Recent Forbes study... Rich "cheat" more on Taxes.. wow, what a shocker
Of course, one mans cheat is another man's loophole... Forbes calls any attempts to shelter income "cheating"... but it is an obvious reaction to tax policy. If the poor had more ways to shelter income, they would... in fact, many do... cash under the table type transactions. The super-rich, who don't really need 'income" obviously have the greatest ability to shelter it.
which is why the "tax the rich" schemes never work. They'll drop the definition of Rich down to something that makes the math work and go with that. Unfortunately, as the super-rich can invariably shelter up to 100% of their income, while those earning 150k+ can't... The tax will be borne by the upper working class... and the super-wealthy will get even wealthier. The chasm between the top 1% and the top 10% is millions of dollars, but only about 50,000 to the bottom 50%. There is something wrong with that, and it is our tax code, and politicians seeking to "tax the rich".
Hambone10 Wrote:Recent Forbes study... Rich "cheat" more on Taxes.. wow, what a shocker
Of course, one mans cheat is another man's loophole... Forbes calls any attempts to shelter income "cheating"... but it is an obvious reaction to tax policy. If the poor had more ways to shelter income, they would... in fact, many do... cash under the table type transactions. The super-rich, who don't really need 'income" obviously have the greatest ability to shelter it.
which is why the "tax the rich" schemes never work. They'll drop the definition of Rich down to something that makes the math work and go with that. Unfortunately, as the super-rich can invariably shelter up to 100% of their income, while those earning 150k+ can't... The tax will be borne by the upper working class... and the super-wealthy will get even wealthier. The chasm between the top 1% and the top 10% is millions of dollars, but only about 50,000 to the bottom 50%. There is something wrong with that, and it is our tax code, and politicians seeking to "tax the rich".
If you owe no taxes, impossible to "cheat". Using legal methods to reduce taxes is not generally considered "cheating", but most of those legal methods are not generally available unless one has the money to take advantage of them. See John Kerry's tax return, 2003 - 11.8% paid on income of $5,000,000. I presume that like Mccain, his wife filed separately. Kerry didn't release the details (wonder why) but it is reasonable to presume he used Sub-S corps, C-Corps, trusts, etc. to legally shelter income, means that are neither available to the poor nor needed by them. Income from means other than wages - businesses, investments, trust funds - are much easier to shelter legally. Bringing it down to the realm of us middle-classers, the tax break for owning a home is considered a tax break for the rich, as is anything on Schedule A, the itemization of deductions. Poor people take the standard deduction and are done with it.
Hambone10 Wrote:Recent Forbes study... Rich "cheat" more on Taxes.. wow, what a shocker
Of course, one mans cheat is another man's loophole... Forbes calls any attempts to shelter income "cheating"... but it is an obvious reaction to tax policy. If the poor had more ways to shelter income, they would... in fact, many do... cash under the table type transactions. The super-rich, who don't really need 'income" obviously have the greatest ability to shelter it.
which is why the "tax the rich" schemes never work. They'll drop the definition of Rich down to something that makes the math work and go with that. Unfortunately, as the super-rich can invariably shelter up to 100% of their income, while those earning 150k+ can't... The tax will be borne by the upper working class... and the super-wealthy will get even wealthier. The chasm between the top 1% and the top 10% is millions of dollars, but only about 50,000 to the bottom 50%. There is something wrong with that, and it is our tax code, and politicians seeking to "tax the rich".
I don't know if this ("Rich Cheat More On Taxes, New Study Shows") is the article you were referring to; I found it at Forbes but it wasn't their study -- they just did an article on a recent study by a U Mich professor and an IRS economist.
Interestingly, what they studied was unequivocally cheating, and not something that could be mistaken for a loophole or a "legitimate" tax shelter.
Quote:The previously unreported study estimates that taxpayers whose true income was between $500,000 and $1 million a year understated their adjusted gross incomes by 21% overall in 2001, compared to an 8% underreporting rate for those earning $50,000 to $100,000 and even lower rates for those earning less. (The "net misreporting rate" as the IRS calls it, includes both underreported income and inflated deductions.)
...
The Slemrod/Johns analysis uses unpublished data from special research audits the IRS conducted on a sample of 45,000 individual returns filed for 2001.
...
The main reason for the income-related cheating disparity: Higher income folks receive more of their income from sources that are easier to hide, including self-employment earnings; income from rents, partnerships and S corporations; and capital gains.
"The distribution of noncompliance lines up pretty closely with who gets income that's hard (for the IRS) to keep track of,'' Slemrod says.
