Are all these "tax loopholes" for rich people really that sweet of a deal?

Hieveryone

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If you have less than a 5 million dollar estate, you can leave your wealth to your heirs tax free.

But let's pretend that you have 7 million in assets- thats 2 million over the tax free limit.

When you pass, your children will owe 40% of that 2 million to Uncle Sam, or $800,000 in taxes.

So you decide, let me find one of those proverbial "tax loopholes" all these rich people exploit at the cost of everyone else :rolleyes: (Remember that Mitt Romney guy?)

Well, what are your options?

You can start a Foundation and put your money there like the Clintons, the Gates, amongst many other wealthy people out there.

Sure, you and your children won't have to pay taxes, but you and your children will owe 5% of the net assets of the Foundation, including investment income, every single year in perpetuity to other charitable organizations. In 8 years, that's 40%. And you cannot hire your kid and give him the 5% in salary (which is a good thing IMO)

So how is this a "loophole?" You're not paying taxes but you're donating 5% of your assets to charity every. single. year.

Now that's great to do charity, but for God's sake, please stop calling these loopholes for the rich. They are not!

By no means are these rich people getting to keep their money by exploiting these "loopholes."

Your other options are spending everything over 5 million, or just having your kids pay 40% in taxes.
 

rdowns

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What the **** is your obsession with wealth? With each thread, I see you in a lower and lower economic bracket.
 

Hieveryone

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I should add the basis for this estate tax is to prevent dynasties. The philosophy behind it is brilliant because it prevents America from having nobels and lords like the British (thank God) and princes and princesses in the middle east and people like Rahul Gandhi in India.

So I'm saying it's a good thing that we have these steep estate taxes because it does benefit America as a whole.

But what I'm arguing is that most people think rich people have these "loopholes" to avoid losing their money when in fact they aren't loopholes at all.
 
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Ledgem

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But what I'm arguing is that most people think rich people have these "loopholes" to avoid losing their money when in fact they aren't loopholes at all.
Tax loopholes that mainly benefit the rich

10 Notorious Tax Loopholes

How The Super-Rich Ducked $100 Billion In Estate Taxes Since 2000

The 10 Most Corrupt Tax Loopholes

These are basically pulled from the first few links off of Google; no doubt there are more. You do realize that you can't cite one example and then make a sweeping generalization about how loopholes benefitting the rich don't exist, right?
 

Hieveryone

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Tax loopholes that mainly benefit the rich

10 Notorious Tax Loopholes

How The Super-Rich Ducked $100 Billion In Estate Taxes Since 2000

The 10 Most Corrupt Tax Loopholes

These are basically pulled from the first few links off of Google; no doubt there are more. You do realize that you can't cite one example and then make a sweeping generalization about how loopholes benefitting the rich don't exist, right?
Not of those actually is a loophole because it doesnt make them richer.
 

chown33

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Not of those actually is a loophole because it doesnt make them richer.
A tax loophole is simply a legal way to avoid paying taxes. If they get to keep money they'd otherwise have to pay in taxes, they're richer by that amount of money.

An inheritance tax loophole would be a legal way to avoid paying some or all inheritance taxes. Again, the inheritors get to keep money they'd otherwise have to pay in inheritance taxes. How is that not making them richer?
 

Hieveryone

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A tax loophole is simply a legal way to avoid paying taxes. If they get to keep money they'd otherwise have to pay in taxes, they're richer by that amount of money.

An inheritance tax loophole would be a legal way to avoid paying some or all inheritance taxes. Again, the inheritors get to keep money they'd otherwise have to pay in inheritance taxes. How is that not making them richer?
They DO NOT get to keep the money. They have to give 5% to charity every year in perpetuity. Eventually their heirs will have exactly $0. They'd be richer if they just paid 40% in taxes!
 

chown33

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They DO NOT get to keep the money. They have to give 5% to charity every year in perpetuity. Eventually their heirs will have exactly $0. They'd be richer if they just paid 40% in taxes!
Your comment saying it's not making them richer was directed to the links listed. I responded in kind. That is, I was addressing whether the loopholes listed in the links made people richer or not. To the extent that those loopholes allow people to keep monies they'd otherwise pay in taxes, then it makes them richer.

