Nathan Bomey explained the tax avoidance strategies of the super-rich in an article in USA Today.
Tax evasion is illegal but tax avoidance is not. Clever accountants can find loopholes and strategies to reduce the taxes of their clients.
It is far better to be an investor than to have a salary.
Wealthy Americans are the largest source of underreported income, according to IRS data analyzed by researchers. The top 1% of American taxpayers account for about 34% of misreported income, according to a study published in the National Tax Journal.
Many wealthy Americans deploy complex, arcane but wholly legal strategies to minimize their tax obligations. Some use fairly straightforward strategies that allow them to minimize their taxes under the tax code…
It’s much harder to avoid taxes on your paycheck than on your investments.
In general, the federal government taxes regular wages at higher rates than investment income. The long-term capital gains tax rate maxes out at 20%, and the highest income tax rate is 37%.
In other words, if you make a salary of $1 million, the government keeps $370,000. If you make $1 million on stocks or similar investments, the government keeps $200,000.
Taxes on assets such as stocks and real estate investments aren’t owed until they are sold. That helps people such as Jeff Bezos, the Amazon CEO, founder and richest person in the world, grow their wealth rapidly while avoiding a huge tax bill. Then they can be strategic about when they sell.
Very wealthy people have lobbyists. They make large campaign contributions to key members of Congress, who protect the interests of their donors.
It is not fair, and Trump’s tax returns should make more people aware of the need for genuine tax reform, not the kind of sham tax plan passed by Trump and Mitch McConnell to benefit corporations and the wealthy.
No, no, no, no!
“In other words, if you make a salary of $1 million, the government keeps $370,000. If you make $1 million on stocks or similar investments, the government keeps $200,000.”
The rates quotes are marginal tax rates. Everyone pays the same rates. So much on the first $15,000, so much more on the next segment, etc. The rates quoted are only paid on the highest amount earned above a certain level (they change), now the 37% only applies to earnings above roughly $250,000 and not on any of the first $250,000.
True, but what about the fact that dividends are taxed at lower rates than salaries? Why are we giving tax incentives to inflate Wall Street instead of incentivizing investment in Main Street to make the economy work better?
Those of us whose salaries are fixed have very few means of tax avoidance. Our incomes are reported, and we pay accordingly. Our deductions are defined and not left to anyone’s discretion. The big windfall for teachers is a measly $250 deduction for out of pocket classroom expenses.
I can’t quite remember the exact words from the debate the other night but Trump basically called ALL working class Americans STUPID because they pay taxes. He doesn’t think he should have to pay taxes and he doesn’t want to pay taxes because he is a real estate investor. So many loopholes were written into tax code to benefit big business and the wealthy from Reagan > Clinton eras that the average American is unable to understand how their taxes are calculated or used. I claim this is Taxation without Representation. Our tax $$$$ are supposed to be for the public good and for public infrastructure yet everything is crumbling around us….but big business is booming and the rich are getting richer. Trump was correct when he said the laws allow him to avoid paying taxes and that “they” (politicians/lawyers) let him get away with it. Time for EVERYONE to finally wake up to this scheme that robs us all of a decent life.
Our public assets, public schools and the USPS, are under siege, by the 1% whose goal is to transfer their values onto their own greedy pockets. The lack of regulation for those at the top allows them to cannibalize the services for everyone else. It is not that way in Europe where capitalism is tempered by a willingness of government to protect the common good including social safety nets. This country has too many ultra wealthy people that write the rules to serve their own interests, and the rest of us are left to fight for scraps. Wall St, Silicon Valley and other assorted billionaires are calling the shots.
I know that I will take heat about my feelings about this, but when Bill-ary Clinton (yes….I said Billary…..because HRC was calling a lot of the shots while Bill was chasing skirts and living the high life!) took office, most of these tax loopholes were enacted. This is one of the reasons that I felt held hostage to vote for HRC in 2016 and I resent it. Time for real change!!
We need to vote out the extremist conservatives as well as some of the corporate democrats and replace them with more progressives. Our best hope of accomplishing this is to have a better participatory democracy with a much higher rate of voting. Too many Americans are more interested in watching the Kardashians than voting. It’s a distraction. In order for the people to have real power, we need an informed electorate.
White House today announced the appointment of leader of Judicial Watch, an extremist rightwing group, to a panel to oversee judges in DC courts, with power to remove them. This is like putting the leader of the Proud Boys on U.S. Commission on Civil Rights.
I don’t think voter participation is low because of being distracted. I think it’s low because for so long, our vote has not mattered and people think “why bother”. We elect people who campaign for the common good and then they change course when elected OR they get out voted by those keeping the free market machine rolling right along.
I agree that some people have given up on voting because they are frustrated. Yet, it is the only peaceful way to enact change
LisaM,
Bill Clinton raised taxes on the rich. So did Obama.
So I don’t understand blaming the dems for this. What “tax loopholes” are you talking about? The Capital Gains Tax isn’t a loophole.
The crazy thing is that what happens is that the Democrats, when they have the Congressional support, raise taxes on the rich. This has happened in almost every administration. Then the Republicans win the House, and there is some compromise, and then the angry progressives help elect a Republican president who makes tax policy that favors the rich completely.
Then, when our country is entirely bankrupt under the Republican presidents, a democrat comes in and raises taxes on the rich again.
The big difference between Democrats and Republicans that I have seen in my lifetime is not that the policies passed by the democrats are the perfect progressive policies. But when there are problems, the democrats want to fix them.
The Republicans also pass policies they claim will do what they intend (help the economy!) But when they are bad, they double down because their intent is not to fix but to win,even if it causes harm.
