get beyond the standard deduction. The real problem with our tax code is that it favors capital over labor. Losses tied to capital can be written off, but losses tied to labor cannot (like the food, shelter, and clothing you need so you can live to work another day). Imagine how our world would change if you could write off your rent, meals, and clothes. Anyone living paycheck to paycheck wouldn't pay any taxes at all. Of course it would also discourage savings, so we'd have to find a balance somewhere.

kristjansson 5y ago
> Losses tied to capital can be written off, but losses tied to labor cannot An even better word here is 'expenses'. Businesses pay tax revenue net of expenses, people pay tax on revenue, and Propublica is shocked - shocked! - by what businesses can count as expenses. I suppose there's an argument that standard exemption/deduction are an estimate of baseline expenses to sustain labor, and additional costs over that are consumption that shouldn't be allowed to be netted against revenue (labor income). Does one's _entire_ rent go toward sustaining their productive capacity, or does is some part of that accrue to personal enjoyment? Of course, for most workers, even the 12k deduction probably doesn't feel anywhere close to basic living expenses, It is nice to imagine a fairer system that would allow the high cost of living in most US cities to be reflected in the treatment of labor income, but that sounds like even more complexity to add to the tax code.

Sr_developer 5y ago

Either this the biggest concentration of actual multi-millionaires in the history of a forum thread or they can pat themselves in their backs and laugh all the way to the bank since the hoi-polloi fiercely fight the ideological battle for them. I suppose from the misguided belief they will soon join the club.

compsciphd 5y ago

yes, one depreciates a sports teams asset, but it will eventually depreciate to zero. then when you sell it, 100% will be capital gain (still less than income tax, but a bit closer, especially on these high wealth individuals). the bigger deal would be the fact that if held to death (much like with other assets) the cost basis resets to. so what was once depreciated to 0% of value, is now cost basis as value at time of inheritance. I'm sort of leaning towards the belief that the reset of the cost basis should perhaps be limited to normal tax free estate limits, and anything above that, does not get reset.