The Secret IRS Files: Trove of Never-Before-Seen Records Reveal How the Wealthiest Avoid Income Tax

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For the most part people pay tax on their earnings, not their net worth or the gross income of their company. As long as there is a way to avoid directly paying yourself from your own company or asset portfolio, tax can be avoided. It's also that there are some jurisdictions which don't have certain taxes, meaning they often avoid tax by doing the right economic activities in the most fitting jurisdiction.

The main reason most normal people don't consider such things is it often costs some amount of money to setup these tax avoidance schemes. It's often cheaper to just pay the tax than setup an avoidance scheme if you're not dealing with at least 6 figure sums on a regular basis. That said, a common one most people can do if they run a small company (like a solo contractor) is tax deductibles.
 
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"Elon Musk's wealth grew an estimated $13.9 billion between 2014 and 2018. He reported $1.52 billion in total income and paid $455 million in taxes. It equates to a 3.27 percent true tax rate."

So 29.93%. Do people really expect him to pay tax on what a third party company estimates his wealth is?
 
Cooler running said:
For the most part people pay tax on their earnings, not their net worth or the gross income of their company. As long as there is a way to avoid directly paying yourself from your own company or asset portfolio, tax can be avoided. It's also that there are some jurisdictions which don't have certain taxes, meaning they often avoid tax by doing the right economic activities in the most fitting jurisdiction.

The main reason most normal people don't consider such things is it often costs some amount of money to setup these tax avoidance schemes. It's often cheaper to just pay the tax than setup an avoidance scheme if you're not dealing with at least 6 figure sums on a regular basis. That said, a common one most people can do if they run a small company (like a solo contractor) is tax deductibles.
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Well yeh, as a contractor I paid myself a salary and took dividends - but to run a company and not have any taxable income from it at all appears quite peculiar and would most likely be investigated by HMRC over here, no?

So do the IRS not look into these guys?
 
Le Clandestin Brun said:
Well yeh, as a contractor I paid myself a salary and took dividends - but to run a company and not have any taxable income from it at all appears quite peculiar and would most likely be investigated by HMRC over here, no?

So do the IRS not look into these guys?
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Pay them just enough and they'll go after the easier targets. They do the same thing here. If you investigated any small business owner you'd find some falsehoods.
I bet that car that is a corporate expense is never used for routine private usage.
I bet those tools you bought aren't used for routine jobs at home.
I bet that workwear isn't actually just normal clothing.
 
[FnG]magnolia said:
There are tax people losing their mind over your misuse of the word 'evasion'. Well, actually they're probably not; more shaking their head.
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Only because their job relies on the distinction. The difference between tax evasion and tax avoidance is that the latter exploits loopholes in complex tax regulations and the former is more honest. The result is the same. The "tax people" you refer to make money by fitting tax dodging through the loopholes, so of course they consider it important.
 
jsmoke said:
It's wealth though not cash in bank, they create a lot of jobs and drive markets.
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anyon who owns stocks should get a tax discount then?

I thought that was banks and investment firms etc

Elon created a government funded and subsidised business :O

0.4billion from the gov, only 70mil of his own money

it's kinda ridiculous some of the biggest companies in the world can grow the revenues etc by 30% annually but still pay almost 0 taxes
 
"ProPublica has obtained a vast cache of IRS information showing how billionaires like Jeff Bezos, Elon Musk and Warren Buffett pay little in income tax compared to their massive wealth — sometimes, even nothing."

Income tax is paid on income, not wealth...

If they want to advocate for a wealth tax or better rules on estate taxes then they can go ahead, there isn't anything broken re: income tax, the wealthiest aren't "avoiding" income tax by virtue of the fact their wealth has increased thanks to (often unrealised) capital gains.
 
arknor said:
anyon who owns stocks should get a tax discount then?

I thought that was banks and investment firms etc

Elon created a government funded and subsidised business :O

0.4billion from the gov, only 70mil of his own money

it's kinda ridiculous some of the biggest companies in the world can grow the revenues etc by 30% annually but still pay almost 0 taxes
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Could be tied up in American exceptionalism, the government want American companies to succeed.
 
Sankari said:
If you're rich enough, you don't need to pay tax like regular people because your income is derived from sources that aren't taxed in the usual way; they are taxed, but via a different process which attracts a lower rate. This is not exactly news.
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I get what you are saying. An example would be that people in the UK can pay themselves dividends to a certain amount and only really pay 7.5% tax vs somebody on salary.

But their business would be expected to pay 19% corporation tax, as you can only pay dividends if your company makes a profit.

The main issue here is that Jeff Bezos paid very little personal tax, and Amazon paid very little corporation tax.

In the case of the super rich they are having their cake and eating it.
 
Longbow said:
"Elon Musk's wealth grew an estimated $13.9 billion between 2014 and 2018. He reported $1.52 billion in total income and paid $455 million in taxes. It equates to a 3.27 percent true tax rate."

So 29.93%. Do people really expect him to pay tax on what a third party company estimates his wealth is?
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Indeed it would appear that the authors have made up a new term of 'true tax rates which in essence taxes projected assets rather than income.

Would anyone want to pay extra tax every year based on the rise of average house price? It is an asset that does tend to rise in value, like shares and stocks.
I'd rather not.
Tax income, and tax the sources of income suitably, and enforce domiciling as I believe that foreign based investment companies and schemes are a vast basis of missing tax revenue.
This will stop individual pilfering.
 
Get yourself an accountant. I was self employed for a while and paid an accountant I think it was about five thousand a year to do my accounts ( probably double that now ). Thing is that I paid pretty much no Income Tax or National Insurance. They guy saved me far more than the five thousand a year I paid him.
 
Angilion said:
Only because their job relies on the distinction. The difference between tax evasion and tax avoidance is that the latter exploits loopholes in complex tax regulations and the former is more honest. The result is the same. The "tax people" you refer to make money by fitting tax dodging through the loopholes, so of course they consider it important.
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‘Tax avoidance’ doesn’t have to be a ‘loophole’, most of the time it isn’t and is actively set up that way or even encouraged. Think running a business as a sole trader/partnership vs a corporate. You can pay yourself in dividends at a lower rate than a salary/income.

Do you consider your pension to be tax avoidance? Because that’s effectively what it is at the end of the day. The income you put aside for your pension is taxed at a much lower rate. You avoid national insurance and spread the income to future years to take advantage of personal allowances in years after you have retired. If you didn’t put any money into a pension, you’d pay far more in tax over your lifetime.

As others have said many times already, you only pay INCOME tax on INCOME and not wealth. It would be like homeowners paying taxes on the yearly increase in the value of their home even if they haven’t sold it. When they sell the shares which is driving the growth in wealth, they’ll pay taxes on them.
 
Ayahuasca said:
Should have given this a trigger warning for half of GD.
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To be fair, its morally wrong. We live in a society that relies on people contributing a fair portion of their salary towards the shared upkeep of the country. People who are not doing that are utterly selfish and should be called out on it. The idea that just because you can then you should is a bizarre concept to me.

If everyone does what he does then the country would be an utter mess and a cesspit. But its OK because hes not breaking any laws eh.

Ultimately we have glorified and incentivised the self centred outlook that is so prevalent in todays society so its no surprise. **** the lot of you, I'm OK.
 
Angilion said:
That's an empty statement. You provide no evidence or reasoning for your claim and you don't even state this mysterious fallacy of yours.
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The fundamental fallacy is that an asset may have increased in value but you aren't actually richer until you sell it and realise the profit. And it is at that point when taxes become due. Remember that line in adverts about investments going down in value?
 
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