Trump's tax strategy - an example of a rigged tax system

Discussion in 'Politics, Religion, Social Issues' started by VulchR, Nov 1, 2016.

  1. VulchR macrumors 68020

    VulchR

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    #1
    A very interesting article appeared today in the New York Times (link). I am no expert in tax law, but the claim is made that Trump in essence deducted debt losses that were actually incurred by other people. It is one thing gambling with other people's money (and losing to the tune of nearly $1 billion, as Trump did), it's another to try to claim a deduction for yourself that actually belonged to somebody else.

    Before this thread gets degenerates into tit-for-tat claims about each candidate's level of corruption, the question I wish to pose is this: Why do the people of the US tolerate this level of manipulation of the tax system by the rich? Perhaps it is time to simplify the tax code.
     
  2. thewitt macrumors 68020

    thewitt

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    #2
    If the IRS audits Trump and finds he has not complied with the tax law, he will be fined. That's good. If he DID comply with tax law and simply avoided paying taxes as a result, that's even better.

    Insinuating he has done something wrong by simply using the tax code in a way that you disagree with is just politics.

    The IRS will rule one way or another. They are not fooled.
     
  3. forcesteeler macrumors 6502

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    #3

    When you have alot of money you can hire Accounting Forensics to find every trick and loophole in the book,

    Samething when with the legal system, If your Rich you can hire a High Power Attorney and depending on the crime, You can serve little to no Jail time.
     
  4. vrDrew macrumors 65816

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    #4
    Congress and the IRS closed the loophole that Trump exploited. In very brief terms, Trump was able to avoid paying taxes for years due to massive ~$1 billion loss on his casinos back in the early 1990s. Where a problem arose is when his creditors forgave the debts that were associated with those losses. The IRS generally views debt forgiveness as income. So if Bank ABC forgives $100 million in debt, it counts as $100 in income. Trump structured this loan forgiveness as a "debt for equity" swap, where instead simply forgiving the debt, it was exchanged for an ownership interest in a company that was essentially worthless. Tax experts at the time expressed a very dim view of the transactions. Certainly he couldn't get away with such a scheme today.

    The US tax system is frequently criticized as being unfair. However, I would push back at various European criticisms of US tax policy. British citizens, for instance, can frequently avoid paying UK tax by shifting much of their income offshore to jurisdictions with very low tax rates. The US, by way of contrast, taxes individuals on their worldwide income. The Duke of Westminster might earn hundreds of millions of pounds in rent on his properties in Knightsbridge and Belgravia. But if the actual property is held by a trust located in the Cayman Islands, he's not going to be paying anything like the top UK tax rate on that income. Even high-tax countries such as Sweden have rules that favor the super-rich. Sweden places very low rates on corporations and trusts - which is why families such as the Wallenbergs and Kamprads can accumulate fortunes in the tens of billions.

    Simplifying the tax code is a popular idea, but the reality is that it is remarkably difficult to put into practice. Virtually all large businesses just don't work on a cash-basis that just doesn't translate well to simple tax rules. Large businesses often hold assets whose values vary dramatically over time, and is necessarily subject to interpretation.
     
  5. AllergyDoc macrumors 65816

    AllergyDoc

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    #5
    The tax system in the U.S. is and always will be "rigged" in favor of the rich. They're who influence politicians who enact tax law. I do not begrudge wealthy people who take advantage of tax law to reduce their tax burden. It's what I would do if I was wealthy.
     
  6. thermodynamic Suspended

    thermodynamic

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    #6
    Do you begrudge the rich who say they want to be taxed more and say and understand why?

    Phew, we're glad you're not running for public office in America*. Let's make a country with a simpler tax system, that way everyone pays a fair share and the rich can still be rich.

    On the other hand, all the boomers decrying the rich as being spoiled trust fund babies - what's their opinion of your opinion? (To cite the point, why do the rich want a free ride when so many more work and pay higher effective tax rates that pay for their corporate welfare too, all while they say how government (as welfare or as market regulation) are bad.)


    * But you'd fit into all those countries were people are fleeing en masse because of relevant forms of injustice. How's Somalia nowadays? Nice little anarchy?
     
  7. tgara macrumors 6502a

    tgara

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    #7
    I believe Warrant Buffett did a similar maneuver when he bought Duracell from P&G in 2014. A major incentive was the tax structuring of the deal. Instead of selling his P&G shares (which would necessarily cause a taxable event), he swapped the shares of P&G for those of Duracell, which resulted in a minimized tax bill.

    http://dealbook.nytimes.com/2014/11...-to-buy-duracell-battery-from-procter-gamble/

    I think savvy businesspeople will always look for ways to minimize their tax bill. I guess I disagree with the premise of the OP's question and don't see it as manipulation. It may appear unseemly, but it's not illegal. And as vrDrew said, Congress can close this or any other loophole if it wishes. In the end, it is us who elected our representatives to Congress, so I suppose we only have ourselves to blame.
     
  8. AllergyDoc macrumors 65816

    AllergyDoc

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    #8
    I'll ignore your snark and focus on this statement.

    The trumpet call of the liberal: let's make everyone pay their "fair share"! You do realize that almost half of the country pays no federal income tax, right? Nothing is their "fair share"? Doesn't sound fair to me. Of course, what you meant was let's make the rich pay their fair share. Always rings true to the ignorant voter.

