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kallend

How to encourage tax cheating by the very wealthy

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9 hours ago, billvon said:

The problem is that many of those ways are not quite legal - but are not illegal, either.

For example, let's say you create a 501c3 private foundation, intended to run a museum.  The museum is in a building you purchase.  You have a few things on exhibit, all relatively cheap art that you like.  You also have a back room with an entertainment space where you hold parties for donors, who are all your friends, and who rarely donate.  Big TV, an open bar, stripper poles.  The money in this foundation pays for the purchase of the property, utilities, for catering supplies for your parties, and for travel expenses that allow to fly first class all over the world to buy art you like.  You contribute your ordinary pay check to this foundation, and thus deduct all your income.

That is all technically legal.  It is also a way to party and travel all over the world tax free.  You can't get away with this, of course, unless you have those clever accountants you mention.  But if you are making $500K a year, the $185,000 you save on taxes pays for a lot of creative accounting.

Yep. No question that the tax laws need an overhaul. And like many other things more enforcement of existing laws is needed.

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10 hours ago, billeisele said:

So 

1) yes, there are plenty of legal ways to avoid paying taxes. Anyone that uses those rules is not cheating.
 

The tax code is written by the very people who have been bought and paid for by the beneficiaries of the tax code.

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1 hour ago, kallend said:

The tax code is written by the very people who have been bought and paid for by the beneficiaries of the tax code.

And there is the problem. Don't know the solution but term limits might help along with decreasing the power of lobbyists.

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14 hours ago, billeisele said:

So 

1) yes, there are plenty of legal ways to avoid paying taxes. Anyone that uses those rules is not cheating.

For instance, with a sole proprietorship of LLC, one can write off equipment investment, and so many other things. Those write offs reduce taxes. In some cases one can divert "profits" to a retirement account and essentially have zero taxable income. Anyone that has the ability to do that and doesn't, could be seen as stupid.


Some say that the most important company asset is a good tax accountant.

Hi Bill,

That reminds me of the old joke about the businessman wanting to hire an accountant.  He brought 3 of them in for an interview & asked each: 'What is 2 and 2?'

1st guy:  'It is 4.'

2nd guy:  'It could be 4 or it could be 22.'

3rd guy:  'What do you want it to be?'

Guess who got hired?

Jerry Baumchen

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8 hours ago, JerryBaumchen said:

Hi Bill,

That reminds me of the old joke about the businessman wanting to hire an accountant.  He brought 3 of them in for an interview & asked each: 'What is 2 and 2?'

1st guy:  'It is 4.'

2nd guy:  'It could be 4 or it could be 22.'

3rd guy:  'What do you want it to be?'

Guess who got hired?

Jerry Baumchen

Jerry - so true. My CPA college room mate says that the tax code is some black and some white with a whole lot of gray area. He's been involved in audits where his client was bending the rules but was consistent in how it was done. The IRS said no problem. If the client had used the rule one way one year and another way the next year it would have been a problem.

He always said that the most important thing is documentation to back up everything, even if you have to create it. If it is created please don't tell me. Just say here it is. The rules don't require that one makes smart decisions with their money just that they have the documentation.

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On 3/23/2021 at 8:00 AM, wmw999 said:

I'd be OK with simplifying the structure and decreasing the tax rate for small businesses. As in actual small businesses -- up to 50 employees (or some other reasonable number probably less than that), with net income (after materials and wages) of less than some other reasonable number.

And an even more radical and simplified one for even smaller -- 1-3 employees, less than $100,000 after wages of non-ownership employees. Yeah, that leaves family eligible, but there's lots of room for discussion.

Wendy P.

Hi, Wendy,

I have advocated in the past for a "maximum wage" for corporate officers. No owner, contractor, officer (or whatever) may receive in wages, incentives, bonuses or other compensation an annual amount to exceed (10x?  15x?) the annual gross income, incentives and bonuses of the (lowest-paid? median? average?) employee (direct hire or contractor) of the corporation.  

