7 ms·

Per the Washington Post [1] > "The uber-rich in the United States tend to pay such low tax rates that they have less incentive to seek offshore havens. But the

Per the Washington Post [1] > "The uber-rich in the United States tend to pay such low tax rates that they have less incentive to seek offshore havens. But their absence from the files also may mean that very wealthy Americans turn to different offshore jurisdictions." [1] https://www.washingtonpost.com/business/interactive/2021/pandora-papers-offshore-finance/ https://www.washingtonpost.com/business/interactive/2021/pan...

taurath 5y ago
Its pretty well known by now that billionaires pay an effective single digit tax rate in the US. https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax https://www.propublica.org/article/the-secret-irs-files-trov... Hell, the person who used to be president was paying that or less. They have at least 60% of congress paid for in order to not raise taxes or close loopholes as well. Then you have so many otherwise smart people believing that taxation is theft, when they're just not rich enough to pay the good rates.
- thatswrong0 5y ago
  I genuinely wonder what would be the best way to deal with the unrealized gains + taking out loans as untaxable income loophole. It seems like the current Democratic party strategy would be taxing unrealized gains over a certain amount but that still doesn't quite feel right..
  - nmfisher 5y ago
    I’ve said this a number of times before, but I still can’t see why loans > $1m against share-based collateral shouldn’t be taxed as income.
    - 1123581321 5y ago
      It’s because loans must be repaid. Perhaps there could be a fee on the collateral process itself.
      - dredmorbius 5y ago
        Possibly: tax the interest on those loans at the bank. Possibly count such loans against assets (reducing banks' lending capability). I'm not positive this works out, but: - Banks tend to be well-established, identifiable entities. - They are highly regulated and audited. The question I'm not certain of the answer is what the result of such a tax would be. I suspect such loans would tend to be crowded out or inerest rates increased (raising costs to the billionaire utilising this cash-out option). This seems to me along the lines of an HFT transaction tax, possibly operating similarly.
  - occamrazor 5y ago
    Taxing capital gains at nark-to-market values, with a flat rate (maybe 20-25%) and without exemptions or deductibles would go a long way towards fiscal equity.
    - watertom 5y ago
      The concept of “capital gains” in the U.S. is a joke, unless you buy stock directly from the company, or buy when the company goes public, there is no capital investment. Once the company sells stock to the public, further purchase or sale of stock is nothing more than buying/selling goods. When I buy stock on the stock market the company doesn’t get the money, the person who sells me the stock gets the money, and that’s not capital investment. Sale of stock should be taxed at each states tax rate, because it’s the buying and selling of a good, it’s not capital investment.
      - lotsofpulp 5y ago
        Capital gain is defined as an increase in the price of any capital asset, not just publicly traded stocks. https://www.investopedia.com/terms/c/capitalasset.asp https://www.investopedia.com/terms/c/capitalasset.asp
    - djbebs 5y ago
      You know what would go a long way towards fiscal equity? Cutting taxes on the richest to 1/6th of what they currently are. It's not the rich that arent paying their fair share here.
      - thatswrong0 5y ago
        Yep it's definitely those damn poor people who aren't pulling their weight
  - refurb 5y ago
    Loophole? How is it a loophole? It’s just kicking the can down the road. The equity gets sold and taxed eventually. The only “loophole” is inheritance with a stepped up basis, which every American gets. I’d be happy to get rid of that rule. No need for inheritance taxes, just make the estate pay all capital gains up death.
    - thatswrong0 5y ago
