How The Super Rich Avoid Taxes Even As They Demand That The Rest Of Us Pay More [theeconomiccollapseblog]

From http://theeconomiccollapseblog.com

How The Super Rich Avoid Taxes Even As They Demand That The Rest Of Us Pay More

The way that we tax people in the United States is fundamentally broken and should be completely discarded.  The U.S. tax code is absolutely riddled with loopholes that allow the super rich to legally avoid taxes while many of the rest of us are being taxed into oblivion.  In our system of taxation, middle class families that work hard and try to play by the rules are deeply penalized while those that are willing to abuse the system make out like bandits.  There is something fundamentally wrong with a system that enables wealthy politicians such as Barack Obama and Mitt Romney to pay a smaller percentage of their incomes in taxes than millions of middle class families.  Mitt Romney hasmillions of dollars parked down in the Cayman Islands and in other tax havens.  He does this to avoid taxes.  Unfortunately, most Americans do not have the resources to funnel money through offshore tax havens.  Most Americans just automatically have their paychecks shredded by taxes and then try to live on whatever is left over.  Most Americans are just trying to survive financially from one month to the next.  But the super rich have options.  Thanks to technology, they can live almost anywhere they want and they can run their companies and manage their investments from anywhere in the world.  The truth is that the wealthier you are the easier it is to avoid taxes.  But even as the ultra-wealthy do their best to avoid taxes, many of them still feel free to demand that the rest of us be taxed more.

So what are some of the ways that the super rich avoid taxes?

Well, let’s start with those that are just “somewhat wealthy”.  Many millionaires still want or need to be U.S. citizens, so they are subject to the U.S. tax code.  Fortunately for them, their tax lawyers know of thousands of loopholes that have been designed to help the rich avoid taxes.

The following is from a recent article by Jen Talley….

Some of the richest people in the country pay the least, relatively speaking, in taxes. How is this possible? Answer: Through the clever manipulation of the U.S. tax code’s loopholes. And it works: as income rises, effective tax rates rise as well, but only up to a point. IRS data shows that the effective income tax rate flattens out at just over 24 percent for those making over a million dollars. As income exceeds $1.5 million, the rate begins to decline; those with incomes above $10 million pay an average income tax rate of around 19 percent. So, how do they do it?

You could write an entire series of books on the technical details of how this gets done.  Trust me, I studied tax law when I was in law school.

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Lagarde does not pay income taxes

Google translation

Having incurred the wrath of the Greek people that it calls to pay his taxes, the Executive Director of the IMF is at the heart of a controversy based on their specific tax status as international civil servants.

New outcry for Christine Lagarde. Three days after he shocked the political establishment by urging Greeks to pay taxes, the Executive Director of the International Monetary Fund suffers lightning ranks.

Most complain that the former Minister of Economy, who currently earns 380,939 euros per year, pays no income taxes.The explanation is given by the Vienna Convention on Diplomatic Relations from 1961: as an official international, Christine Lagarde benefit of a specific tax status. Article 34 states that “diplomatic agent is exempt from all dues and taxes, personal or real, national, regional or municipal.”

However, the article adds that the diplomatic agent is liable for certain other taxes such as “taxes on private immovable property situated in the territory of the receiving State, unless the diplomatic agent holds it on account of the sending State for the purpose of the mission. “

The Foreign Ministry said that this specific tax status also benefits the leaders of international institutions like the International Atomic Energy Agency, the World Health Organization, UNESCO or the International Bank for Reconstruction and Development. European officials have also in part of this tax benefit. Find this article on Figaro.fr

 

Comments from Italy on “Financial Terrorism”, Taxes, General Economic Condition, and Mario Monti [Mish]

Financial Terrorism

Reader Andrea from Italy (who now lives in France) has some interesting comments regarding my post on Saturday Italy Deploys 20,000 Law Enforcement Officers to Protect Individuals and Sensitive Sites; Anecdotes From Italy via Canada: Taxed Out of House and Home.

Andrea writes …

 Hi Mish,

I would like to give your readers a better understanding of terrorism in Italy. Italy went through the seventies with a very hard season of terrorist acts.

In the worst period you could count one terrorist act per day: killing or bombing of politicians, managers, journalists and trade unions representatives. The main terrorist organization during those years were the “Brigate Rosse” (Red Brigades).

The climax happened when they managed to kidnap, jail and eventually kill the Italian PM Aldo Moro. Their “five point star” logo is still today symbol of fear and terror in the country.

