»Why you cannot tax the rich. Or: Why you always tax the poor«
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 I start this topic because I want to point out a frequent misconception of socialism supporters: The truth is: You can not really tax the rich. Or to say it differently: The country's ability to tax the rich is very limited. Or: If you tax the rich then the poor will pay their taxes. The reason for this is that people are usually rich because they have companies. If you tax the rich then they increase their prices -> The buyers pay their taxes. The other reason is that the rich will leave the country. If a country starts to tax the rich and, say, 500 millionairs leave the country then this causes a feelable loss of tax money, thus the country must now tax higher the remaining poor. Moreover millionaires who leave, spend their millions somewhere else... another tax loss (since the country won't get VAT anymore). The rich nearly always CAN leave the country. It is the poor who HAVE TO stay. Moreover let me assure you that the richer you are the more possibilities you have to setup tax avoidance schemes, which are 100% legal. The methods are countless, but just to name a few to give you a picture:
There are only a few examples, where a rich wouldn't be able to lower his taxes. But usually every business can internationalize his company structure (= set up companies in other countries) to lower the taxes. posted by knn |
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| in-my-opinion.orgPoliticsPolitics and Crime (Assorted topics)Why you cannot tax the rich. Or: Why you always tax the poor |
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 knn: You can not really tax the rich. Then who should be taxed? Joe makes $1,000,000 a year. Jim makes $15,000 a year. The government needs $50,000 this year to meet its budget. So who do we tax --- Joe or Jim? Or, of course, we could do deficit spending. The US loves that tactic. knn: The other reason is that the rich will leave the country. So let's tax the poor! We know they can't leave and get away from us, so let's bleed 'em dry. And look out for all those millionaires leaving the United States of America in droves because they pay more taxes than the poor do... knn: Moreover let me assure you that the richer you are the more possibilities you have to setup tax avoidance schemes, which are 100% legal. The net result of a tax avoidance scheme is that the person utilizing it pays less in taxes, correct? So we tax the poor more heavily, meaning that the rich get richer. You state that the richer you are, the more possibilities you have to set up tax avoidance schemes. So when the rich get richer because we're taxing them less, they get more possibilities to set up tax avoidance schemes, meaning they will pay even less in taxes. Then, of course, because we're getting even less money from the ever-prospering wealthy, we have to tax the poor more heavily to make up for this. posted by Tiefling |
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 Tiefling: Then who should be taxed?
Joe makes $1,000,000 a year. This is already a wrong assumption. NOONE transfers 1 million dollar per year to their personal bank account (unless they are completely brain dead). There is simply nothing like that. If you have 10 companies and earn 1 million per year, then you wouldn't transfer 1 million onto your bank account but only as much as you need to buy food. If you'd like to buy 1 house for 1 million, then you simply set up a company in another country (e.g. Bahamas) and let the company buy that house. Tiefling: Joe makes $1,000,000 a year. Jim makes $15,000 a year. The government needs $50,000 this year to meet its budget. Another mistake. What does the country need 50'000 for? Tiefling: Then who should be taxed? ... So who do we tax --- Joe or Jim? OK, wait my wording mistake. Of course you can tax both, but you won't get the theoretical 100% of the taxes that you as a country think you could get. Just take the above example: The rich guy sets up a company or a trust and buys that house and rents it for 100 bucks per month. Not only that he saves himself taxes, not only that he saves himself inheritance tax, but also the company that bought the house can deduct investment expenses. But that's another story You CAN tax both but 1) you must make it a flat tax (= same % for rich and poor). Actually it should be a regressive tax rate to get more millionaires into your country, but that would open the door to other tricks 2) You should set a max. amount of tax that one should pay per year, say 100'000 USD. Tiefling: So let's tax the poor! We know they can't leave and get away from us, so let's bleed 'em dry. That's what happens now. The taxes rise, because the rich are leaving (or using tax schemes) while the poor can't. Tiefling: So we tax the poor more heavily, meaning that the rich get richer. Why do the rich get richer by taxing the poor? There is no connection. The rich get richer because of interest (= making money by having money) and because of the low inflation. Tiefling: So when the rich get richer because we're taxing them less, they get more possibilities to set up tax avoidance schemes, Setting up avoiding schemes does not cost much. Tiefling: Then, of course, because we're getting even less money from the ever-prospering wealthy, we have to tax the poor more heavily to make up for this. No, by lowering the tax you get more and more millionaires into your country, who buy more and more thus starting up the economy. If you have a country full of poor people then you have no economy at the end. posted by knn |