      > Amazon founder and CEO Jeff Bezos paid a true tax rate of 0.98% as his wealth grew by a staggering $99 billion between 2014 and 2018; he reported just $4.22 billion in reported income during the same period. I'm curious how I should rationalize that this is not in fact a giant loophole for billionaires. Bezos' wealth increased immensely such that he is now one of the richest people in the world, and yet his effective tax rate is far lower than anything you or I will ever see. If he needs "income", he can simply take out a low interest loan with his stock as collateral to pay for whatever he needs (yachts, spurious lawsuits against NASA, etc.). His stock is effectively cash, loans effectively "realize" his gains, and yet we don't treat any of it as income. There's a vast difference between the unrealized gains of not-filthy-rich people with 401ks / middling stock portfolios and the unrealized gains of filthy rich people who primarily take stock as income (which they do for the exact purpose of paying lower taxes). [0] https://www.forbes.com/sites/sarahhansen/2021/06/08/richest-americans-including-bezos-musk-and-buffett-paid-federal-income-taxes-equaling-just-34-of-401-billion-in-new-wealth-bombshell-report-shows/?sh=1b5cda287fe1 https://www.forbes.com/sites/sarahhansen/2021/06/08/richest-...
      - QuarterReptile 5y ago
        First, you can look at "true tax rate", which has nothing to do with how taxes are calculated (as described in your linked article). .98% sounds like he paid just under 1 billion on 4.22 billion of reported income (or just under 25%). I guess it sucks to be Bezos, because he spent more in one year on taxes than I'll have to pay in my life.. I'm going to go out on a limb and suspect that figure is not AGI, but total income. I suspect he had many deductible expenses like donations to charity, though 25% isn't that low since the top marginal bracket for capital gains is 20%. I guess I'm curious how he paid so much in taxes...
  - 3finmunchousen 5y ago
    https://en.m.wikipedia.org/wiki/Guillotine https://en.m.wikipedia.org/wiki/Guillotine Alternatively, tax consumption over a certain threshold as though spending is income. Effectively instate a federal sales tax after one has spent $X dollars.
    - roenxi 5y ago
      There is a section on that page titled "Reign of Terror" talking about how eventually the revolutionaries were also guillotined. Although violence can resolve a situation, negotiation with only the threat of violence gets much better results.
- feelandcoffee 5y ago
  This is the case of "Buy, Borrow, Die" or "kick the can". The top 0.01% paying a lower percentage of taxes than even the lower tax bracket worker class. If you are a wharever-ionaire you could put your gains in index S&P 500 shares, then use them as collateral, paying everything you need with credit and having a $1 annual salary. So technically, that $1 it's their only income to the IRS. But what about interest? with that collateral, you have a special rate close to (or even lower than) inflation. Then you die, the bank takes your shares to pay your debt, and that's it. https://www.wsj.com/articles/buy-borrow-die-how-rich-americans-live-off-their-paper-wealth-11625909583 https://www.wsj.com/articles/buy-borrow-die-how-rich-america...
  - GDC7 5y ago
    but that isn't very smart strategy because it prevents you from spending every dollar that you have ever earned. At some point you want to open the floodgates so you don't leave any quality of life on the table. You can't do that on margin loans, whereas you can if you are able to engineer a tax efficient way to cashout without paying capital gain tax
    - nikitaga 5y ago
      Nobody who uses this strategy will come even close to spending every dollar that they earned, they spend all they want yet still end up leaving all their wealth to their kids when they die.
      - GDC7 5y ago
        > Nobody who uses this strategy will come even close to spending every dollar that they earned But why? It's a lot of quality of life left on the table.
        yifanl 5y ago
        After the first hundred million dollars spent on personal expenditures, what material gains to quality of life are there?
- zo1 5y ago
  I believe "taxation is theft" out of moral and ethical reasons. It's not something I just pulled out of nowhere because I don't like paying taxes. The problem here is as always the government, which is not doing as much as we'd like and has supposedly gotten captured by bad individuals. We can't have our cake and eat it. And despite being against taxation I'm all for flat or proportional taxation, while we have it. This whole mess arguably came about because we wanted the ability to make the rich pay more than the rest of us, and then while we were at it decided to use taxation to manipulate the behavior of the public. And look how it turned out, the market spoke and found optimal solutions around taxation, and unfortunately it only works for the wealthy. It's like shaking our fists at the sky because the rain caused a lake and mosquitos bred there. /rant