The main reason for the income-related cheating disparity: Higher income folks receive more of their income from sources that are easier to hide, including self-employment earnings; income from rents, partnerships and S corporations; and capital gains.
"The distribution of noncompliance lines up pretty closely with who gets income that's hard (for the IRS) to keep track of,'' Slemrod says
[/quote]
So it's not just because the wealthy are inherently evil? It's just that they have easier opportunities?
OptimisticOwl Wrote:The main reason for the income-related cheating disparity: Higher income folks receive more of their income from sources that are easier to hide, including self-employment earnings; income from rents, partnerships and S corporations; and capital gains.
"The distribution of noncompliance lines up pretty closely with who gets income that's hard (for the IRS) to keep track of,'' Slemrod says
So it's not just because the wealthy are inherently evil? It's just that they have easier opportunities?
Two factors not mentioned:
1. Higher marginal rates. Is it worth underreporting a dollar of taxable income when the resulting benfit is 15 cents? Is it worth underreporting a dollar of taxable income when the resulting benefit is 50 cents? For some people, that makes a significant difference. That's one argument in favor of flat taxes.
2. Subjective forms of income. Your W-2 income is pretty straightforward--you, your employer, and the IRS know exactly what it is. Rental, partnership, S corporation, and capital gains are far more subject to interpretation. There will be a number of gray areas with almost any source of those sorts of income. When you took a customer out to play golf, did you actually talk business or did you just have a few beers and a good time? If all you did was have a few beers and a good time, but a week later the customer gave you a significant piece of repeat business, how much did the golf game have to do with that? If you take the position on each gray area that minimizes taxes, have you cheated? Maybe, maybe not. It will certainly be possible to make an argument that you did cheat, even if everything was legitimate. Most successful small businessmen that I know take a "pigs get fat, hogs get slaughtered," approach; generally aggressive but there are some things that they just don't do.
The two factors are tied together in one area--the huge amount of "cash only" businesses. Many of those who earn such incomes are officially below the poverty line, or so low that they are eligible for various handout programs. If they make too much money, they lose eligibility for those handouts. I would argue that these are actually the people paying the highest marginal "tax rates" in the current system. If I make $1000 in salary, but in the process lose qualification for $1000 in government benefits, am I not effectively in a 100% "tax bracket"? At the same time, many of these products or services are offered in millions of daily transactions of minimal value each, so that tracking and monitoring them would be well nigh impossible, and certainly not cost-effective. The motivation and opportunity to cheat are obvious. Who knows how much is lost in terms of tax revenues from this?
(This post was last modified: 10-24-2008 05:10 PM by Owl 69/70/75.)
OptimisticOwl Wrote:The main reason for the income-related cheating disparity: Higher income folks receive more of their income from sources that are easier to hide, including self-employment earnings; income from rents, partnerships and S corporations; and capital gains.
"The distribution of noncompliance lines up pretty closely with who gets income that's hard (for the IRS) to keep track of,'' Slemrod says
So it's not just because the wealthy are inherently evil? It's just that they have easier opportunities?
Two factors not mentioned:
1. Higher marginal rates. Is it worth underreporting a dollar of taxable income when the resulting benfit is 15 cents? Is it worth underreporting a dollar of taxable income when the resulting benefit is 50 cents? For some people, that makes a significant difference. That's one argument in favor of flat taxes.
2. Subjective forms of income. Your W-2 income is pretty straightforward--you, your employer, and the IRS know exactly what it is. Rental, partnership, S corporation, and capital gains are far more subject to interpretation. There will be a number of gray areas with almost any source of those sorts of income. When you took a customer out to play golf, did you actually talk business or did you just have a few beers and a good time? If all you did was have a few beers and a good time, but a week later the customer gave you a significant piece of repeat business, how much did the golf game have to do with that? If you take the position on each gray area that minimizes taxes, have you cheated? Maybe, maybe not. It will certainly be possible to make an argument that you did cheat, even if everything was legitimate. Most successful small businessmen that I know take a "pigs get fat, hogs get slaughtered," approach; generally aggressive but there are some things that they just don't do.
The two factors are tied together in one area--the huge amount of "cash only" businesses. Many of those who earn such incomes are officially below the poverty line, or so low that they are eligible for various handout programs. If they make too much money, they lose eligibility for those handouts. I would argue that these are actually the people paying the highest marginal "tax rates" in the current system. If I make $1000 in salary, but in the process lose qualification for $1000 in government benefits, am I not effectively in a 100% "tax bracket"? At the same time, many of these products or services are offered in millions of daily transactions of minimal value each, so that tracking and monitoring them would be well nigh impossible, and certainly not cost-effective. The motivation and opportunity to cheat are obvious. Who knows how much is lost in terms of tax revenues from this?
