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Part 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

• dundarious 5y ago
  Part 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 ago
    His 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 ago
      Is 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 ago
        It'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 ago
        The 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.
      • skywal_l 5y ago
        Yes it is absurd because destroying the environment should not be considered a business expense. When a cab is fined for speeding, he cannot claim it as a business expense. He put lives at risk and that is not a reasonable business decision. It should be the same for oil spills. But guess what, tax codes are not written by taxi drivers...
      • micromacrofoot 5y ago
        It's absurd that a fine reduces your taxable income. It has very little impact on low-income people, but quite a high one if you're rich.
      • cycomanic 5y ago
        The argument is that someone rich enough can deduct fines from their tax, but a poorer person can deduct the speeding ticket from their tax. They will also not be able to deduct the lost salary for being locked up from their future tax bill. So this clearly creates an imbalance, rich and poor are treated differently before the law.
    • dr_orpheus 5y ago
      The article points out that fines are not tax deductible and gives the other example of BP and Deepwater Horizon > But such write-offs are legal, qualifying as “ordinary and necessary” business expenses. By contrast, fines and penalties are not deductible. Oil giant BP was able to deduct most of the settlement it reached with the government over the Deepwater Horizon spill because much of it went to address the environmental calamity, rather than to penalties for wrongdoing. And the other points in the article are the trust that was set up and the expenses for cleaning up the spill were what was deducted on taxes but they seemingly did not actually do anything to clean it up. > In 2012, the Coast Guard finally ordered Taylor to install a dome to contain the leak, but three years later, when Taylor Energy settled a lawsuit that forced it to start publicly disclosing more about its efforts, the company had not even finished the design.
      • skywal_l 5y ago
        They are damages so, indeed, it is unfair to compare them to fines, as all damages are tax deductible. I stand corrected. I am not trying to claim that the situation is illegal, merely that it is immoral (thus the human part). Putting aside the laws and codes, paying to fix a situation that you created through negligence should not be a normal business expense IMHO. I resent the idea that you can pay you way out of almost all situations unless the victim is richer than you.
    • beerandt 5y ago
      Expenses just reduce your net income. It costs money to cleanup an oil spill. The fines, afaik, are not tax deductible and are paid after calculating taxable income. This is true for any business, but I don't get why oil gets singled out by people describing this type of accounting as oil companies getting a government subsidy. It just means expenses were higher, so net income and profit are lower, which is the amount you pay taxes on. It's not that complicated. Now if the government pays for part of the cleanup, and for some reason that amount is forgiven for whatever reason (maybe as part of a settlement), then that forgiven debt is considered taxable income. It's standard businesses accounting, whether oil company or any other type of business.
  • db48x 5y ago
    You can frequently avoid paying taxes, but only at the cost of paying more money than your taxes would have been. It is usually preferable to pay the taxes instead.
    • dundarious 5y ago
      I think everyone, including the writer of the article, understands the mechanism at play. The point is that you can't justify something by just stating the mechanism. The article already states very clearly what is going on. > That’s in significant measure because she was able to transform money her company was compelled to spend cleaning up the oil spill into a perfectly legal nine-figure tax write-off for herself. OP's post was essentially a re-wording of this quotation, and as such, doesn't make a case beyond I guess an implied "that's legal so it's good, or at least just the way it has to work".
      • hogFeast 5y ago
        > I think everyone, including the writer of the article, understands the mechanism at play. That is the most interesting aspect of these articles. They are optimised for the title, not the content. Ignore the oil spill: if you lose $100m, you won't pay tax on that..."Billionaire pays no tax" is a better headline than "Billionaire loses lots of money". If you think that a wealth tax is a good idea, fine just say that...don't bother with the article. But the reason most journalists don't write about wealth taxes is because they lack the actual knowledge to understand why we don't have wealth taxes, they just write misleading bullshit about income taxes instead. This isn't just splitting hairs either. There is enough real information on inequality in the US (this is something that most journalists are very clever about...this is an article about inequality because journalists know that the target audience will interpret it that way). You don't need the bullshit articles. These articles misinform the public, they don't need to be written.
