How the Wealthiest Americans Avoid Paying Their Taxes

HARK! · Jun 16, 2021

morningstar2651 said:
2021 Texas power crisis - Wikipedia

In February 2021, the state of Texas suffered a major power crisis, which came about as a result of three severe winter storms sweeping across the United States on February 10–11, 13–17, and 15–20; a massive electricity generation failure in the state of Texas; and resultant shortages of water, food, and heat. More than 4.5 million homes and businesses were left without power, some for several days. At least 151 people were killed directly or indirectly.

Although state officials including Republican governor Greg Abbott initially blamed the outages on frozen wind turbines and solar panels, inadequately winterized natural gas equipment was the primary cause. Also, Texas had isolated its power grid from the two major national grids in an effort to avoid federal oversight and deregulate its energy sector, making it difficult for the state to import electricity from other states.

The crisis drew much attention to the state's lack of preparedness for such storms, and to a report from U.S. Federal regulators ten years earlier that had warned Texas its power plants would fail in sufficiently cold conditions. Damages from the blackouts were estimated at $195 billion, making them the costliest disaster in Texas history. According to the Electric Reliability Council of Texas (ERCOT), the Texas power grid was "seconds or minutes away from" complete failure when partial grid shutdowns were implemented. During the crisis, some energy firms made billions in profits, while others went bankrupt, due to some firms being able to pass extremely high wholesale prices ($9,000/MWh, typically $50/MWh) on to consumers, while others could not, as well as this price being held at the $9,000 cap by ERCOT for allegedly two days longer than necessary; creating $16 billion in unnecessary charges.

Texas freeze delivers billions in profits to gas and power sellers

ERCOT overcharged power companies $16 billion for electricity during winter freeze, firm says

Griddy customers face $5,000 electric bills for 5 freezing days in Texas

...and?

HARK! · Jun 16, 2021

morningstar2651 said:
Me neither. I think it would be much better if the workers owned or controlled the means of production.

I was considering doing that with a LLC.

HARK! · Jun 16, 2021

KCfromNC said:
Where I live, industry uses the court systems, police and fire protection, government-funded health care, roads, power, and so on. The bigger ones also care about international treaties.

In Texas these services are provided in absence of an income tax.

HARK! · Jun 16, 2021

KCfromNC said:
I don't doubt that you believe this.

Axioms generally tend to be credible.

HARK! · Jun 16, 2021

Belk said:
Try having industry without supporting infrastructure.

Texas does it without income taxes.

Belk said:
Buzzwords. Neither communism nor fascism posits such.

You might want to read up on those subjects.

Belk said:
Name a modern first world country that manages to have a high functioning industry with tax revenue structured they way you suggest.

Texas!

The economy of the State of Texas is the second largest by GDP in the United States after that of California. It has a gross state product of $1.887 trillion as of 2019.[8] As of 2015, Texas is home to six of the top 50 companies on the Fortune 500 list and 51 overall (third most after New York and California).[9] In 2017, Texas grossed more than $264.5 billion a year in exports—more than the exports of California ($172 billion) and New York ($77.9 billion) combined.[10][11][12]

Economy of Texas - Wikipedia

Ken-1122 · Jun 16, 2021

Whyayeman said:
Did you notice the word 'proportionately' there?

Proportionate of what? The money they make, or the wealth they generate?

HARK! · Jun 16, 2021

Arcangl86 said:
While I suppose that is true, industry is dependent on many things that are currently provided by government and would be cost prohibitive if completely privatized. Things like roads, education, power grids, water mains, law enforcement etc.

I didn't mention privatization; but there is evidence that privatization, for example, of roads, can be cost effective. Texas has many toll roads. Those who don't use them, don't pay for them.

Arcangl86 said:
Texas also has sales and property taxes, both of which are quite high compared to most of the country.

The sales tax is a little on the high side; but I've found the property taxes to be lower than other prosperous areas.

Deborah Medina, as well as many other prominent Texans, have been working to abolish the property tax. The numbers can work.

Arcangl86 · Jun 16, 2021

HARK! said:
In Texas these services are provided in absence of an income tax.

Yes, and they make up for it with high sales taxes and high property taxes. The federal government has neither of those sorts of taxes, so they use entirely income taxes.

HARK! · Jun 16, 2021

Arcangl86 said:
Yes, and they make up for it with high sales taxes and high property taxes. The federal government has neither of those sorts of taxes, so they use entirely income taxes.

You're mistaken about high property tax. This was already covered.

What's wrong with the Feds raising revenue according to the Constitution?

Ken-1122 · Jun 16, 2021

GreekOrthodox said:
The issue is that the super wealthy do not pay a true tax rate as their wealth increased compared to an average income person pays. The difference is that income is taxed, but not wealth.

Yeah; when your money is invested, you don’t pay taxes on that investment until you cash it in. To be forced to pay taxes on investments before you are able to get a return on that investment will stop people from investing causing the economy to collapse.

GreekOrthodox said:
They can shelter their income and wealth in ways that the average person can't. For example, I can write off $3000 in stock losses per year, but the wealthy can strategically sell and buy various investments to reduce so that they have no taxable "income".

How is the wealthy “strategically selling and buying various investments to reduce” different than you writing off $3000 in stock losses per year?

RocksInMyHead · Jun 16, 2021

Ken-1122 said:
Proportionate of what? The money they make, or the wealth they generate?

To clarify, VAT in the UK is the equivalent of sales tax in the US. It's a (fairly high; ~20% iirc) tax on goods and services. However, unlike the US, since VAT is standard nationwide, it's generally included in prices as displayed. I've known a few Brits who have been confused and/or frustrated by the fact that sales tax is added to purchases in the transaction here rather than being displayed as part of the price on the shelf.

