How the rich pay no taxes
Eleven shelters, dodges, and rolls -- all perfectly legal -- used by America's wealthiest people.
For the well-off, this could be the best tax day since the early 1930s: Top tax rates on ordinary income, dividends, estates, and gifts will remain at or near historically low levels for at least the next two years. That's thanks in part to legislation passed in December 2010 by the 111th Congress and signed by President Barack Obama.
"This is clearly far and away the most generous tax situation that's existed," says Gregory D. Singer, a national managing director of the wealth management group at AllianceBernstein (AB) in New York. "It's a once-in-a-lifetime opportunity."
For the 400 U.S. taxpayers with the highest adjusted gross income, the effective federal income tax rate -- what they actually pay -- fell from almost 30 percent in 1995 to just under 17 percent in 2007, according to the IRS. And for the approximately 1.4 million people who make up the top 1 percent of taxpayers, the effective federal income tax rate dropped from 29 percent to 23 percent in 2008. It may seem too fantastic to be true, but the top 400 end up paying a lower rate than the next 1,399,600 or so.
That's not just good luck. It's often the result of hard work, as suggested by some of the strategies in the following pages. Much of the top 400's income is from dividends and capital gains, generated by everything from appreciated real estate -- yes, there is some left -- to stocks and the sale of family businesses. As Warren Buffett likes to point out, since most of his income is from dividends, his tax rate is less than that of the people who clean his office.
The true effective rate for multimillionaires is actually far lower than that indicated by official government statistics. That's because those figures fail to include the additional income that's generated by many sophisticated tax-avoidance strategies. Several of those techniques involve some variation of complicated borrowings that never get repaid, netting the beneficiaries hundreds of millions in tax-free cash. From 2003 to 2008, for example, Los Angeles Dodgers owner and real estate developer Frank H. McCourt Jr. paid no federal or state regular income taxes, as stated in court records dug up by the Los Angeles Times. Developers such as McCourt, according to a declaration in his divorce proceeding, "typically fund their lifestyle through lines of credit and loan proceeds secured by their assets while paying little or no personal income taxes." A spokesman for McCourt said he availed himself of a tax code provision at the time that permitted purchasers of sports franchises to defer income taxes.
For those who can afford a shrewd accountant or attorney, our era is rife with opportunity to avoid, or at least defer, tax bills, according to tax specialists and public records. It's limited only by the boundaries of taste, creativity, and the ability to understand some very complex shelters.
- The 'no sale' sale: Cashing in on stocks without triggering capital-gains taxes
- The skyscraper shuffle: Partnerships that let property owners liquidate without liability
- The estate tax eliminator: How to leave future stock earnings to the kids and escape the estate tax
- The trust freeze: "Freezing" the value of an estate so taxes don't eat up its future appreciation
- The option option: Stock options allow executives to calibrate the taxes on their compensation in a big way
- The bountiful loss: Using, but not unloading, underwater stock shares to adjust your tax bill
- The friendly partner: With this deal, an investor can sell property without actually selling -- or incurring taxes
- The big payback: So-called permanent life insurance policies are loaded with tax-avoiding benefits
- IRA Monte Carlo: Tax advisers recommend converting traditional IRAs to Roth IRAs -- soon
- The venti: Putting a chunk of pay in a deferred compensation plan can mean decades of tax-free growth
- The exit strategy (not CPA-recommended): Death and taxes? Not for those who shuffled off to the hereafter in 2010
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Don't remember who said that last one, but as a 'worker bee', I really like it.
HERE GOES..."Corporate Greed/Welfare" "Rich 'wall street' fatcats...But we never hear about....
Michael Bay - $125 million
Johnny Depp - $72 million
Steven Spielberg - $85 million
Roland Emmerich - $70 million
Will Smith - $80 million
Eddie Murphy - $55 million
Mike Myers - $55 million
Leonardo DiCaprio - $45 million
NHL - Vincent Lecavalier - $10 Million
GOLF - Tiger Woods - $10 Million
NBA - Tracy McGrady - $23 Million
NFL - Philip Rivers - $25 Million
TENNIS- Roger Federer - $8,768,110
NHL - Vincent Lecavalier - $10,000,000
GOLF - Tiger Woods - $10,508,163
FOOTBALL- Cristiano Ronaldo - $16,261,759
NBA - Tracy McGrady - $23,239,561
FORMULA ONE - Kimi Raikkonen - $45 Million
MLB - Alex Rodriguez - $33 Million
I am one of those people who are in the top 1% and started in an old apartment building. We were very poor and I have lived the American dream financially. One thing I know from going up the ranks is that the poor and lower middle class may not pay any or little "income taxes" but the thing people forget is that they pay a much higher per centage of their income for all the other taxes that must be paid. A guy driving to work every day buying gas pays a higher portion of his income for the highways. He pays a higher portion of his income for property taxes and taxes on purchases he make, licenses and the list goes on and on. I have always felt that the guy that lives in the penthouse should be paying a lot more rent per foot than the guy in the basement. All the little income earners have paid for so much of the things that allow mw to make what I make such as the highways and sewer and water systems to name a few. Never met an money maker that was discouraged by his rate at 30% or say 40% as most business people are gamblers by nature. In my life the most millionaires made were when there was a strong enough middle class that had enough disposable income to buy my product. Decrease the middle class and there will be less buyers to create success stories.
If you've never had a rich person rob you, than you either have not been paying attention or you have no money to begin with. Rich people rob you every single day... it's interesting that a Dr. would have trouble seeing that! Ever get a cable bill? Ever pay a lawyer or insurance company? I don't blame the rich for robbing me, it's simply the way the system is designed:
There are so many poor people in our system because the system was designed that way... It's not a system shaped like a pyramid, it's the point. That tens of millions of working poor would toil, and billions of sweatshop slaves would blister and bleed... for the comfort of our ultra wealthy (and even our middle and upper middle classes to be perfectly frank). This American capitalism actually encourages and rewards bad behavior, such as hoarding billions of dollars while millions starve or succumb to the resulting systemic violence. Such as externalizing pollution costs, resulting in profits and bonuses. Such as outsourcing labor costs to the same ends.
This has got to stop or we will be stopped... not a warning but a plea...
-starving for your humanity.
Rather than judge all conservatives, or all liberals (depending on your point of view), as too stupid to understand how the world really works, I suggest we ask ourselves a simple question. Why are there so many loopholes for the rich to exploit? Common sense tells me it is because the ones who write the rules make sure that they are not hurt by them. In other words, legislators make sure that the tax code takes care of them and their supporters. (isn't the same true for Government workers' pension and health benefits?) If we want to make it more fair, we should adopt a simple flat rate tax system in which everybody pays something, and the wealthier pay more, but I for one do not believe the government should ever get 1/2 of everything someone gets, as long as it is legally obtained. Lastly, the government should have NO RIGHT to anyone's inheritance. But alas, the dead don't vote.
What absolute rubbish, your figures are impossible!! Show us the unbiased source of these trumped up figures. And sorry, rich people may have earned their money in the past but nowadays, there are way too many scammers and thieves (Like Bernie Madoff) who abuse positions of trust or who have managed to find loopholes and ways of making money using immoral means. Take your crocodile tears elsewhere!
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