        • dundarious 5y ago
          The articles spends the majority of its time going over: - the mechanism for the tax write-off, by paying costs for cleanup rather than a fine - how wealthy the players involved really are - another mechanism for avoiding tax (transferal of property to a spouse on death avoids capital gains -- I'm not really interested in this one, but the article goes into it) - yet another mechanism (possibly unilaterally inflating company valuation after the transferal, then selling "for a loss" that perhaps is illegitimate -- remember the damaged rig was not part of the sale) - how sole-proprietership means the first write-off is a personal tax write-off too (I have no real objection to this) - how the company has dragged its feet tremendously in actually doing the cleanup (ample detail in the article) - how the estimate on the extent of the spill was perhaps 20 times too small (according to a government law suit) - how the Coast Guard had to hire its own contractor to finally install the protective dome The article definitely has some "look how wealthy these people are, they're not like us" aspects to it, especially in the first quarter or so, but the substance of it is about the triangulation of fire to "push for settlement with a trust for costs (tax write-off), push for that settlement to be based on an estimate that underestimates the true cost, push back on doing any of the actual work". (That being said, and maybe I missed it, but I don't think the article does a good job of explaining how that last part improves their bottom line -- do they get to recoup unspent funds from the trust?) But I don't see how you're getting to (paraphrasing) "just say you want a wealth tax, instead of this misleading bullshit". Seems like a reasonably good article on "doing bad things and largely getting away with it".
  • vorpalhex 5y ago
    Income Tax. Read that again but slowly and out loud. Income is Revenue (any money you take in) minus Expenditure (any money you put out). If you take in $100 and pay out $600, how much Income do you have?
    • dundarious 5y ago
      Have you read the article slowly, out loud, or otherwise? > It may be surprising that the costs of cleaning up an environmental disaster are tax-deductible. But such write-offs are legal, qualifying as “ordinary and necessary” business expenses. By contrast, fines and penalties are not deductible. Oil giant BP was able to deduct most of the settlement it reached with the government over the Deepwater Horizon spill because much of it went to address the environmental calamity, rather than to penalties for wrongdoing. You have offered no argument on one of the central questions at play, and are just condescendingly stating mechanisms that are already stated within the article, which crucially, also contains an actual argument and justification.
      • vorpalhex 5y ago
        Sure, so let's address the other point about cleanup not being a fine. If you go spill a bunch of oil, you'll get a fine (a punishment) and you will have to do your best to fix the damage (as much as it can be fixed). That cleanup is not a fine. It's distinct and separate. It is not the punishment. Cleanup is also not a determinate amount. There is no inspector you can fly out who can eyeball the damage and give you any meaningful estimate. It's done when it is done and it costs what it costs. That makes cleanup an expense, therefore diminishing income. If you think the fines should be higher then that's great. You can totally charge them more fines, and they can't treat that punishment as an expense. You can't however start weaponizing tax code against people you don't like. You can't use the cleanup as a second punishment.
        • dundarious 5y ago
          That is finally an actual argument. The problem with treating such environmental cleanup as just another cost, is that it's just another cost. It may be economical to just do the damage, or at least to cut corners such that there's an "unreasonable" risk of doing the damage. After the fact, you can always push for low-ball cost estimates, try to cap your max payout to that level, push back on actually doing the work and paying out (though as I've said in another comment, the article does a poor job of explaining if that's really happening). It's a case where "it's easier to ask forgiveness" has huge problems. I think tax write-offs should be for "legitimate costs of doing business". If the damage was foreseeable (which is not really dealt with in the article, except very obliquely below) and the company is not cooperative in cleanup, there's an argument that it should not be deemed a "legitimate cost of doing business", as to do so only encourages repeat events. It isn't second punishment. > It took years for the extent of the spill to become known. Taylor disclosed almost nothing about the accident and fought public records requests. The reality unspooled thanks to the persistence of environmental groups, investigative reporting, and revelations from a dizzying array of suits and countersuits. > According to a later review by the Coast Guard, Taylor Energy was “obstinate, difficult to deal with and verbally combative,” and preferred “to employ stall tactics over cooperation with an intention to confuse, delay or misdirect” the government.
• vanusa 5y ago
  Jeez, man -- you say "giving" here like it was a charitable contribution. In reality it was a negotiated settlement to avoid (I am assuming) criminal penalties. The point of the article was that it was only because of a loophole in the tax code that she was able to pass this settlement (a huge fine, basically) as an operating "loss". Think about that for a second. Suppose you misfile your taxes (intentionally or otherwise), and get hit with a $20k fine by the IRS. Do you get to write that $20k off as a "loss"? In exchange for "giving" that $20k to the government?