If you only want to address your private foundation idea, then you're forgetting that the foundation can make investments that have a return. So if the return was 5% per year, then the assets have grown 5% in a year. Give away 5%, and you're back where you started. However, if the growth exceeds 5% per year, and you only give away 5% of the resulting total assets, then the foundation is richer (has greater net worth of assets) at the end of the year. For example, 10% return, 5% given away, you're still up ~5%. This is pretty basic arithmetic.

In any case, if you think the only "loophole" is a private foundation, you really ought to consult a competent tax or accounting advisor. Emphasis on "competent".
 

Hieveryone

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Your comment saying it's not making them richer was directed to the links listed. I responded in kind. That is, I was addressing whether the loopholes listed in the links made people richer or not. To the extent that those loopholes allow people to keep monies they'd otherwise pay in taxes, then it makes them richer.

If you only want to address your private foundation idea, then you're forgetting that the foundation can make investments that have a return. So if the return was 5% per year, then the assets have grown 5% in a year. Give away 5%, and you're back where you started. However, if the growth exceeds 5% per year, and you only give away 5% of the resulting total assets, then the foundation is richer (has greater net worth of assets) at the end of the year. For example, 10% return, 5% given away, you're still up ~5%. This is pretty basic arithmetic.

In any case, if you think the only "loophole" is a private foundation, you really ought to consult a competent tax or accounting advisor. Emphasis on "competent".
Tell me another one of these "loopholes." A specific one, not a link or something generic. I'd love to know lol.

Also, the money in the foundation regardless of investment return does not go to the family.

If you have a million, 5% must go to charity or about 50K.

So the Foundation strictly benefits society not the rich people. Hence, it is no loophole at all.

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What is your obsession with the rich keeping as much of their money as possible?
I don't think they should unless we want nobels and lords :mad:

What I am saying is that people need to stop persecuting the wealthy for using "tax loopholes" if they can't name a specific one that rich people use to profit from.

The most notorious is the Foundation "loophole" which isn't one at all in reality.
 

chown33

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Tell me another one of these "loopholes." A specific one, not a link or something generic. I'd love to know lol.
Provide a link explaining your "5% to charity" first. You claimed it's true, but haven't given a source.

Also, the money in the foundation regardless of investment return does not go to the family.
What if some family members work for the foundation and are paid a salary? Surely that's some portion of the money in the foundation that's going to the family.

If you have a million, 5% must go to charity or about 50K.
Let's say the foundation has $100 million in total assets. Its investments return 10% per year, and it donates 5% to charity. It still has a net increase of 4.5% per year, or 4.5 million:
100 million + 10% = 110 million (total assets after one year)
5% of 110 million = 5.5 million (given to charity)
110 million - 5.5 million = 104.5 million (net remaining after amount given to charity)
so 104.5 million is a net increase of 4.5%​
The net worth of the foundation has increased, not decreased, even after it gave away 5% of its total assets.

So the Foundation strictly benefits society not the rich people. Hence, it is no loophole at all.
A family member (or members) can pull a $250K/year salary from the foundation, which the foundation can pay for in perpetuity and never go broke, if its asset growth rate continues to exceed 5%/year.

By coincidence, you happened to say $240K/year was enough to be rich, in the sense of being able to spend freely. So at least one family member could pull a $250K/year salary, be rich using your own definition, and the foundation would never go broke for the return-rate and the 5% donation-rate shown.

And these are just for a foundation with $100 million in assets. There are bigger private foundations than that.
 
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zin

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If you have less than a 5 million dollar estate, you can leave your wealth to your heirs tax free.

But let's pretend that you have 7 million in assets- thats 2 million over the tax free limit.
Is $5 million + (total remaining after estate tax) not enough for your children?

My guess is if you have more than $5 million in estate assets then a tax on anything above that amount shouldn't worry you too much.

The average American doesn't even generate that much income during their entire working years (assuming median $50,000 per year for 45 years), so when you say "if" you have less than a $5 million estate it is more like a certainty.

This is an issue that would quite literally only affect the 0.1%.
 

vrDrew

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The philosophy behind it is brilliant because it prevents America from having nobels and lords like the British (thank God) and princes and princesses i
Actually the British tax system is much better set up to end dynasties than the US one is - at present.