  - andrepd 5y ago
    Taxes are not the evil gobernmint coming to "steal" the money you made alone. It's a price for living in a society that enabled you to make the money in the first place. By all means, I'm in favour that anyone can voluntarily opt-out of the social contract and go live in a cabin in the woods unmolested. But if you don't, then you need to pay taxes and obey laws.
  - SturgeonsLaw 5y ago
    Would you still think taxation is theft if the government was acting as a responsible steward of tax money, and spending it in ways that improve the lives of the citizenry without running up a huge debt?
    - maccolgan 5y ago
      Ideally it would be spending an amount of money that individuals can also afford to spend themselves, that'd be the fairest, but that hardly ever happens...
      - JetSpiegel 5y ago
        How do you build a railroad as an individual? How do you pay for NASA as an individual?
- roenxi 5y ago
  That article is misleading - there are no scenarios where a billionaire is going to withdraw their wealth as income where it might be subject to an income tax. Of course the amount of income tax they pay is tiny and comparable to a multi-millionaire. That is the level of income where all their material wants are met. Even ignoring taxes why would anyone ever want to get paid billions dollars in a direct cash transfusion? Nothing they would be buying regularly costs that much! They should be leading with how much of the tax burden the billionaires are responsible for shouldering, not how much they are shouldering via one specific tax that isn't there to tax them. Income tax isn't for business owners, it is for people who earn an income!
  - taurath 5y ago
    Sure, but then all their real estate, cars, etc is also there and tied to a business. They never have to take money out for any reason, and if they do it’s just forever rolling over low interest loans. Besides, the money amount never goes down unless there’s a big crash.
    - moonchrome 5y ago
      Don't know how it works in the US but here if you own property or cars etc. through business you can't use them for personal reasons and if you get audited this is considered tax evasion. I would be surprised if the US is any different.
      - GDC7 5y ago
        This is very much like the speed limit on highways. You can't put a private investigator on the tail of every business owner. Personal expenses will be justified as business expenses, it's a matter of catching the very big and obvious cases, doing it so very publicly with the help of the press and try to scare all the other business owners in order to scale down the amount of personal expenses that they claim as business expenses
        Aerroon 5y ago
- geomark 5y ago
  And then you have otherwise smart people believing taxation is not theft. Calling people dumb because you don't agree with them...isn't that one of those logical fallacy things?
- refurb 5y ago
  Your article says Elon paid 33% which was half a billion in taxes on a $1.5B stock sale. That’s not single digit.
- bojangleslover 5y ago
  They don't pay tax because they don't earn any money. When they sell assets they pay capital gains like everyone else. Then it's taxed when they die at a hell of a lot higher than single digits. Not saying system is perfect but exaggerating the problem is definitely not the best way to fix it.
  - chockablock 5y ago
    Not true in the US where asset values are ‘stepped-up’ when passing to heirs avoiding all tax on gains.
    - djbebs 5y ago
      That step up is pointless since upon death you pay estate tax which is significantly higher
  - naasking 5y ago
    > Then it's taxed when they die at a hell of a lot higher than single digits. It's not an exaggeration to say the rich rarely actually pay these taxes you describe. There are innumerable ways around it.
- spurgu 5y ago
  > Hell, the person who used to be president was paying that or less. You need to have income to pay income tax.
RNCTX 5y ago
You mean the Washington Post owned by one of those people who would be in the data?
MomoXenosaga 5y ago
The American people worship their rich. There would be no outrage no matter what. See Trump.

