What they do with those 50 million later is somewhat immaterial, that's sort of what I'm pointing out. If they make money with the 50 million, sure, they'll have to pay some taxes, and the difference between the loan and their money is that they get to pocket the money in the latter case, vs using it to repay the loan. If they lose money, they can either opt to use the loss as a deduction, or close down the LLC and file chapter 11. If they used their own capital, then they lost the money out of their pocket as well.
That doesn't really have much to do with what's cheaper for that person in order to get those $50 mill to begin with.
https://www.nerdwallet.com/article/s...-tax-deduction
i'm not talking about what they do with the loan money. i'm talking about what funds they use to pay back the loan money. its going to be cash that they have paid taxes on
but thats a business loan not a personal loan. the propublica article is talking about individuals like bezos, buffett, etc, not berkshire hathaway or amazon. i thought the accusation is that billionaires are able to acquire cash (for personal use) without paying what would otherwise be income or capital gains taxes
I will give you an example. Spring 2020 I bought 3 acres of commercial property at $3 a foot. I used other property I own as collateral and borrowed 400K with zero down @ 4.5%. Payments were around $3500 a month and was mostly deductible interest so my effective rate was more like 3%. I also had to pay about 8k in property tax which was also deductible so my effective tax was a little over 5k. So I'm out of pocket about 30k for one year. Flipped it last spring (held it 13 months) for 500k. Paid the loan off at closing and after closing costs cleared about 70K. Of course I will still have to pay cap gains on that. Of course there is risk but it was an easy 50k, all legal and local taxes and fed taxes all get paid. Win/Win.
I know what you're talking about, and I don't dispute that, but I don't understand is how it's really germane to the point.
I don't know a single millionaire, let alone a billionaire that will not shield itself behind a LLC or similar to do any kind of significant money movement. What they reap eventually comes from those businesses.
sure, but the same could be said of anybody who does a cash out refi of their home. being able to leverage assets to get loans isn't unique to the uber rich... and ultimately during the life of the loan you were making payments with after-tax money, and you ultimately paid capital gains on the profit from the transaction. so i guess my point is im not seeing how this is being characterized as a tax dodge... other than saying you should have sold another asset for 400k (instead of getting a loan using it as collateral) and paid all those cap gains on THAT asset up front
another great Cory Doctorow post
https://pluralistic.net/2021/06/15/g...rried-interestPrivate equity's playbook is to borrow giant sums by putting up other peoples' companies as collateral (yes, really). Then they use that money to buy the company they mortgaged, and pay themselves a huge dividend.
Then they sell off the company's assets and pay themselves even more money. That leaves the company in a state of precarity – assets they once owned, like their buildings, they now rent. If the rent goes up, they have to find the money to cover it.
All of this forms a pretense for mass layoffs, defaulting on pension obligations, lowering product quality, stiffing suppliers and borrowing more money. If the company doesn't go bust, the PE looters can flip it to another PE company, that does it again.
Whenever you see something really terrible happening to a business that once offered useful products and services and paid decent wages, it's a safe bet that PE is behind it. Toys R Us, Sears, your local hospital – and that memestock favorite, AMC.
https://pluralistic.net/2020/04/12/m...-lake-partners
Private equity goons make their money in two ways: the first is by pocketing 20% of these special dividends and other extractive policies that hollow out business.
This is money at PE managers get paid for spending their investors' money. It's a wage, in other words.
But thanks to the "carried interest" loophole (a hangover from 16th-century sea captains that has nothing to do with "interest" on loans), they get to treat these wages as "capital gains" and pay far less tax on them.
The fact that we give preferential tax treatment to capital gains (money derived from gambling), while taxing wages (money derived from doing useful work) at higher rates really tells you everything you need to know about our economic priorities.
https://pluralistic.net/2021/04/29/w...rried-interest
The carried interest loophole lets PE crooks treat their salaries as capital gains, are taxed at a much lower rate than the wages of the workers whose lives they're destroying.
On top of the 20% profit-share that PE bosses get every year, they also pocket a 2% "management fee" for all the "value" they add to the companies they've taken over.
This is definitely a wage. The 20% profit-share at least has an element of risk, but that 2% is guaranteed.
But PE bosses have spent more than a decade booking that 2% wage as a capital gain, using a tax-fraud tactic called "fee waivers." The details of how a fee waiver don't matter because it's all bull , like the tale of the needful Greyhound ticket.
All that matters is that a legal fiction allows people earning eight- or nine-figure salaries to treat all of those wages as capital gains and pay lower rates of tax on them than the janitors who clean their toilets or the workers whose jobs they will annihilate.
Now, the IRS knows all about this. Whistleblowers came forward in 2011 to warn them about it. The Treasury even struck a committee to come up with new rules to fix it.
But Obama failed to make those rules stick, and then Trump put a former tax-cheat enabler in charge of redrafting them. The cheater-friendly rules became law on Jan 5, and handed PE bosses hundreds of millions in savings every year.
https://www.nytimes.com/2021/06/12/b...ity-taxes.html
The New York Times report on "fee waivers" goes through the rulemaking history, the technical details of the scam, and the gutting of the IRS, which can no longer afford to audit rich people and now makes its quotas by preferentially auditing low earners who can't afford lawyers.