As far as hereditary titles are concerned, it is highly unlikely that there will ever be another one created in Britain outside of the Monarchy. The Queen (or her successors) won't ever create another Dukedom or Viscountcy to a British subject outside of the immediate Royal family. The last hereditary Baronetcy (ie. "Sir") created was that bestowed on Margaret Thatcher's husband - and son.

And as a result, it is likely that with each succeeding generation the number of outstanding Hereditary titles will diminish until they become all but extinct.

Financially British "Death Duties" kick in at a much, much lower rate than US estate taxes do. Very quickly rising to 40% plus on estates over 300,000 pounds. A piddling amount, given the very high property taxes in most of Britain.

Over the past hundred years the vast majority of the British aristocracy has lost most - if not all - of their economic power. The current Viscount Nelson (the descendant of the Admiral Nelson who won Trafalgar, and whose statue looms over a huge London square) works as a relatively low-ranked policeman. Because he needs the money.

US estate taxes are nothing compared to British ones. Starting at a much higher base ($10 million plus for a married couple) and including all sorts of exemptions and loopholes. The descendants of Sam Walton will collectively earn more $2 billion annually just in dividends from the Wal-Mart shares left to them. An income that will be taxed at a much lower rate than the salary paid to the humblest cashier in their stores.

So: Yes. US tax law is full of loopholes and exemptions that really do pose a serious threat to this nation's ongoing status as any sort of an egalitarian, merit-based Democracy.

Be very afraid indeed.
 

Hieveryone

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Provide a link explaining your "5% to charity" first. You claimed it's true, but haven't given a source.


What if some family members work for the foundation and are paid a salary? Surely that's some portion of the money in the foundation that's going to the family.


Let's say the foundation has $100 million in total assets. Its investments return 10% per year, and it donates 5% to charity. It still has a net increase of 4.5% per year, or 4.5 million:
100 million + 10% = 110 million
5% of 110 million = 5.5 million
110 million - 5.5 million = 104.5 million
so 104.5 million is a net increase of 4.5%​
The net worth of the foundation has increased, not decreased, even though it gave away 5% of its total assets.


A family member (or members) can pull a $250K/year salary from the foundation, which the foundation can pay for in perpetuity and never go broke, if its asset growth rate continues to exceed 5%/year.

By coincidence, you happened to say $240K/year was enough to be rich, in the sense of being able to spend freely. So at least one family member could pull a $250K/year salary, be rich using your own definition, and the foundation would never go broke for the return-rate and the 5% donation-rate shown.

And these are just for a foundation with $100 million in assets. There are bigger private foundations than that.
Right, and who's getting the money? Oh wait, not the family! Your argument fails because the money is NOT going to the family, so then it isn't a loophole at all! What you're saying is that the kids can go spend 100 million on a new mansion if they wanted, but NOPE, the IRS won't allow it (which is good anyway). So to say this is a loophole is just a fantasy and another complaining point against the rich that isn't even true!

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Is $5 million + (total remaining after estate tax) not enough for your children?

My guess is if you have more than $5 million in estate assets then a tax on anything above that amount shouldn't worry you too much.

The average American doesn't even generate that much income during their entire working years (assuming median $50,000 per year for 45 years), so when you say "if" you have less than a $5 million estate it is more like a certainty.

This is an issue that would quite literally only affect the 0.1%.
But that's the problem. People shouldn't say "oh well they have 5 million anyway who cares"

It's not fair for someone who worked hard and made 20 million, paid 40% in taxes, then when he passes his kids have to pay ANOTHER 40% in taxes on anything above 5 million!
 

chown33

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Right, and who's getting the money? Oh wait, not the family!
As I pointed out, a family member can draw a salary from the foundation. In fact, at $250K/year, a $100 million foundation could pay up to 18 family members before it exhausted the $4.5 million it made on investments.

I have no idea how you can say "not the family" when it's pretty clear that family members can draw salaries, and in amounts that, using your own definition, would qualify them as rich.

Your argument fails because the money is NOT going to the family, so then it isn't a loophole at all!
It's a loophole in the sense that family members can benefit without paying an inheritance tax.