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knn: You CAN tax both but
1) you must make it a flat tax (= same % for rich and poor). Actually it should be a regressive tax rate to get more millionaires into your country, but that would open the door to other tricks Please also note, that WHILE IT SEEMS that the progressive tax rate taxes the rich, it in reality taxes also the poor. Why? Because as the employee wages are adjusted to inflation (= wages rise) the poor get into a higher tax rate band (= have to pay more taxes) without having more for their money. posted by knn |
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 Read "Anarchy, State and Utopia" by Robert Nozick. He talks about this stuff in his book. One of his main points of view is that the goverment should not take the role of a "Robin Hood" character; Stealing/taking from the rich and giving to the poor... posted by Pawnatron |
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knn: This is already a wrong assumption. NOONE transfers 1 million dollar per year to their personal bank account According to Forbes magazine, Jennifer Aniston made $35 million in 2003.   So please tell me what 35 companies Jennifer Aniston uses to divide up her earnings. knn: Another mistake. What does the country need 50'000 for? I'm not sure what third-world country you're envisioning, but most countries need a lot more than $50,000 to meet their budget each year. knn: The taxes rise, because the rich are leaving (or using tax schemes) while the poor can't. Please show me which rich people are leaving the United States because their taxes are higher than those of the poor. knn: Tiefling: So when the rich get richer because we're taxing them less, they get more possibilities to set up tax avoidance schemes, Setting up avoiding schemes does not cost much. I didn't say they did. Where are you getting this from? You claimed that the rich have more opportunities than the poor to set up tax avoidance schemes. Thus, the richer someone is, the more opportunities they have to set up tax avoidance schemes, according to you. posted by Tiefling |
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Tiefling: According to Forbes magazine, Jennifer Aniston made $35 million in 2003. Ahem, did you get my point or not? This thread is not about how much you EARN and how big your house is. I can find you thousands of people who "make" 1 billion. This thread is about: How much TAXES do you PAY. MAKING 1 million and PAYING taxes for 1 million are 2 different stories. If you make 1 million and pay taxes on it, you are plain stupid. Tiefling: So please tell me what 35 companies Jennifer Aniston uses to divide up her earnings. I don't know how she avoids taxes. She has to know. That's her thing. Just to give you an example what she could do: She let's a Bahamas company register the name "Jennifer Aniston" and pay that company fees to be allowed to use that name. Another idea: She sets up a company (e.g. on the Bahams) and is an employee of that company, thus not SHE gets paid but the company and she gets only a salary of 500 USD. Just 2 of many ideas that she can do... Tiefling: I'm not sure what third-world country you're envisioning, but most countries need a lot more than $50,000 to meet their budget each year. Yeah, but not per 2 persons as in your example. Tiefling: Please show me which rich people are leaving the United States because their taxes are higher than those of the poor. 1) You don't have to leave because there are tax avoiding schemes FOR YOUR COMPANIES. 2) The US is an exception because they tax you by nationality. Thus you have to file tax returns no matter where you live. So the US is a global exception. Moreover the taxes in the US are pretty low compared to other countries. 3) Countless millionaires leave their country. I read the statistics once, but they are hard to find online... Tiefling: You claimed that the rich have more opportunities than the poor to set up tax avoidance schemes. Thus, the richer someone is, the more opportunities they have to set up tax avoidance schemes No. The richer someone is = The more he is involved in businesses, the more tax avoiding schemes he can use. Has nothing to do with the costs. posted by knn |
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knn: She let's a Bahamas company register the name "Jennifer Aniston" and pay that company fees to be allowed to use that name. However, the US is also a world-wide exception in this regard. Royalty fees are very hard to leave the US, thus in Jennifer Aniston's needs another scheme most probably. She could ask to pay her out in shares or she could ask to "lend" her the money (instead of paying her out) without the need to ever pay it back etc etc. posted by knn |
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Tiefling: According to Forbes magazine, Jennifer Aniston made $35 million in 2003.
forbes.com... Moreover the Forbes magazine (and others) usually list shareholders as rich, although they may have no money on their bank account. If Bill Gates has shares worth billions then this is NOT on his bank account and is not liable to income tax. posted by knn |
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knn: I don't know how she avoids taxes. She has to know. That's her thing.