taurath 5y ago

Its pretty well known by now that billionaires pay an effective single digit tax rate in the US. https://www.propublica.org/article/the-secret-irs-files-trove-of-never-before-seen-records-reveal-how-the-wealthiest-avoid-income-tax https://www.propublica.org/article/the-secret-irs-files-trov... Hell, the person who used to be president was paying that or less. They have at least 60% of congress paid for in order to not raise taxes or close loopholes as well. Then you have so many otherwise smart people believing that taxation is theft, when they're just not rich enough to pay the good rates.

thatswrong0 5y ago
I genuinely wonder what would be the best way to deal with the unrealized gains + taking out loans as untaxable income loophole. It seems like the current Democratic party strategy would be taxing unrealized gains over a certain amount but that still doesn't quite feel right..
- nmfisher 5y ago
  I’ve said this a number of times before, but I still can’t see why loans > $1m against share-based collateral shouldn’t be taxed as income.
  - 1123581321 5y ago
    It’s because loans must be repaid. Perhaps there could be a fee on the collateral process itself.
    - dredmorbius 5y ago
      Possibly: tax the interest on those loans at the bank. Possibly count such loans against assets (reducing banks' lending capability). I'm not positive this works out, but: - Banks tend to be well-established, identifiable entities. - They are highly regulated and audited. The question I'm not certain of the answer is what the result of such a tax would be. I suspect such loans would tend to be crowded out or inerest rates increased (raising costs to the billionaire utilising this cash-out option). This seems to me along the lines of an HFT transaction tax, possibly operating similarly.
- occamrazor 5y ago
  Taxing capital gains at nark-to-market values, with a flat rate (maybe 20-25%) and without exemptions or deductibles would go a long way towards fiscal equity.
  - watertom 5y ago
    The concept of “capital gains” in the U.S. is a joke, unless you buy stock directly from the company, or buy when the company goes public, there is no capital investment. Once the company sells stock to the public, further purchase or sale of stock is nothing more than buying/selling goods. When I buy stock on the stock market the company doesn’t get the money, the person who sells me the stock gets the money, and that’s not capital investment. Sale of stock should be taxed at each states tax rate, because it’s the buying and selling of a good, it’s not capital investment.
    - lotsofpulp 5y ago
      Capital gain is defined as an increase in the price of any capital asset, not just publicly traded stocks. https://www.investopedia.com/terms/c/capitalasset.asp https://www.investopedia.com/terms/c/capitalasset.asp
  - djbebs 5y ago
    You know what would go a long way towards fiscal equity? Cutting taxes on the richest to 1/6th of what they currently are. It's not the rich that arent paying their fair share here.
    - thatswrong0 5y ago
      Yep it's definitely those damn poor people who aren't pulling their weight
- refurb 5y ago
  Loophole? How is it a loophole? It’s just kicking the can down the road. The equity gets sold and taxed eventually. The only “loophole” is inheritance with a stepped up basis, which every American gets. I’d be happy to get rid of that rule. No need for inheritance taxes, just make the estate pay all capital gains up death.
  - thatswrong0 5y ago
    > Amazon founder and CEO Jeff Bezos paid a true tax rate of 0.98% as his wealth grew by a staggering $99 billion between 2014 and 2018; he reported just $4.22 billion in reported income during the same period. I'm curious how I should rationalize that this is not in fact a giant loophole for billionaires. Bezos' wealth increased immensely such that he is now one of the richest people in the world, and yet his effective tax rate is far lower than anything you or I will ever see. If he needs "income", he can simply take out a low interest loan with his stock as collateral to pay for whatever he needs (yachts, spurious lawsuits against NASA, etc.). His stock is effectively cash, loans effectively "realize" his gains, and yet we don't treat any of it as income. There's a vast difference between the unrealized gains of not-filthy-rich people with 401ks / middling stock portfolios and the unrealized gains of filthy rich people who primarily take stock as income (which they do for the exact purpose of paying lower taxes). [0] https://www.forbes.com/sites/sarahhansen/2021/06/08/richest-americans-including-bezos-musk-and-buffett-paid-federal-income-taxes-equaling-just-34-of-401-billion-in-new-wealth-bombshell-report-shows/?sh=1b5cda287fe1 https://www.forbes.com/sites/sarahhansen/2021/06/08/richest-...
    - QuarterReptile 5y ago
      First, you can look at "true tax rate", which has nothing to do with how taxes are calculated (as described in your linked article). .98% sounds like he paid just under 1 billion on 4.22 billion of reported income (or just under 25%). I guess it sucks to be Bezos, because he spent more in one year on taxes than I'll have to pay in my life.. I'm going to go out on a limb and suspect that figure is not AGI, but total income. I suspect he had many deductible expenses like donations to charity, though 25% isn't that low since the top marginal bracket for capital gains is 20%. I guess I'm curious how he paid so much in taxes...
- 3finmunchousen 5y ago
  https://en.m.wikipedia.org/wiki/Guillotine https://en.m.wikipedia.org/wiki/Guillotine Alternatively, tax consumption over a certain threshold as though spending is income. Effectively instate a federal sales tax after one has spent $X dollars.
  - roenxi 5y ago
    There is a section on that page titled "Reign of Terror" talking about how eventually the revolutionaries were also guillotined. Although violence can resolve a situation, negotiation with only the threat of violence gets much better results.
feelandcoffee 5y ago