Okay, there are ways of wording that so that you don't count the medical and dental (for either group), and close loopholes.  If a corporate officer is getting stock options, then the employees should be getting the same options (lower scale). That way, when the officer makes a windfall when the stock soars, he/she doesn't go above the limit because all the employees have the same gains.

The intent is that the company/corporation pays its workers commensurate to what the income is.  If the company is doing well, give the employees a bonus so the base calculation goes up (and the officers then get their bigger bonuses). Structure the base pay scale to accommodate for leaner years.  Allow a minimum number of employees (to include maintenance and seasonal workers) to be above a certain number before this rule kicks in, to protect small businesses.

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4 hours ago, TriGirl said:

I have advocated in the past for a "maximum wage" for corporate officers. No owner, contractor, officer (or whatever) may receive in wages, incentives, bonuses or other compensation an annual amount to exceed (10x?  15x?) the annual gross income, incentives and bonuses of the (lowest-paid? median? average?) employee (direct hire or contractor) of the corporation.  

The entire system has to be looked at in terms of game theory - to "get around" the issue above, a company simply has to automate all the lower-level jobs so that the lowest paid employee is a relatively well-paid level, below that everything is robots. While unemployed people sleep rough in the streets.

The current system gives unequal negotiating leverage to the company - for a job, what's at stake for the company is a bit of revenue, but for the person being offered the job, what's at stake is their ability to survive. Therefore people will accept lower and lower salaries because the motivation to survive is REALLY strong.

A minimum wage, while a good intention, won't really fix it either - because companies will continue automating. It distorts the market by putting a minimum value on labour but not putting a minimum value on the goods and services generated by that labour, and when companies compete on price, the outcome is inevitable. A good social welfare system should replace (not add to, as many leftists think) minimum wage by ensuring food, shelter and healthcare for everyone. This removes companies' unequal negotiating leverage (which is powerful enough that even governments lose out!) over people's livelihoods, while removing the distortion on the value of people's labour, making the market more efficient.

Wishful thinking from me though. What will probably happen is continued technological development and automation will make the gap between rich and poor bigger and bigger, until...who knows.

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(edited)

i heard that japan had a system like that years ago, where the highest paid workers got 17x the lowest paid ones.  it was the best and most fair system i had ever heard about, and there is no downside to it.  no way they would automate everyone lower out of a job; if that were possible, it would already be done.  the only way to get more money when at the top is to give everyone more money.  take profits out of the equation altogether; those go to stockholders, employees get their compensation.  had it not been for the greed surge and excess at the beginning of the 80's, we may have been able to achieve that.  it will never happen now.

Edited by sfzombie13

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14 minutes ago, sfzombie13 said:

no way they would automate everyone lower out of a job; if that were possible, it would already be done.

Technology is improving and trust me, it is being done as fast as technologically possible. "It would already be done" is not a good argument because tech is always less capable in the past.

17 minutes ago, sfzombie13 said:

had it not been for the greed surge and excess at the beginning of the 80's

Humans are humans, they're not really any more greedy or less greedy at any other time and there's really not much evidence to support that this changes.

Dogs will eat themselves to obesity or even death if given an unlimited food supply, other animals will take much more than they need if given the opportunity. Humans aren't really much different. (And just to be clear - I love dogs, and also lots of humans, that doesn't mean I have to be blind to their flaws)

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5 hours ago, TriGirl said:

Hi, Wendy,

I have advocated in the past for a "maximum wage" for corporate officers.....  Allow a minimum number of employees (to include maintenance and seasonal workers) to be above a certain number before this rule kicks in, to protect small businesses.

 

1 hour ago, olofscience said:

The entire system has to be looked at in terms of game theory - to "get around" the issue above, a company simply has to automate all the lower-level jobs...

