Your Take 

Your Take: Do Tax Shelters, Dodges, and Rolls Anger You?

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Form 1040I’m a big fan of Bloomberg Businessweek, especially their iPad app where you can download your subscription and take it anywhere, and recently they had a really interesting special report called How to Pay No Taxes – very good reading. It held a lot of insights into how the wealthy are able to avoid taxes in entirely legal, and very clever, ways. They’re all strategies that make sense when you’re moving millions of dollars around because the costs of paying accountants, lawyers, and the like are likely in the tens and hundreds of thousands of dollars. It makes less sense if you’re just moving several thousand around.

As I read the article, I was about to get annoyed at all the sheltering and dodging until I realized it’s just part of the game. Our tax structure has gotten so complicated, it’s basically a game. Consider this – the United States has one of the highest corporate income tax rates at 35%. Yet, after all the loopholes and credits and other tax breaks, corporations, in aggregate, pay about average. The difference is that certain industries pay a lot less and others pay more.

It’s like playing a game and finding out that one of the other players has discovered the optimal strategy before you do. They’re beating your pants off because they’re smarter than you. Can you really get that upset because they figured it out? I suppose you can get upset at anything but the reality is that you have to change the rules… right?

Check out the list of 11 moves and tell me what you feel!

(Photo: aidanmorgan)

{ 22 comments, please add your thoughts now! }

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22 Responses to “Your Take: Do Tax Shelters, Dodges, and Rolls Anger You?”

  1. No Debt MBA says:

    I agree with you, paying taxes in this country (and probably most countries)is a big game. People playing it well doesn’t anger me. What does anger me is the blathering from Congress about it without basis in data and how so many appointees and congress people don’t bother to file taxes at all.

  2. Strebkr says:

    As a CPA I appreciate the holes in the tax code. The IRS says you are legally allowed to minimize your taxes as long as you follow all 17,000+ pages of the US Tax Code.

    • sophomore says:

      I concur. One quick note on “fairness” has to do with walking a mile is another’s shoes. Please consider beginning your post with “I am in the Federal marginal tax bracket.” If you don’t know your 1040 income taxes paid, please consider not posting your viewpoint.

  3. So what if they ‘figured it out’?

    Those loopholes should not be there for them to discover, use or abuse.

    • Strebkr says:

      Most are not loopholes. The government uses tax breaks to incentivise its citizens to do things they deem beneficial. For example, you can write off your student loan interest before your AGI. This is a nice benefit and the government wants a smarter population so they “help” people go to school by offering this incentive. The 8,000 first time home buyers credit was designed to stimulate the housing market. The government got its citizens to do something they deemed beneficial to the entire country by offering this incentive.

      So they are not all bad like you think.

  4. aus says:

    The integrity of the tax system really does rely on everyone paying their fair share. I think it is legitimate to take advantage of deductions and other provisions in the way that they were intended. But going to great lengths to exploit unintended loopholes to avoid paying a fair share of taxes should rightly be looked down it – it is entirely unethical as all it achieves is improving one’s bank account at the expense of other taxpayers.

    • Jim says:

      I’ve never agreed with the “fair share” because everyone’s interpretation of fair share is different. Nearly 50% of Americans pay no tax, is that truly fair?

      • Dave says:

        Nope, not fair at all. Then again, life isn’t fair. 🙂

      • Bey says:

        Well, no Federal Income Tax . . . almost everyone is subject to a broad spectrum of taxes regardless of income — sales tax on retail items, excise tax on vehicle registration, use tax at hotels, etc. These things wouldn’t go away with a flat income tax, but I still think that’s a bit more fair. Make a dollar, pay a dime. Simplify the monstrous tax code we have.

        • JJ says:

          Agree with you here Bey. Flat tax rate and NO loopholes (no 401k, no IRA, no HSA, no tax exempt munis, etc). This would also eliminate all the cottage industries around taxes & investment vehicles.

          I think it’s insane that I’m able to shelter more than the average family makes in a year by simply using 2 shelters (46k in a non-prototype self employed IRA and an HSA). Give everyone a flat rate and get rid of all the shelters!