Trump and COVID-19 are a perfect example of how Repulicans govern. For power and to enrich themselves when they can.
Democrats response to pandemics, even it is wrong at first, is about using government to do good. So yes, de Blasio was wrong not to close down schools earlier. But then he did, and kept trying to do the right thing. That includes making mistakes, but when realizing it is a mistake, trying to fix it.
Republicans only want to fix their mistakes when they and their rich overlords suffer. Otherwise, it is all about power.
The people who say “it doesn’t matter who wins” don’t even notice that Social Security and Medicare and Environmental protections and all the things that make the US a lot more like western Europe than Latin America are all because democrats were elected with large majorities so that they could do good.
Bernie Sanders has stayed in government – including running for Senator – because it matters. AOC and her squad entered politics because they knew it matters.
But the far right has taken over country because some voters believe their propaganda over Bernie Sanders and AOC!
That wonderful ‘tax cut for the middle class’ that took place in 2017 is a disaster for the middle class.
I had around $8,000 in medical expenses because I do a lot of alternative medicine work and none of it is covered by Medicare. I’ve always deducted medical expenses but NOT after the huge ‘tax cut’. My tax advisor said the we now have to have 25% of our salary in medical expenses to be able to deduct any of it.
I earned over $32,000 in salary and other earnings so I couldn’t declare any of my $8,000 medical.
IF i had purchased a jet airplane for millions of dollars, that I can now deduct. Think I’ll wait until next year to consider purchasing a jet. It’s so hard to make such decisions when you are a retired teacher. I personally look at all of these luxurious private jets and just can’t make up my mind. /s
I wonder how DeVos managed to pick out 10 yachts.
FORGET the American paradigms, Worthless! Look at how Scandinavia and Western Europe not only tax their people and companies, but how those tax dollars come back to the taxpayer in the form of goods and services and public commons. PLEASE!
DUH!
Patriotic Times:
President Trump’s Policies Boost Lower, Middle Income Americans
Lower- and middle-income Americans gained ground in President Donald Trump’s first-term economy, while upper-income Americans gained the most under President Barack Obama, according to a survey by the Federal Reserve banking system.
“Families near the bottom of the income and wealth distributions generally continued to experience substantial gains in median and mean net worth between 2016 and 2019,” says the report, titled, “Changes in U.S. Family Finances from 2016 to 2019: Evidence from the Survey of Consumer Finances.”
The report says:
During the three years between the beginning of the 2016 and 2019 surveys, real gross domestic product grew at an annual rate of 2.5 percent, and the civilian unemployment rate fell from 5.0 percent to 3.8 percent.
Families at the top of the income and wealth distributions experienced very little, if any, growth in median and mean net worth between 2016 and 2019 after experiencing large gains between 2013 and 2016 [during the Obama administration].
The 2016-2019 survey does not include the economic damage caused by the coronavirus crash in early 2020.
The Federal Reserve report comes shortly after the Census Bureau report showed that wages for full-time male employees at the midpoint of the national wage scale grew by an average of 2.1 percent to $57,456 in 2019.
Median full-time female employees gained 2.5 percent, up to $47,299, says the September 15 report, titled, “Income and Poverty in the United States: 2019.”
According to the Federal Reserve report, the median income for families rose by five percent from 2016 to 2019. The median is the number at the midpoint between the top and the bottom. For example, the median income of 101 people is the dollar value earned by the 50th-ranked person in the middle.
The median people in the bottom quarter of personal wealth gained 11 percent in income, while people in the top quarter gained six percent, the reserve reported…
The report notes that college graduates did poorly from 2016 to 2019. The family median income level of high school graduates rose by six percent while the median or midpoint income of college graduates fell by two percent, according to the report.
“Families without a high school diploma saw a 9 percent increase in their median income, while families with a college degree saw a 2 percent decrease,” the report says…
But salaries for U.S. graduates are being suppressed by the large-scale inflow of visa workers into Fortune 500 jobs. Roughly 1.3 million foreign graduates hold jobs needed by American graduates, often at lower wages, because the visa workers are hoping to get green cards from their employers.
The report ignores the wage-boosting impact of Trump’s lower-immigration policy, which forces employers to compete for workers by offering higher wages.
There is overwhelming evidence that migrants displace many Americans and lowers many people’s wages — even as immigration also expands the scale of the economy, raises the number of jobs, and boosts the stock market…
But Joe Biden’s 2020 plan includes several proposals to expand the inflow of foreign workers and consumers into the United States. He promises to let mayors import foreign workers for local jobs, let companies import more visa workers for college jobs, expand the inflow of chain-migration migrants, suspend immigration enforcement against illegals, dramatically increase the inflow of poor refugees, and also provide more health care and other aid to arriving migrants.
Any huge inflow of migrants will lower Americans’ wages, transfer more wages to investors, shift jobs from the interior states to the coasts, reduce investment in wealth-generating technology, and exacerbate the chaotic diversity that has damaged U.S. society and politics…
https://t.co/gHlh42iUcd?amp=1
I clinked on the link at the bottom of your comment. It led me to Breitbart. I hope you don’t intend for us to take this report seriously.
NO, I KNOW IT CAME FROM BREITBART AND WAS A BUNCH OF LIES. The far right has SO many media named, “Patriotic Times”, PatrioticPulse, etc. It is all pure garbage. I figured people would see that so I didn’t comment. UGH!
I didn’t think so, but I have been questioned on comments in the past that people took seriously. Usually it was someone fairly new. I still forget to put snark alert, on occasion, but I guess I flap my gums enough, so most commenters know.