What you're saying is that the kids can go spend 100 million on a new mansion if they wanted, but NOPE, the IRS won't allow it (which is good anyway).
That's not at all what I'm saying. You're just making stuff up and then complaining about your made up arguments, instead of responding to what I actually wrote.

So to say this is a loophole is just a fantasy and another complaining point against the rich that isn't even true!
I already pointed out the very simple arithmetic by which family members can benefit without having to pay inheritance tax on that benefit.
 

Hieveryone

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As I pointed out, a family member can draw a salary from the foundation. In fact, at $250K/year, a $100 million foundation could pay up to 18 family members before it exhausted the $4.5 million it made on investments.

I have no idea how you can say "not the family" when it's pretty clear that family members can draw salaries, and in amounts that, using your own definition, would qualify them as rich.


It's a loophole in the sense that family members can benefit without paying an inheritance tax.


That's not at all what I'm saying. You're just making stuff up and then complaining about your made up arguments, instead of responding to what I actually wrote.


I already pointed out the very simple arithmetic by which family members can benefit without having to pay inheritance tax on that benefit.
No, it cannot exhaust 4.5 million in salaries!!! That's the mistake you are making and where you are factually incorrect. That would HAVE to go to charity, hence the heirs are NOT getting the money.

If you believe that is true and you are right please provide a source because my tax attorneys have stated otherwise.
 

b3av3r

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So how is this a "loophole?" You're not paying taxes but you're donating 5% of your assets to charity every. single. year.

Now that's great to do charity, but for God's sake, please stop calling these loopholes for the rich. They are not!
Do you have a credible source explaining this loophole? Other than your explanation?

But what I'm arguing is that most people think rich people have these "loopholes" to avoid losing their money when in fact they aren't loopholes at all.
You keep saying loopholes, plural, when you continually only bring up one which has to do with starting a charity foundation. Perhaps the loopholes people are discussing are different from the one you keep mentioning. Maybe you should look for other ways to avoid paying the most in taxes besides starting a charity.

Tell me another one of these "loopholes." A specific one, not a link or something generic. I'd love to know lol.
Again you keep using loopholes, plural so you must think there are more than one.

What I am saying is that people need to stop persecuting the wealthy for using "tax loopholes" if they can't name a specific one that rich people use to profit from.

The most notorious is the Foundation "loophole" which isn't one at all in reality.
Do you have a source stating this "foundation loophole" is the most notorious tax loophole?

And again, if the foundation one is the most notorious then you are stating there must be more than one. Otherwise your sentence would be, "The only loophole is the foundation loophole which isn't one at all in reality."
 

chown33

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No, it cannot exhaust 4.5 million salaries!!! That's the mistake you are making and where you are factually incorrect.

If you believe that is true please provide a source because my tax attorneys have stated otherwise.
I didn't say "4.5 million salaries". I said "$4.5 million in salaries". There's a big difference.


I'm not a tax attorney, but I do understand arithmetic.

I was just using basic arithmetic to show that net gains can be paid as salaries without drawing from the initial endowment, and that some of those salaries could be to family members. You were complaining that the returns won't go to family members, when it's pretty clear they can (barring a law that says otherwise). If you have a source for a law that says family members can't draw salaries from a foundation, please provide it.

You haven't cited a single source in the entire thread.

All I've done is present basic arithmetic that shows how the basic endowment can be protected, can grow instead of decline to $0 like you said in post #7, and can pay salaries to family members (barring a law that says otherwise).

If your tax attorneys have a source that says family members can't draw salaries from a private foundation, you should present that source.

EDIT
You revised to say:
That would HAVE to go to charity, hence the heirs are NOT getting the money.
No, the $4.5 million is the net gains of the foundation AFTER paying out $5.5 million to charity. Go look at the arithmetic again. See the "5% of 110 million" line? That's subtracted as the amount given to charity. That still leaves $4.5 million remaining as net gains AFTER donations to charity.

Again, go look at the arithmetic. I showed it line by line to make it easy to follow and understand.
 
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zin

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But that's the problem. People shouldn't say "oh well they have 5 million anyway who cares"

It's not fair for someone who worked hard and made 20 million, paid 40% in taxes, then when he passes his kids have to pay ANOTHER 40% in taxes on anything above 5 million!
It's not fair that income inequality has grown substantially since the 1970's. It's not fair that hard working and middle class Americans have had next to zero real term growth in their incomes for over a decade. It's not fair that the U.S. ranks close to bottom for child poverty in developed countries. It's not fair that in the U.S. the top 10% of households control 73% of the wealth and the bottom 60% have close to 4%.