Wishful thinking from me though. What will probably happen is continued technological development and automation will make the gap between rich and poor bigger and bigger, until...who knows.

 

1 hour ago, sfzombie13 said:

i heard that japan had a system like that years ago, where the highest paid workers got 17x the lowest paid ones.  ...  had it not been for the greed surge and excess at the beginning of the 80's, we may have been able to achieve that.  it will never happen now.

No insult intended but you have all suggested classical theories of economic development and social equality. None of which is ideal but all of which attempt to achieve a social ideal.

Before any of those systems can be implemented. The society needs to have a common acceptance that the social system not only works. But that all people are working within that system. If there are "slackers" who want to live off the system it discourages the tax and income suppressed. If there are tax cheaters it encourages cheating. Sweden-Finland are closest to a common social-welfare system.

Greece the least.in Greece, "the percentage of the self-employed is twice as high as the European average. According to studies, the self-employed hide around 57-58.6% of their income, while salaried workers are only able to hide about 0.5-1%."

As long as there are those in America with a "I got mine" mentality. Tax policy that is broad with effective sanctions for evasion. Is the best income redistribution mechanism.

In other news: "The president will travel to Pittsburgh on Wednesday to detail a “Build Back Better” proposal that aides say will include $3 trillion in new spending and up to $1 trillion more in tax credits and other tax incentives."

Shortly thereafter there will be tax increases because pandemic spending and infrastructure. Have to be paid for.

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(edited)
5 hours ago, olofscience said:

Technology is improving and trust me, it is being done as fast as technologically possible. "It would already be done" is not a good argument because tech is always less capable in the past.

Humans are humans, they're not really any more greedy or less greedy at any other time and there's really not much evidence to support that this changes.

Dogs will eat themselves to obesity or even death if given an unlimited food supply, other animals will take much more than they need if given the opportunity. Humans aren't really much different. (And just to be clear - I love dogs, and also lots of humans, that doesn't mean I have to be blind to their flaws)

there most certainly is evidence of the changes of the '80s, that's when reagan deregulated almost everything.  also the first puppet president of the gop.  it is very well documented that the decade began the upward spiral of ceo pay, and the beginnings of the wall street fiasco that culminated in one of the bubbles that burst when it was unsustainable, the dotcom crash if i recall.  until that point in history, the 20th century had fairly stable lines of income for all classes in charts that i have seen, then it flattens out for workers.  just so you don't think i'm making it up, look at this link.

 

also, i just read an article on reddit that showed how they taught african parrots to use tokens to buy their food.  when they did, they found that the birds with all the tokens shared them with those who had none so that they all got to eat.  on the science sub if you want to look it up.  blows out the theory you have about animals and food greed.  it all depends on how the tests are conducted. 

Edited by sfzombie13

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15 minutes ago, sfzombie13 said:

blows out the theory you have about animals and food greed.  it all depends on how the tests are conducted. 

 I didn't say animals were incapable of altruism - there are lots of examples like the one you said above. Altruism has its own evolutionary advantages, as does selfishness. They're not mutually exclusive. And I don't really have a "theory" - my main point was that humans aren't really that different or special.

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20 minutes ago, sfzombie13 said:

just so you don't think i'm making it up, look at this link.

I don't think you're making it up, but I think we're missing each other's points here...

CEO pay is definitely out of control and I agree that it's an injustice that Amazon workers have to pee in bottles while Bezos' wealth keeps growing, but I think capping the pay is putting a band-aid over a cracked dam. The problem is how the entire game is set up, and how the players are motivated.

That said, I'd still support capping CEO pay though. It's not going to solve the entire thing, but it's slightly better than doing nothing.

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5 minutes ago, olofscience said:

 I didn't say animals were incapable of altruism - there are lots of examples like the one you said above. Altruism has its own evolutionary advantages, as does selfishness. They're not mutually exclusive. And I don't really have a "theory" - my main point was that humans aren't really that different or special.

