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An Oil Spill Helped One Billionaire Avoid Paying Income Tax for 14 Years
- RicoElectrico 5y agoSo the main point is about questionable valuation of companies to avoid capital gains tax, right? Because if there's a company (in this case a sole proprietorship) that reports business expenses exceeding income, what is there to tax? Can some chime in to say what's the matter with tax write-offs portrayed as unfair gains? I mean, you still have to pay for the written-off stuff. As I understand, you're not better off just deciding to spend money on the basis of it being tax deductible. It'd make only sense if you're going to spend the money anyway.
- maxbond 5y agoAvoiding paying taxes because you lost money doing something destructive, that we as a society have to bear the cost for by living in a damaged environment, is a form of double dipping. It externalizes risks while keeping gains private.
- gruez 5y ago>Avoiding paying taxes because you lost money doing something destructive But in this case her being able to avoid paying taxes isn't really because she did something destructive, it's because her business did badly. If gambled all her money on meme stocks or whatever, and lost, she would be able to claim the same deduction. The main issue here seems to be that valuations can be fudged to maximize tax savings, not that you can avoid taxes after causing an oil spill. >It externalizes risks while keeping gains private. but her company already paid fines for it?
- lordnacho 5y agoI think the suggestion is that if the company had been fined, there wouldn't be a tax deduction. So why wasn't the settlement structured as a big fine, rather than a cleanup expense?
- rhino369 5y agoIf she's not adequately paying the costs, that issue should be resolved directly. But business deductions aren't really avoiding taxation. It's more accurately calculating your profits so the taxation can be calculated.
- titusjohnson 5y agoBecause if there's a company (in this case a sole proprietorship) that reports business expenses exceeding income, what is there to tax? The objection is to the idea that you can fuck up the world for everyone else and somehow mischaracterize the cleanup of that fuckup as a "normal business expense". The cleanup of an oil spill should come from post-tax profits, the burden should 100% be on the company. They made their profits from the extraction of common resources, they can restore the common resources to a healthily state. If it is economically unviable to do so, well, I guess you shouldn't be extracting those common resources then. If the company cannot afford to perform the cleanup it should be nationalized and sold off until the cleanup can be funded. I'm heavily in favor of this also applying to the Board and Investors in the company, there needs to be real consequences with being involved in world-destroying corporate fuckups. Ideally to the point that being on the Board of an Energy Company carries the very real consequence of flipping burgers for the rest of your days should the company you are supposed to be overseeing fucks up badly enough. The objection is to the idea that one can somehow come out ahead while also fucking the world up for everyone else. The objection is to the complete and total lack of Consequences for Actions.
- gruez 5y ago>The cleanup of an oil spill should come from post-tax profits, the burden should 100% be on the company. or maybe that's already baked into the fine? In other words fine for a bad: $1000 average tax rate: 30% new fine ("from post-tax profits"): $1300 alternatively, the "real" price of the fine: $769.23
- ChrisLomont 5y ago> mischaracterize the cleanup of that fuckup as a "normal business expense" An alternative is to go out of business and leave the total cleanup costs to society instead of paid for out of future profits. Which is better? >If the company cannot afford to perform the cleanup it should be nationalized and sold off until the cleanup can be funded. That mindset adds SuperFund sites - destroy the actor without being able to extract profits over longer periods of time. >Ideally to the point that being on the Board of an Energy Company carries the very real consequence of flipping burgers for the rest of your days And as you drive the risk so high capital will flee the sector, we'll ultimately have higher energy costs and worse technology as places that don't view the world so black and white use a nuanced approach. Then when energy is too costly for the poor, we can screw em or nationalize more things to help them, right? Seems this recipe has been tried places...
- dkdk8283 5y agoThere’s nothing wrong with write offs, about half of my income is paid to the government. I will always do everything I can to minimize my tax liability, and it’s natural to do so.
- lostlogin 5y agoDoes this include fighting to keep an oil well leaking?
- dkdk8283 5y agoThe climate comments here are virtue signaling. Like it or not it was completely legal. There is a price for everything, including human lives. Lose a limb? Eye? There’s a price for it all, even a oil spill. Whether it’s enough is an entirely different conversation.
- arrosenberg 5y ago> The climate comments here are virtue signaling. What a convenient way to shut down a valid argument. The whole thrust is that the incentives are encouraging negative externalities by legalizing them and providing tax breaks for polluting. I don't like it, and it should be called out - more people need to be aware that these things keep happening because it's benefitting some rich knob.
- sva_ 5y ago> Like it or not it was completely legal. Pretty sure that's the exact point that people are lamenting.
- lostlogin 5y ago> The climate comments here are virtue signaling. Like it or not it was completely legal. Laws come and go. It’s not hard to think of things that seem blatantly wrong now, that were formerly legal. Do we describe those that wanted the law changes that have since occurred as ‘virtue signalling’? Making money by pouring oil into the environment seems pretty clearly wrong. I’d argue that the behaviour of the protagonists in the article is virtue signalling, they are seemingly doing good things for their community while actually damaging the place.