      • Strebkr says:

        The guys who are not paying any tax could be big business owners. It sounds unfair, but in reality, they could be employing hundreds if not thousands of people who are paying tax. Everyone pays tax, its just a matter of how effective your taxes are.

  5. billsnider says:

    I am proud to say that I use all eleven.

    Bill Snider

    PS Anybody want to buy my bridge?

  6. freeby50 says:

    I’m generally OK with tax avoidance as long as everything is on the up and up and its all legal.

    However when the tax dodge starts to look like a shell game that would take a flowchart and a team of accountants to untangle .. then I am not as happy. To me those schemes usually just seem like some new creative way to exploit loopholes or otherwise invent tax dodges that are not intended in any way. Shuffling money back and forth between trusts partnerships loans etc. wasn’t intended to be tax free. Generally I do not like that kind of scheme. On the other hand usually these schemes really just end up defering taxes rather than dodging them all together and in that case I’m not as annoyed by it as long as taxes are paid one way or another eventually.

  7. mannymacho says:

    I think that you will always have loopholes for people to exploit, unless you move to something ridiculously simple like a flat income tax, and even then there would still be ways to get around it in certain industries. You can close some loopholes but never remove them completely.

  8. daenyll says:

    would i like to see the loopholes and end-arounds closed? yes. do I fault anyone who legally takes advantage? no. That’s just the game, you want to pay as little as you can get away with. What I dislike are the ones that get away with more than they should, or get out paying less than they are supposed to based on the ridiculous mess of our tax code says they should.

  9. A game?

    When people’s livelihoods are at stake, he!! yes it angers me.

    When the government is shutting down, vital services are going away, and jobs are lost, you bet it angers me.

    When rich people who can afford to support our country get off free and I have to choke up slabs of my Social Security and piddling adjunct pay while I struggle to make ends meet, da^^n right it makes me angry!

    When I have to pay $400 to an accountant to do my taxes because the whole mess is so complicated I can’t even BEGIN to figure it out — again, while I struggle to buy flickin’ groceries and pay the property tax on my paid-off home — by God, you can be sooo sure it makes me angry!

    This game needs to come out of overtime and end.

    But of course, it won’t, because the wealthy individuals and corporations that profit from the “game” can afford to buy lobbyists and politicians to see to it that it never ends.

    Flat tax? Dream on, folks!

    • Grant says:

      The goal of individuals generally take into account their own well being first and society’s second. Economically speaking that is generally the case based off a utilitarian approach. I am in my mid 20’s and by no means consider myself rich but I hope to be at that point in my future. I don’t understand the view that rich people can afford to support our country. I am fine with a progressive tax system, but why is their such animosity surrounding taxing the rich? I believe many of these “rich” people are average people who have worked hard and made tough decisions to get to where they are in their life. Must they be taxed more because they made good life choices? Clean up the tax code and cut the government out from incentivizing what they believe to be “best” for society and we will all be better for it. Reduce the tax rates and cut out almost all deductions and credits. This will avoid manipulation and if implemented correctly should produce more fair and equitable taxation. If you’re not happy with the current system write your representatives and vote for change you believe in.

      • tbork84 says:

        Great post. I definitely agree with the kinds of changes that you propose, and I wonder if everyone who complains about “the rich” thinks there is some kind of landed nobility in this country that has inherited all its wealth and never worked for it.

      • Strebkr says:

        Grant – Great points. Really on point. You always hear this term “Rich”. What is rich? 50k, 100k, 200k, 1m? Who knows, its all relative. I like you am in my 20s. I make ok money, but dont consider myself rich. Even if I doubled my money I wouldnt be rich. But to a blue collar guy, I could be on top of the world. I certainly don’t want to support everyone else. I worked hard for my own money.

        I do agree that the tax code is too complex, but until there is a flat tax, we have the play THE GAME

  10. John says:

    Grant, I agree with you almost 100%. Cut out the loop holes, no more deductions, simplify tax the system to make it fair across the board.We also need to get rid of the special interest lobby that is choking this country.

  11. skylog says:

    yes, it angers me, but if they are there, and legal, they are going to get utilized. to get angry at the interests taking advantage of the system is foolish. that anger needs to be focused towards the body that has such things written into the “rules.”

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