Another argument in favor od the national sales tax. Sure, the buyer might want to avoid paying, but there is no incentive for the merchant to clolude with him. No gain, all risk for them, and in 42 states already, they are doing the collection work for state and local taxes anyway, so the only difference to them is amount. Since the feds can piggyback on the current state collection networks in 42 states, only in 8 others do collection networks need to be set up. All americans become concerned taxpayers (probably the gratest benefit), all politicians must answer to all their constituents for every increase, and the easy way out politically becomes cutting costs rather than raising taxes. Either a prebate or exempting certain basics such as groceries, gasoline and medicines would take care of objections about regressiveness.
Who would oppose something like this? Well, politicians who currently base their electibility on promising benefits to some that others will pay for.
[quote]Eliminating Capital Gains Taxes for Entrepreneurs and Investors in Small Business. Barack Obama
understands that small businesses are the engines of our economy, and he will eliminate all capital gains
taxes on investments in small and start up firms.
So, if someone starts a business today and sells in 2025, we must wait until then to see any benefit to the economy.
If someone sells next year on a business started in 2002, is the tax savings a sort of windfall - profits they were not expecting?
Lots of questions here about how this would work, what the benefits would be, and when they will be felt. I guess we will get the details next year, maybe.
JOwl Wrote:Interestingly, what they studied was unequivocally cheating, and not something that could be mistaken for a loophole or a "legitimate" tax shelter.
Quote:The previously unreported study estimates that taxpayers whose true income was between $500,000 and $1 million a year understated their adjusted gross incomes by 21% overall in 2001, compared to an 8% underreporting rate for those earning $50,000 to $100,000 and even lower rates for those earning less. (The "net misreporting rate" as the IRS calls it, includes both underreported income and inflated deductions.)
...
The Slemrod/Johns analysis uses unpublished data from special research audits the IRS conducted on a sample of 45,000 individual returns filed for 2001.
... The main reason for the income-related cheating disparity: Higher income folks receive more of their income from sources that are easier to hide, including self-employment earnings; income from rents, partnerships and S corporations; and capital gains.
"The distribution of noncompliance lines up pretty closely with who gets income that's hard (for the IRS) to keep track of,'' Slemrod says.
How is this fundamentally different from the waiter or the guy who mows my lawn and doesn't claim it as "income" or for that matter... the parking attendant in Omaha who takes nothing but cash to park in his front yard??
income from rents may be hard to track, but not nearly as hard as checks from individuals or cash.
let's not even start with illegals...
IMO, the study simply proves that the ULTRA rich pay less in taxes than the merely rich... which has always been my argument... and doesn't really talk about the millions of people who earn less than 30,000/year and/or work in a person-to-person business like mowing lawns or waiting tables.
the person who gets screwed is the W-2 employee who doesn't have much of an investment portfolio outside of perhaps his 401k.... in other words... MOST of us...
[quote]Eliminating Capital Gains Taxes for Entrepreneurs and Investors in Small Business. Barack Obama
understands that small businesses are the engines of our economy, and he will eliminate all capital gains
taxes on investments in small and start up firms.
So, if someone starts a business today and sells in 2025, we must wait until then to see any benefit to the economy.
If someone sells next year on a business started in 2002, is the tax savings a sort of windfall - profits they were not expecting?
Lots of questions here about how this would work, what the benefits would be, and when they will be felt. I guess we will get the details next year, maybe.
[/quote]
What does that mean for someone like Dell or Gates who started small businesses that are now worth billions??
More importantly... there's nothing to stop Congress from reversing this position in the future... you know... BEFORE they can sell.
Not to reopen this oozing wound, but I found these two videos interesting on Obama's plans for tax relief. All along, it's been folks under $250k, or so the word has been (when referring to the 95% of Americans). One of the latest Obama commercials actually now says that it's for folks making under $200k:
Then you've got Biden spouting off to his birthplace media (in Scranton) that they're defining middle class relief at $150k:
He has said that only those above $250k (families -- individuals would be $200k) would pay more taxes and that people under that would pay less or the same. $200k and below is the line where families would get a tax cut. Families making $200-250k would see no change in marginal rates.
Biden misspoke.
Here's Obama in the third debate stating that those under $200k get a tax cut. See 4:00 where he talks about < $200k getting a cut and 7:00 where he talks about >$250k seeing an increase.
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Question on Obama's tax policy