- quantified 5y agoTreating a valuation as if it was actual income is highly misleading. If you inherit something without paying a tax in the gain in value, fine. But being able to declare your basis in it at the newly gained value allow taxes on its eventual sale to skip a massive gain in value. That is the sketchiest aspect IMHO.
- deleted 5y ago[deleted]
- mox1 5y agoPart of the 'avoiding taxes' equation here was giving the government (or setting aside) ~$600 million dollars to pay for oil spill related problems. So I mean she did avoid paying income tax, but only by giving up $600 million dollars to the government (which flowed back to her personal taxes to offset any income).
- dundarious 5y agoPart of the 'giving up $600 million dollars' equation here was creating an environmental disaster. I don't understand the relevance of your point.
- skywal_l 5y agoHis point is that fines are tax deductible. It's logical from an accountant point of view, but indeed absurd from a human point of view.
- LamdbaMamba 5y agoIs it absurd from a human point of view? 'Tax deductible' means lowering your taxable income because you incurred certain expenses. It's not just a free tax write off.
- arrosenberg 5y agoIt's definitely absurd that you lower your tax basis (i.e. the gains/income-based maintenance obligation we all have to keep the country running) because you paid a fine to offset an externality (which is a cost above, beyond, and unrelated to the maintenance cost of the country).
- woodruffw 5y agoThe absurdity is in its dampening of the (ostensible) punishment: you shouldn't be rewarded with a tax deduction for performing an incredible amount of pollution. Instead, you should be both fined and taxed.
- hondo77 5y agoIf Taylor Energy is now setup as a sole proprietorship, she is no longer protected by a corporate veil, right? Why aren't regulators aggressively figuring out ways to go after her personally? Maybe they are but it isn't covered in the article.
- DaveExeter 5y agoBillionaire dies at 67. Damn. Seems unfair.
- the_optimist 5y agoThis is a PR piece for politicians, yellow-journalism for uneducated people. Lots of adjacent color cultivating reader biases and eliding basic economics and accounting. But thumbs up, great journalism! Reminds me of how the same US pols that fundamentally drive infrastructure policy with the tax code chided companies for “not paying taxes” based on the very incentives they had designed.
- quantified 5y agoCan you enumerate some of the accounting issues? Also, “they” is not accurate. I suspect you already realize that lawmakers and the population governed by their laws have very different incentives and outcomes.
- the_optimist 5y agoYes. They’ve conflated the idea of the tax basis on transfer with the tax losses due to remediation. They’ve also mixed in remediation costs vs penalties. We also lack meaning attached to the word “income” used right up front. If it’s not taxable income, it’s not taxable income. Many of these concepts are not only entirely economically distinct, but also potentially functionally causal. For example, depending on when the environmental liability was introduced and to what responsible party, the woman may well have had an asset worth more than 1.2B, then has to sell it for less because of the very liability they decry. Is this an article about the tax consequences of direct environmental remediation? About the tax basis of inheritance? Of the environmental remediation reserves? Of the tax codes relationship to the continuation of the leak? Since they enlisted an expert tax consult, why didn’t the author let him explain what this article is supposed to be about, instead of writing about wall paper and Horatio Nelson. Perhaps only an excellent example of the Talebian perspective that one should not read journalism; when conveyed through the minds of non-experts, it often produces a sense of knowledge while failing to deliver understanding.
- the_optimist 5y ago“They” above was intended to reference individual politicians designing legislation but publicly castigating citizens who follow the very intent of the same code.
- CPLX 5y agoThis title is wildly misleading. The problem isn't the oil spill it's the treatment of step up basis on the death of her husband. That's where the real awfulness creeps in to this sequence of events. You have a person with this basic trajectory: Step 1 - Gets a $1 billion dollar asset, but claims it's worth $1.2 billion. No tax due, basis set at $1.2bn. Step 2 - Sells asset for $1 billion, which is what it's worth. Says hey I just lost $200MM Step 3 - Uses that loss to offset real gains from other businesses. Doesn't pay tax on anything at all It's Step 1 that's the problem. For fucking insane reasons no tax at all is due at all in this step AND there's no unrealized capital gains transferred either, so the billion dollars of wealth created will never be taxed as having accrued to anyone ever AND there's an incentive to overvalue it since there's no tax due. In a normal world people don't pretend assets they get are worth more than the really are since that's a gain they'll have to pay taxes on. This state of affairs is fundamentally indefensible. Even in our fucked up world of influence peddling I'm amazed the plutocrats were able to make this happen.
- IG_Semmelweiss 5y agoIt's unfortunate that propublica puts out in depth research.... over incendiary clickbaity content. If they put half the effort into investigating topics hidden in the shadows, i bet they would find Ghislaine-level revelations that would really make society better off. Instead they choose -like with this article- to coat the morality of accounting (in this case, expenses) behind some kind of nefarious activity, when in reality accounting rules are amoral because they are the same for everyone. But saying "the activity was inmoral, spilling oil is horrible, and the fine was too small!! " is not clickbaity enough it seems.
- yunohn 5y ago> when in reality accounting rules are amoral because they are the same for everyone. When is the last time you avoided 600M in taxes on your personal income, due to business “expenses” (fines)?
- littlestymaar 5y agoIs is possible to deduct your parking tickets from your income in the US?