    Then, it doesn't happen. Obama, the most liberal president ever, has been in charge for for 8 years, yet tax loopholes continue. Look at what happens when a politician starts talking about a flat tax; if they don't stop such talk they quickly disappear.

    Why? Because if a president isn't already rich when they're sworn in, they plan on being rich afterward. Why would they set in motion laws that would take more from themselves?

    The big banks and those who control them, as well as other wealthy people, control tax laws through money and influence. Republican or Democrat, it doesn't really matter.
     
  9. VulchR thread starter macrumors 68020

    VulchR

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    #9

    Two things: First, I think a 'fair share' depends on wealth, not just income, and the poor people who do not pay tax (unlike Trump) have a vanishing small proportion of the US's wealth. Second, it's all too easy to complain about lobbying in Congress. Voters determines who gets elected to Congress and thus those of us who vote (or could vote, but foolishly don't) are responsible for the outcome.

    I guess that is part of my question. Both the Left and the Right don't feel the system is fair, Trump and Sanders can only be viewed as a rejection of the current state of party politcis, and yet I don't hear a thing about how tax loopholes are going to be closed down and the tax system simplified. Perhaps we're too preoccupied with the horror show of the Presidential election.
     
  10. thewitt macrumors 68020

    thewitt

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    #10
    Fair Share is easy.

    Tax every above the poverty level at 10%. Eliminate deductions and exemptions. Taxes for corporations, churches, charities, individuals, all the same.

    Quit trying to drive behavior with the tax code.

    Simple.
     
  11. skunk macrumors G4

    skunk

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    #11
    That does not answer the grotesque and increasing disparity of wealth. Some problems cannot be resolved in a single tweet.
     
  12. thewitt macrumors 68020

    thewitt

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    #12
    There is no such thing as disparity of earned wealth.

    You deserve nothing of what I earn, as I deserve nothing of what you earn.
     
  13. skunk macrumors G4

    skunk

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    #13
    I said nothing about "earning".
     
  14. thewitt macrumors 68020

    thewitt

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    #14
    So you want to what? Confiscate existing wealth until you feel it's equitable?

    We are talking about a tax strategy, which should only be on earnings, noting more.

    Today's confiscatory tax policies drive businesses away and support those who "pay to play" for policies that specifically benefit them, or otherwise know how to work the system.

    When I had the golf business, I was taxed on my earnings, AND the value of my inventory, which I paid for with those earnings... taxed twice. Made me spend thousands on tax accountants to figure how how to avoid double-taxation...
     
  15. Zombie Acorn macrumors 65816

    Zombie Acorn

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  16. ChrisWB macrumors 6502

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    #16
    Fiscal conservatives (I count myself as one) strongly frown on tax cheats. It's one more reason why we dislike Trump as a candidate and feel that he doesn't represent our values.
     
  17. Praxis91 macrumors regular

    Praxis91

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    #17
    Taxation is theft. We did just fine without an income tax. The gov is too large and bloated.
     
  18. Fancuku macrumors 6502a

    Fancuku

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    #18
    Why do you buy Apple products when Apple uses loopholes to pay very little taxes in Europe?
     
  19. werked macrumors regular

    werked

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    #19
    Already sitting here thinking of the loopholes I can use next year to pay less taxes. Y'all aren't??
     
  20. VulchR thread starter macrumors 68020

    VulchR

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    #20
    Interesting point I must admit. I feel I have less choice over Apple's practices than I do over the government's, given that I can vote, so I accept Apple's policy. It's not consistent or rational, because I do have a choice about whether to buy Apple's products. :oops: The same thing applies to Amazon and other companies as well.

    In my defence, Apple and other companies are sheltering money but that doesn't mean they won't be made to pay reasonable taxes at some point.
     
  21. tgara macrumors 6502a

    tgara

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    #21
    I frown on tax cheats as well, but there is a big difference between not paying what is legally owed and working within the tax system set by Congress to legally minimize your tax liability or avoid certain taxes altogether. I do not blame anyone for using any legal method or strategy to pay less tax as Mr. Trump (and Mr. Buffett and Mr. Soros, and a whole slew of others) has done.
     
  22. VulchR thread starter macrumors 68020

    VulchR

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    #22
    Have you read what Buffet has said about Trump's tax strategy?
     
  23. ChrisWB macrumors 6502

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    #23
    There's a small difference in my mind.

    He has also refused to pay a large number of small businesses and contractors. He reneges on his contracts.
     
  24. tgara macrumors 6502a

    tgara

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    #24
    Small difference? You lost me, bro. What does that have to do with tax strategies, which is the topic of this thread?o_O

    As far as "reneging" on his contracts, there may be good reasons for that. What if a contractor did a shoddy job? What if he didn't get the proper permits? What if he used inferior materials that were not specified in the contract? What if the contractor did not stay on a specified timeline or budget? If you had a plumber install new pipes in your house and the contract called for PEX but he used copper, would you pay him? Just saying broadly that Trump "reneges" on his contracts doesn't cut it until you dig a bit deeper and understand the details to see if it is justified or not.
     
  25. rdowns macrumors Penryn

    rdowns

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    #25
    Spin, spin, spin.

    http://www.foxnews.com/politics/201...trump-not-paying-his-bills-reports-claim.html
     

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