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The public has a right to know how companies that pay no taxes pull it off

larrysummers.com

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Re: The public has a right to know how companies that pay no taxes pull it off

#81

Post by goatinaboat »

Cthulhu_ wrote: post #70
ALittleLight wrote: post #26

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes. My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some…

> My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some loophole, I would go to prison. Why isn't the same standard applied to rich companies? I know of one "gotcha" that works in my country at least: work for low / no wage but instead have loads of assets like stocks; dividend taxes are much lower than income taxes. I could be wrong. I'm jus…

I know of one "gotcha" that works in my country at least: work for low / no wage but instead have loads of assets like stocks; dividend taxes are much lower than income taxes.

This is a common trick in the UK, or at least it was before the IR35 crackdown. Programmers, sportsmen, celebrities, even politicians and civil servants would run single-person companies and get their salaries paid to them. Then those companies in turn would pay them in dividends.

Re: The public has a right to know how companies that pay no taxes pull it off

#82

Post by simonh »

wiz21c wrote: post #64
gnicholas wrote: post #32

Earlier quoted context omitted.

This is a case of economies of scale. A fairly wealthy person could save maybe $50,000 per year with the advice of the smartest tax lawyers and accountants in the world. But it would cost them $500,000 per year to pay for the structure to be created/updated. When I worked as a tax lawyer, we created structures and defended cases that saved our clients hundreds of millions of dollars. At this scale, paying for our ser…

Maybe it's a little too much to ask, but are why are you "not saying any of this is right or good". Part of my brain wishes that law would actually mean justice but somehow, if I trust only what I know, I cleary cannot judge, as you do, if finance engineering is good or bad. I'd like to know what prevents you to choose if it's good or right (as person who have worked inside the business) thx

It the OP, but there’s a difference between holding a moral opinion and stating that opinion in a discussion. OP may simply have not wanted to obscure information presented from an insider perspective with personal opinion, in an attempt to stay objective.

Further, financial engineering by itself is morally neutral. It can create abuses sure, but it can also reduce unnecessary costs so that a company can employ more people, offer goods and services to customers at lower prices, etc. Tax is just one piece of a much bigger puzzle and it can’t always easily be disentangled from other issues.

I’m reminded of the saying about porn, you might not be able to define it, but you know it when you see it. There are plenty of publicly discussed cases of pretty clear and egregious tax evasion, but not all efforts to limit tax liability are abuses. Some of them are responses to deliberate incentives put into the tax system to encourage specific behaviour.

Re: The public has a right to know how companies that pay no taxes pull it off

#83

Post by gnicholas »

hugh-avherald wrote: post #74
closeparen wrote: post #47

Earlier quoted context omitted.

If it's a real loophole, the government is out of luck; best it can do is remove it next year. When the money flowing through a corporation actually makes someone rich, it becomes his personal income. It's not clear that corporations paying their own taxes is even a good idea vs. collecting the same revenue through higher marginal tax rates on the beneficial owners.

Tax loopholes can generally be closed retrospectively.

At least in the US, there are constitutional issues created by changing tax laws with retroactive effect.

Re: The public has a right to know how companies that pay no taxes pull it off

#84

Post by gizzlon »

gnicholas wrote: post #32
ALittleLight wrote: post #26

I read about tax avoidance schemes like corporate inversions or sending all your patents to a company in some tax free haven and licensing your patents from your company for all your profits, and so on, and it makes me really mad. Companies making many billions of dollars paying no taxes. My intuition is that if I personally came up with a cute "gotcha" like this where I wound up paying zero in taxes because of some…

This is a case of economies of scale. A fairly wealthy person could save maybe $50,000 per year with the advice of the smartest tax lawyers and accountants in the world. But it would cost them $500,000 per year to pay for the structure to be created/updated. When I worked as a tax lawyer, we created structures and defended cases that saved our clients hundreds of millions of dollars. At this scale, paying for our ser…

> At this scale, paying for our services was a no-brainer.

What? I don't think so. If money is the only thing they care about, sure. But is it? Should it be? And if breaking the spirit of the law is fine, shouldn't breaking the letter of the law be fine as well? As long as the risk is low enough..

Re: The public has a right to know how companies that pay no taxes pull it off

#85

Post by [deleted] »

bagels wrote: post #59
Zarath wrote: post #43

Earlier quoted context omitted.

If you are upper middle class it is possible to pay zero taxes. Between tax loss harvesting, 401ks, opportunity zones, and LLC formation, a citizen can legally pay no taxes some years. It's a bit of a learning curve but none of the mechanics are particularly difficult.

Where can we learn how to do this?

[deleted]

Re: The public has a right to know how companies that pay no taxes pull it off

#87

Post by ArnoVW »

wiz21c wrote: post #64
gnicholas wrote: post #32

Earlier quoted context omitted.

This is a case of economies of scale. A fairly wealthy person could save maybe $50,000 per year with the advice of the smartest tax lawyers and accountants in the world. But it would cost them $500,000 per year to pay for the structure to be created/updated. When I worked as a tax lawyer, we created structures and defended cases that saved our clients hundreds of millions of dollars. At this scale, paying for our ser…

Maybe it's a little too much to ask, but are why are you "not saying any of this is right or good". Part of my brain wishes that law would actually mean justice but somehow, if I trust only what I know, I cleary cannot judge, as you do, if finance engineering is good or bad. I'd like to know what prevents you to choose if it's good or right (as person who have worked inside the business) thx

Because he wants to give his technical expertise, and does not want to enter into a political debate about the way we organise society.

If you read between the lines, you can see that he understands that people have reservations (and probably he has chosen). He just chooses to explicitly not make a statement about it, and keep this a technical discussion.

In todays highly politicised society, this is (in my opinion) a sensible thing to do.

Re: The public has a right to know how companies that pay no taxes pull it off

#88

Post by lozaning »

bagels wrote: post #59
Zarath wrote: post #43

Earlier quoted context omitted.

If you are upper middle class it is possible to pay zero taxes. Between tax loss harvesting, 401ks, opportunity zones, and LLC formation, a citizen can legally pay no taxes some years. It's a bit of a learning curve but none of the mechanics are particularly difficult.

Where can we learn how to do this?

If you're a salaried employee that gets a W2, you're gonna pay taxes.

Re: The public has a right to know how companies that pay no taxes pull it off

#89

Post by cblconfederate »

chii wrote: post #63
cblconfederate wrote: post #30

> The public has a right to know how companies that pay no taxes pull it off Not just that, they need cheap access to the same infrastructure.

unfortunately, it doesn't exist. Otherwise, if it does, then there's a way to arbitrage the extra money savings into a service that you can pay for (in lieu of tax). The fact that such a service doesn't exist for the pleb individual means that this can't be done.

at least in europe , there is a market for "tax optimization" for middle-to-upper middle class people that is not prohibitively expensive, involving the many tax havens of the EU for certain kinds of businesses, for those willing to go through the hassle.

Re: The public has a right to know how companies that pay no taxes pull it off

#90

Post by redis_mlc »

wolco2 wrote: post #65
demadog wrote: post #34

Earlier quoted context omitted.

Which states are those?

Delaware to incorporate and East Texas to file patents?

No, those states have well-understood roles, though East Texas is diminishing in importance because of the notoriety.

There's a couple of states that quietly hide money, nothing to do with any useful purpose to the public.

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