Yes some are "I've got mine" and some are one for you and one for me. There are even those who not only want it all but would steal it all. They all get a vote.

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2 minutes ago, olofscience said:

I don't think you're making it up, but I think we're missing each other's points here...

CEO pay is definitely out of control and I agree that it's an injustice that Amazon workers have to pee in bottles while Bezos' wealth keeps growing, but I think capping the pay is putting a band-aid over a cracked dam. The problem is how the entire game is set up, and how the players are motivated.

That said, I'd still support capping CEO pay though. It's not going to solve the entire thing, but it's slightly better than doing nothing.

It requires laws that give shareholders and the board of directors greater authority and transparency. Monopolies, quasi-monopolies need greater oversight and scrutiny.

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5 minutes ago, olofscience said:

That said, I'd still support capping CEO pay though. It's not going to solve the entire thing, but it's slightly better than doing nothing.

 

 

7 minutes ago, olofscience said:

CEO pay is definitely out of control and I agree that it's an injustice that Amazon workers have to pee in bottles while Bezos' wealth keeps growing, but I think capping the pay is putting a band-aid over a cracked dam.

I would point out that people like Bezos are not billionaires because of high CEO pay. Amazon shares are widely held and are part of most people's pension funds. Workers being powerless have lead to revolutions in the past. Changing the rules to be more in favour of labourers is in the long term interest of all of us. Including Bezos. But if he wants Amazon to keep growing and being the best at what it does he has to play within the existing rules.

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1 minute ago, gowlerk said:

Changing the rules to be more in favour of labourers is in the long term interest of all of us. Including Bezos.

I agree, but Bezos is clearly not seeing that.

And that's exactly what I'm trying to do - I'm trying to warn people how companies are going to try to get around these more favourable worker rules. Not having much luck though...

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43 minutes ago, sfzombie13 said:

also, i just read an article on reddit that showed how they taught african parrots to use tokens to buy their food.  when they did, they found that the birds with all the tokens shared them with those who had none so that they all got to eat.  on the science sub if you want to look it up.  blows out the theory you have about animals and food greed.  it all depends on how the tests are conducted. 

Polly Share A Cracker? Parrots Can Practice Acts Of Kindness, Study Finds

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1 minute ago, olofscience said:

I agree, but Bezos is clearly not seeing that.

And that's exactly what I'm trying to do - I'm trying to warn people how companies are going to try to get around these more favourable worker rules. Not having much luck though...

Bezos sees all! Just kidding. He is most famous for the collection and analysis of all relevant information. Currently Amazon employs 1.3 million about 900,000 less than Walmart.

He uses traditional union busting and suppression tactics that other companies use.But will raise wages and conditions when forced to. Or when necessary. Amazon isn't successful and profitable w/o reason. Thats not to say that Bezos isn't human, re cheating on personal relationship and divorce. He understands the Washington lobby industry and his markets. He exploits individual states for best economic advantage. As do other companies.

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1 hour ago, olofscience said:

And that's exactly what I'm trying to do - I'm trying to warn people how companies are going to try to get around these more favourable worker rules. Not having much luck though...

And you are correct. I'm thinking the biggest new threat to workers is the so called "gig" economy. As practiced by the evil called Uber and the like. Also largely practiced by DZs, but for a completely different reason.

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2 hours ago, gowlerk said:

Yes, both are examples of terrible exploitation.

Exploitation, but i don't know about terrible. IMO buying a Huawei product or service is advancing an exploitation. A gig worker for Uber, Doordash, etc. can opt out of the equation at a moments notice. Or be looking for a better job between paying customers.

Someone held capture by a dominate party in the work relationship. Is by far worse.

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2 hours ago, wmw999 said:

The gig economy isn’t that different from piecework in the garment industry in the early 20th century. 
Wendy P. 

Agreed.  And as in both cases, some people get great benefit out of it, some do not get much benefit, and some are harmed.

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