But I digress. Like any tax on goods, it affects the poor disproportionately. A 20% tax on a $100 item is much more financially difficult for someone who makes $10,000/year than it is for someone who makes $100,000/year.

The wealthier person certainly has the means to purchase more, and may thus pay more in actual tax dollars, but generally, those tax dollars will be a smaller percentage of his wealth than they are for the poorer person.

ETA: with regards to a flat rate tax on income or wealth, that is also regressive. Think about it - there's a certain level of income at which extra money literally does nothing for you besides make you more money. All of your needs are met and exceeded. If Jeff Bezos lost 20% of his wealth (or income) overnight, absolutely nothing would change in his daily life. He wouldn't lose any of his houses. Or his cars. Or his private jets. He would still be able to put food on his table. If someone worth $100,000 lost 20%, that would hurt. They might lose their car or have trouble making rent the next month, but they could probably squeak through. If someone worth $10,000 lost 20% of that, they'd likely end up on the streets

RocksInMyHead · Jun 16, 2021

grasping the after wind said:
What point would that be? That a person making a hundred thousand dollars a year is being oppressed in some way by paying 20% income tax?

Rather that the person making $10 billion is not paying enough.

RocksInMyHead · Jun 16, 2021

Ken-1122 said:
According to the Tax Foundation, the top 1% pays 38.5% of all federal income taxes, and the bottom 50% pays just 3%.

Summary of the Latest Federal Income Tax Data, 2020 Update

Do you agree with this? If not, what percentages do you believe they pay, and what do you base this on?

He was referring to a smaller proportion of their income/wealth (it can be hard to separate those things when it comes to the ultra-rich) rather than a smaller proportion of the overall tax bill

Belk · Jun 17, 2021

HARK! said:
Texas does it without income taxes.

As does Washington. Are you claiming you think the US could switch from income tax to sales tax?

HARK! said:
You might want to read up on those subjects.

Hi pot, this is kettle.

HARK! said:
Texas!

The economy of the State of Texas is the second largest by GDP in the United States after that of California. It has a gross state product of $1.887 trillion as of 2019.[8] As of 2015, Texas is home to six of the top 50 companies on the Fortune 500 list and 51 overall (third most after New York and California).[9] In 2017, Texas grossed more than $264.5 billion a year in exports—more than the exports of California ($172 billion) and New York ($77.9 billion) combined.[10][11][12]

Economy of Texas - Wikipedia

Texas is not a country.

GreekOrthodox · Jun 17, 2021

Ken-1122 said:
Yeah; when your money is invested, you don’t pay taxes on that investment until you cash it in. To be forced to pay taxes on investments before you are able to get a return on that investment will stop people from investing causing the economy to collapse.

How is the wealthy “strategically selling and buying various investments to reduce” different than you writing off $3000 in stock losses per year?

The strategy is the same, the scale is different. The general notion that long-term capital gains is taxed at a lower fixed rate than regular income is a sound one. It encourages people to save in various investment vehicles.

However, when you can live off of your investments, and I'm not talking about retirement income, the wealthy can use legal strategies that the average person simply can't utilize due to the wealth needed to make them work. For example, they can get stock options, which they use as collateral to borrow from a bank, which is now tax-free. If the stock price falls below that option, they can sell them at a loss to offset investments that did make a profit, and use that to the pay off the loan.

Whyayeman · Jun 17, 2021

I think it is unfair that the mega-rich have so many ways not to pay taxes that they routinely pay proportionately less than their share. I don't think the distinction between income and wealth is helpful in this context; it feeds the idea that the mega-rich are helpless in the face of their ever-swelling coffers.

We have had one biblical reference [Luke 21 vv1-4]. It is that bit about the widow's mite and one of several references to money in the Gospels. I am a bit surprised that nobody has offered this: It is easier for a camel to pass through the eye of a needle than for a rich man to enter the Kingdom of God [Mark 10 v25]

Sell everything and give it to the poor? Anathema to some here! My suggestion that the mega-rich might be politely invited to give (not all of) it away was called the worst idea in the world. Ah, well.

GreekOrthodox · Jun 17, 2021

Whyayeman said:
I think it is unfair that the mega-rich have so many ways not to pay taxes that they routinely pay proportionately less than their share. I don't think the distinction between income and wealth is helpful in this context; it feeds the idea that the mega-rich are helpless in the face of their ever-swelling coffers.

Morning, well good afternoon to you in the UK,

The reason I'm distinguishing between income and wealth is how the US tax system ordinarily works. Income, in the form of a paycheck, is taxed differently than wealth, that is investments, is. Because of those differences, the ultra-wealthy, (using one definition, investable assets over $30M USD) can use legal loopholes to disguise their income so that it is not taxed as income.

Even their philanthropic foundations can be used as legal loopholes.

How Tech Billionaires Hack Their Taxes With a Philanthropic Loophole (Published 2018)

grasping the after wind · Jun 17, 2021

RocksInMyHead said:
Rather that the person making $10 billion is not paying enough.

Which person making $10 billion are you referring to? If you have been made aware that this person is cheating and not paying what is required perhaps you should report that that to the IRS so they could take action?

KCfromNC · Jun 17, 2021

HARK! said:
In Texas these services are provided in absence of an income tax.

Texas takes 0 or less federal funds?

98cwitr · Jun 17, 2021

If we'd just repeal the 16th and replace it with the FAIR tax all of this concern and virtue signaling goes away.

How the Wealthiest Americans Avoid Paying Their Taxes

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