Along with the “Brigate Rosse”, other minor far-left armed organizations have been spreading terror in the country and also many far-right organizations. An involvement of Italian and US intelligence has sometimes been guessed for some these acts. Those years passed to history as the “years of lead”, by the metal bullets are made of.

The period of terrorism roughly ended in 1982 with the liberation of US Army Gen. Dozier, kidnapped by Red Brigades. Most of their masterminds and killers have been caught and put in jail or spontaneously surrendered by that time.

Since then, from time to time, some acts are still claimed by Red Brigades.

So the matter of terrorist acts is very, very sensitive in Italy. Unfortunately, the difficult economic environment creates the conditions for a comeback of terrorism.

Best regards,
Andrea

General Economic Conditions, Taxes, and Mario Monti

In a followup on general economic conditions Andrea writes …

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You Are Free To Travel—If The IRS Lets You [gonzalolira]

As read on http://gonzalolira.blogspot.com/2012/04/you-are-free-to-travelif-irs-lets-you.html

 

A bill that nobody is paying any attention to is sailing through Congress: Senate Bill 1813. It passed the Senate by 74 to 22, and is expected to sail through the House as well. It’s an act “[t]o reauthorize Federal-aid highway and highway safety construction programs, and for other purposes.”

It’s the “and for other purposes” part of the title that has me worried—specifically Section 40304: “Revocation or denial of passport in case of certain unpaid taxes.

This section would give the IRS the power to keep a U.S. citizen from traveling—

—and it’s another example of Executive Power run amok. It’s another example of how the United States is turning into a police-state.

The right to travel freely is sacrosanct—it’s not some privilege that the government bestows on us: It’s one of our basic freedoms as citizens. In point of fact, the countries that have limited their citizens’ ability to travel—the Soviet Union, the People’s Republic of China, North Korea, Cuba—were all rightfully called “police-states”: It’s one of their defining characteristics—the fact that they were keeping their citizens hostage.

In the United States, there are several, clearly defined reasons why you would have your passport either denied or revoked—and all of them pass the smell test.

In the case of a passport being denied, according to the U.S. State Department, the reasons are:

“a federal warrant of arrest, a federal or state criminal court order, a condition of parole or probation forbidding departure from the United States (or the jurisdiction of the court), or a request for extradition [by a foreign country].

Additionally, failure to pay a court-ordered child-support in excess of $5,000 can also be grounds for the State Department to refuse to issue a passport to a U.S. citizen.

In the case of a passport being revoked, the law (22 CFR 51.72) says very clearly that:

A passport may be revoked or restricted or limited where:
(a) The national would not be entitled to issuance of a new passport under §51.70 or §51.71 [the above conditions]; or
(b) The passport has been obtained illegally, by fraud, or has been fraudulently altered, or has been fraudulently misused, or has been issued in error; or
(c) The Department of State is notified that a certificate of naturalization issued to the applicant for or bearer of the passport has been canceled by a federal court.
[54 FR 8532, Mar. 1, 1989, as amended at 64 FR 19714, Apr. 22, 1999]

Now, notice how both in the case of a denial or a revocation of a passport, the State Department is essentially carrying out the judgment of the courts.

An arrest warrant can only be issued by a court. A parolee is, again, limited under the aegis of a judicial order. An extradition request will only be complied if a foreign court is making the request, not a foreign law enforcement agency. A court-ordered child support payment is, again, a judicial decision.

In all of these cases, the State Department is acting on the orders of a court. It is the Judiciary that decides to restrict the freedom of movement and travel of a U.S. citizen—as is their exclusive prerogative.

According to the Constitution, the Legislature does not have the right to judge the guilt or innocence of a person, be they a citizen or not. According to the Constitution, the Executive does nothave the right to judge the guilt or innocence of a person, be they a citizen or not.

According to the Constitution’s separation of powers, only the Judiciary has the right to determine guilt or innocence.

Thus, ultimately, only the Judiciary has the right to revoke or deny a citizen’s ability to travel—and only for serious crimes.

But with this Bill 1813, it will now be the IRS—without any judicial oversight—which will determine if a citizen can travel or not. Not even the IRS as an institution—just some random IRS bureaucrat, with no oversight or restraint, will be able to decide to strip you of your right to travel freely.

As written, Bill 1813 states that the IRS must find that $50,000 or more is owed by the citizen—but this is a unilateral determination by the IRS, and it includes penalties and interest. So the alleged amount that you owe could be substantially less—but you are now no longer allowed to travel.

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