Just to give you an example what she could do: She let's a Bahamas company register the name "Jennifer Aniston" and pay that company fees to be allowed to use that name. Another idea: She sets up a company (e.g. on the Bahams) and is an employee of that company, thus not SHE gets paid but the company and she gets only a salary of 500 USD. Where are you getting this garbage from? She doesn't do these things. She makes $1.25 million per episode of "Friends". This goes to her bank account, not to some intermediate company. Look, Jennifer goes to buy a $1 million house. Your claim is that she takes the money out of the funds that this imaginary company for which she works has? Assuming that she does indeed work for this imaginary company... you do know what embezzling is, right? knn: MAKING 1 million and PAYING taxes for 1 million are 2 different stories. If you make 1 million and pay taxes on it, you are plain stupid. Then every celebrity out there is just plain stupid, huh? Or maybe it's that tax evasion and embezzlement are serious crimes. knn: Ahem, did you get my point or not? This thread is not about how much you EARN and how big your house is. I can find you thousands of people who "make" 1 billion. This thread is about: How much TAXES do you PAY. I really don't know what to say to you if you sincerely feel that there are no people out there who earn, and pay taxes on, $1 million a year. That's just ignorance speaking. Athletes, celebrities, and CEOs all make $1 million a year, easily. knn: Tiefling: I'm not sure what third-world country you're envisioning, but most countries need a lot more than $50,000 to meet their budget each year. Yeah, but not per 2 persons as in your example. Joe makes $1,000,000 a year. Jim makes $15,000 a year. Their president, Jack, makes $50,000 a year. So yes, this tiny country does need $50,000 to meet its budget. knn: No. The richer someone is = The more he is involved in businesses, the more tax avoiding schemes he can use. Has nothing to do with the costs. So, once again. If someone gets richer, then they have access to more tax avoidance schemes, according to you, because the richer they are, the more involved they are in business. knn: 2) The US is an exception Your point is that: You can not really tax the rich. The US taxes the rich much more heavily than the poor. Thus, the US is not an exception. And yet, millionaires are not leaving the US in droves. Thus, the US is a great example of why you CAN tax the rich. posted by Tiefling |
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Tiefling: Where are you getting this garbage from? She doesn't do these things. OK reread my post. I DO NOT KNOW WHAT SHE DOES. And YOU do also not know what she does. Are you her personal accountant or what? Tiefling: Look, Jennifer goes to buy a $1 million house. Yeah, and you have been right there to see that her personal bank account is being charged. Right? You saw it with your own eyes? Tiefling: Athletes, celebrities, and CEOs all make $1 million a year, easily. Again: You miss the point of this thread. It's not about how much they earn, but how much taxes they pay. Tiefling: Joe makes $1,000,000 a year. Jim makes $15,000 a year. Their president, Jack, makes $50,000 a year. So yes, this tiny country does need $50,000 to meet its budget. No, a country does not need 50'000 USD for 3 persons. That is robbery. Tiefling: So, once again. If someone gets richer, then they have access to more tax avoidance schemes, according to you, because the richer they are, the more involved they are in business. Yes, take for example an actor. As you know movies are filmed in Ireland, New Zealand or Canada these days. You only need to shift your residence for 183 days per year out of the US and you have avoided to pay taxes in the US. A normal employee CAN NOT DO THAT. posted by knn |
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Take for example Bill Gates. Bill Gates is constantly listed as one of the richest (if not THE richest guy on earth). Does he pay income tax for his wealth? No. 0% Why 0%? Because Bill Gates and most wealthy Americans make the majority of their money off of capital gains, not earned income. The tax rate for the money (ONLY when they sell their shares, not while they rise) is 15% in the US. In MANY OTHER countries it's 0%. Now, if you have a company and you are the only shareholder, and your company earns 1 million USD then you can write in your books that your shares rised 1 million (= 1 million capital gains), pay ity out to yourself and pay 0% taxes. So in other words: Bill Gates has 30'000 million USD, he spend 100 million and paid 15 million taxes (if he didn't do some other tricks). Thus he paid 15 from 30'000 = 0.05% taxes: The system is similar for individuals. I have the income of an average American taxpayer. On a marginal basis, I pay 25% of my income to the federal government, 6.75% to the state in which I live and 6.2% to the social security system and 1.45% to Medicare, putting me in about the 40% marginal tax bracket. Bill Gates' tax bracket is well below 15%. Bill Gates and most wealthy Americans make the majority of their money off of capital gains, not earned income.
The maximum long-term capital gains tax rate is 15% and this is only paid when stocks are sold. The net effect is Bill Gates', and other Billionaire's, wealth grows largely tax-free while people whose primary source of income is labor pay 40% or more of their income to the government in taxes. ((Associate Professor of Finance at Northeastern State University in Tulsa)) posted by knn |
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Just to give you another example what you can do: Earn the money but let it pay out later. Why later? Because later you can move to a country where the tax is very low, get the money, pay taxes there (e.g. 5%) and then move back. Or you can spend the most time of the year (the year when you got this huge payout) on a ship or on your yacht or so... posted by knn |
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And Tiefling, please, give me hardcore facts, not some Jennifer Aniston example from the yellow press. Maybe she is so stupid to pay the normal tax rate, maybe she isn't. I don't know. But unless you are not her personal friend or her accountant, you don't know either. I gave enough valid+workable+applied tax avoiding techniques in this thread already and am waiting for a reply... posted by knn |
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No replies til you explain, in 10 words or less, why taking $1 million out of your company's funds to buy yourself a house is a bad idea. posted by Tiefling |
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