This is the case of "Buy, Borrow, Die" or "kick the can". The top 0.01% paying a lower percentage of taxes than even the lower tax bracket worker class. If you are a wharever-ionaire you could put your gains in index S&P 500 shares, then use them as collateral, paying everything you need with credit and having a $1 annual salary. So technically, that $1 it's their only income to the IRS. But what about interest? with that collateral, you have a special rate close to (or even lower than) inflation. Then you die, the bank takes your shares to pay your debt, and that's it. https://www.wsj.com/articles/buy-borrow-die-how-rich-americans-live-off-their-paper-wealth-11625909583 https://www.wsj.com/articles/buy-borrow-die-how-rich-america...
- GDC7 5y ago
  but that isn't very smart strategy because it prevents you from spending every dollar that you have ever earned. At some point you want to open the floodgates so you don't leave any quality of life on the table. You can't do that on margin loans, whereas you can if you are able to engineer a tax efficient way to cashout without paying capital gain tax
  - nikitaga 5y ago
    Nobody who uses this strategy will come even close to spending every dollar that they earned, they spend all they want yet still end up leaving all their wealth to their kids when they die.
    - GDC7 5y ago
      > Nobody who uses this strategy will come even close to spending every dollar that they earned But why? It's a lot of quality of life left on the table.
      - yifanl 5y ago
        After the first hundred million dollars spent on personal expenditures, what material gains to quality of life are there?
zo1 5y ago
I believe "taxation is theft" out of moral and ethical reasons. It's not something I just pulled out of nowhere because I don't like paying taxes. The problem here is as always the government, which is not doing as much as we'd like and has supposedly gotten captured by bad individuals. We can't have our cake and eat it. And despite being against taxation I'm all for flat or proportional taxation, while we have it. This whole mess arguably came about because we wanted the ability to make the rich pay more than the rest of us, and then while we were at it decided to use taxation to manipulate the behavior of the public. And look how it turned out, the market spoke and found optimal solutions around taxation, and unfortunately it only works for the wealthy. It's like shaking our fists at the sky because the rain caused a lake and mosquitos bred there. /rant
- andrepd 5y ago
  Taxes are not the evil gobernmint coming to "steal" the money you made alone. It's a price for living in a society that enabled you to make the money in the first place. By all means, I'm in favour that anyone can voluntarily opt-out of the social contract and go live in a cabin in the woods unmolested. But if you don't, then you need to pay taxes and obey laws.
- SturgeonsLaw 5y ago
  Would you still think taxation is theft if the government was acting as a responsible steward of tax money, and spending it in ways that improve the lives of the citizenry without running up a huge debt?
  - maccolgan 5y ago
    Ideally it would be spending an amount of money that individuals can also afford to spend themselves, that'd be the fairest, but that hardly ever happens...
    - JetSpiegel 5y ago
      How do you build a railroad as an individual? How do you pay for NASA as an individual?
roenxi 5y ago
That article is misleading - there are no scenarios where a billionaire is going to withdraw their wealth as income where it might be subject to an income tax. Of course the amount of income tax they pay is tiny and comparable to a multi-millionaire. That is the level of income where all their material wants are met. Even ignoring taxes why would anyone ever want to get paid billions dollars in a direct cash transfusion? Nothing they would be buying regularly costs that much! They should be leading with how much of the tax burden the billionaires are responsible for shouldering, not how much they are shouldering via one specific tax that isn't there to tax them. Income tax isn't for business owners, it is for people who earn an income!
- taurath 5y ago
  Sure, but then all their real estate, cars, etc is also there and tied to a business. They never have to take money out for any reason, and if they do it’s just forever rolling over low interest loans. Besides, the money amount never goes down unless there’s a big crash.
  - moonchrome 5y ago
    Don't know how it works in the US but here if you own property or cars etc. through business you can't use them for personal reasons and if you get audited this is considered tax evasion. I would be surprised if the US is any different.
    - GDC7 5y ago
      This is very much like the speed limit on highways. You can't put a private investigator on the tail of every business owner. Personal expenses will be justified as business expenses, it's a matter of catching the very big and obvious cases, doing it so very publicly with the help of the press and try to scare all the other business owners in order to scale down the amount of personal expenses that they claim as business expenses
      - Aerroon 5y ago
geomark 5y ago
And then you have otherwise smart people believing taxation is not theft. Calling people dumb because you don't agree with them...isn't that one of those logical fallacy things?
refurb 5y ago
Your article says Elon paid 33% which was half a billion in taxes on a $1.5B stock sale. That’s not single digit.
bojangleslover 5y ago
They don't pay tax because they don't earn any money. When they sell assets they pay capital gains like everyone else. Then it's taxed when they die at a hell of a lot higher than single digits. Not saying system is perfect but exaggerating the problem is definitely not the best way to fix it.
- chockablock 5y ago
  Not true in the US where asset values are ‘stepped-up’ when passing to heirs avoiding all tax on gains.
  - djbebs 5y ago
    That step up is pointless since upon death you pay estate tax which is significantly higher
- naasking 5y ago
  > Then it's taxed when they die at a hell of a lot higher than single digits. It's not an exaggeration to say the rich rarely actually pay these taxes you describe. There are innumerable ways around it.
spurgu 5y ago
> Hell, the person who used to be president was paying that or less. You need to have income to pay income tax.

RNCTX 5y ago

You mean the Washington Post owned by one of those people who would be in the data?

MomoXenosaga 5y ago

The American people worship their rich. There would be no outrage no matter what. See Trump.