Where are all of your other threads on these subjects? Given that the amount of wealth controlled by the very top, the same group addressed in this thread, has continued to climb, even more so during the recession, I don't think the top 0.1% of estates are having any trouble whatsoever avoiding the required taxes.

The game is rigged. The estate tax is not doing what it was intended to. These people that occupy the 0.1% top of all estates should be forced to pay the 40% tax and it is sad that you are defending them.
 

Hieveryone

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I didn't say "4.5 million salaries". I said "$4.5 million in salaries". There's a big difference.


I'm not a tax attorney, but I do understand arithmetic.

I was just using basic arithmetic to show that net gains can be paid as salaries without drawing from the initial endowment, and that some of those salaries could be to family members. You were complaining that the returns won't go to family members, when it's pretty clear they can (barring a law that says otherwise). If you have a source for a law that says family members can't draw salaries from a foundation, please provide it.

You haven't cited a single source in the entire thread.

All I've done is present basic arithmetic that shows how the basic endowment can be protected, can grow instead of decline to $0 like you said in post #7, and can pay salaries to family members (barring a law that says otherwise).

If your tax attorneys have a source that says family members can't draw salaries from a private foundation, you should present that source.

EDIT
You revised to say:

No, the $4.5 million is the net gains of the foundation AFTER paying out $5.5 million to charity. Go look at the arithmetic again. See the "5% of 110 million" line? That's subtracted as the amount given to charity. That still leaves $4.5 million remaining as net gains AFTER donations to charity.

Again, go look at the arithmetic. I showed it line by line to make it easy to follow and understand.
You can't do that. That would be illegal. I have already been through this with my tax attorneys and am letting you know.

I think it's fair to say you haven't researched this and are just assuming incorrect facts.

You cannot withdraw 4.5 mil and give it your people as salary and unless you provide a source then my lawyers are right. You're just assuming you can but you haven't shown you can. My lawyers have said many times over to me when I went through this with them that doing something like that would be very illegal!

Again, let me tell y'all, there is NO loophole! Just assuming there is to feel good isn't right either.

It seems like to me despite me telling you the truth you are convinced rich people use tax loopholes without naming a single one.

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It's not fair that income inequality has grown substantially since the 1970's. It's not fair that hard working and middle class Americans have had next to zero real term growth in their incomes for over a decade. It's not fair that the U.S. ranks close to bottom for child poverty in developed countries. It's not fair that in the U.S. the top 10% of households control 73% of the wealth and the bottom 60% have close to 4%.

Where are all of your other threads on these subjects? Given that the amount of wealth controlled by the very top, the same group addressed in this thread, has continued to climb, even more so during the recession, I don't think the top 0.1% of estates are having any trouble whatsoever avoiding the required taxes.

The game is rigged. The estate tax is not doing what it was intended to. These people that occupy the 0.1% top of all estates should be forced to pay the 40% tax and it is sad that you are defending them.
The problem with what you're saying is that it isn't correct. The rich people aren't getting the money!

Regarding all the other facts and figures, I think it's a disgrace. But what's going to be done about it?

It's in Obama's court to fix it at this point. He's the President.
 
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Hieveryone

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Either the OP is deceiving themselves, or they are incredibly poor at writing propaganda.
No, I have just been through this with my attorneys and found the TRUTH instead of what you hear in the media as smear campaign to make people feel good about themselves.

I really dislike it when people say "Oh, he's rich, he uses tax loopholes."

It's like really? Do you know what "loophole?" Can you actually tell us what he did?

*crickets*

I have yet to learn of one single loophole from anyone. Like some concrete facts that tell us exactly how to exploit one.

That's very telling.
 
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mobilehaathi

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No, I have just been through this with my attorneys and found the TRUTH instead of what you hear in the media as smear campaign to make people feel good about themselves.

I really dislike it when people say "Oh, he's rich, he uses tax loopholes."

It's like really? Do you know what "loophole?" Can you actually tell us what he did?

*crickets*
Being rich: you're not doing it right.