But former securities lawyer Jerri-Lynn Scofield's breakdown of the Times piece on Naked Capitalism really connects the dots:
https://www.nakedcapitalism.com/2021...ids-taxes.html
As Scofield and Yves Smith point out, if Biden wanted to do one thing for tax justice, he could abolish preferential treatment for capital gains. If we want a society of makers and doers instead of owners and gamblers, we shouldn't penalize wages and reward rents.
reward rents
Rent from my rental house is taxed at ordinary income tax rate - it is not rewarded with some special rate. And what exactly is wrong with owners? Don't they want high home ownership? This article needs to use correct terms: real estate investor instead of owners and "capital gains" instead of rent.
PE involvement in the real estate market hasn't conduced to higher rates if individual home ownership, but the opposite. PE is overbidding individual buyers with straight cash upfront.
the equities of the system are screwed up
In the fall of 2020, a consortium of journalists reported out the Jersey Offshore leaks, a collection of 350,000 docs from an especially dirty trust company called La Hougue, on the British Channel Isle of Jersey, a notorious tax-haven.
https://globalreportingcentre.org/jersey-offshore/https://pluralistic.net/2021/06/20/l...ue/#complexityThe Jersey Offshore leaks had the misfortune to be published amid a pandemic, a once-in-a-generation antiracist uprising, a string of armed far-right assaults on US state-houses and a critical election, so the reporting barely registered, despite its significance.
But it's worth revisiting those leaks, especially in light of the debate that the Secret IRS Files has provoked about the morality and legality of dynastic wealth preservation and the bizarre, complicated and hard-to-understand tactics deployed by tax evasion experts.
Last January, Mother Jones published an analysis of a key memo from La Hougue, in which Calyn Shaw and Sam Eifling worked with tax experts to analyze 11 tactics La Hougue advised their clients to employ.
https://www.motherjones.com/politics...oney-offshore/
These "11 ways" are definitely in the "complicated so they'll be hard to understand" category, but at root, they all have a simple, common mechanism: La Hougue opens a secret account in a tax-haven for you and funnels money into it.
That's it.
But like the conjuror who has 11 tricks that all rely on the same sleight, La Hogue has 11 different pretenses that are used to obscure the fraud and slide it under the noses of underfunded, overworked tax officials.
I. Consultancy: secretly incorporate a fake offshore "consultancy." Bill your onshore business for "consulting" and write it off as a "business expense." The money goes into your consultancy's offshore, tax-free bank account, which you secretly control.
II. Expenses: Secretly create an offshore account. Pay money into it that you record as a "travel expense" or "gift" or "misc expense." Keep the payments under the $10,000 threshold for formal reporting.
III. Metrocab: Buy stock options in a money-losing British taxi company called Metrocab that La Hougue secretly controls. La Hougue secretly funnels the money into your secret offshore account.
IV. Los Cabos: Fake an investment in a 65-acre property in Baja California that La Hougue secretly owns. They send you fake docs claiming you lost all your money. The money you send them actually goes into your secret offshore account.
V. Danehill Currency Fund: Borrow money from a company that La Hougue secretly owns and invest it in a "currency fund" La Hougue secretly runs. They fix it so your "investment" loses money (on paper) but actually all the money goes into your secret offshore account.
VI. Bad loans: Make "loans" to businesses secretly controlled by La Hougue. These loans are not repaid so you can write them off, but actually La Hougue just shovels the money into your offshore account.
VII. Mortgage default: Remortgage a property you own to a lender secretly controlled by La Hougue, then default and let La Hougue foreclose. La Hougue secretly transfers le to your offshore company.
VIII. Offshore property: Sell a property at a discount to an offshore buyer (really your offshore company). The discount is due to a contract that requires you be allowed to occupy the property for a month/year. You pay lower tax on the sale and the le is moved offshore.
IX. Redirecting money: If someone owes you money, get them to send it to your offshore company and just don't declare the income.
X. Made-up penalty: When you sell a property, La Hougue forges a contract with your offshore company giving it the right to buy the property, with a penalty if you don't sell it to them. You send some of the sale money to your company as a penalty and don't pay taxes on it.
XI. Fake offshore investment: Sell 49% of your onshore business to an offshore company you secretly own or control. You don't pay taxes on 49% of your onshore earnings or the eventual sale of the business.
Those are the 11 ways, and as you can see, once you cut through all the performative complexity, they're all just obvious frauds. In fact, it seems the La Hougue partner who came up with these got bored and started repeating themself.
Parts of this read like a lazy D&D module, where you enter a series of nearly identical rooms and fight nearly identical monsters for nearly identical rewards – it's a kind of soporific wickedness, what Dana Claire calls the "shield of boringness."
La Hougue was never prosecuted for any of this and never will be. They shut down in 2007.
But that doesn't mean that these scams were consigned to the dustbin of fraud history – far from it! La Hougue's principles decamped to Panama and formed a new "consultancy" there.
The tissue-thin lies of the tax fraud and money-laundering industries are themselves very dull, but what is incredibly interesting is how hard it seems to be for the world's tax authorities to pierce them.
The amount of political pressure not to look to hard at this stuff must be prodigious indeed.
Still confusing increasing net worth ( "wealth" due to stock he owns in the company he created that he never sold) with income...money he actually converted and spent. That stock will eventually be sold and the government will get its money.the equities of the system are screwed up
so what, the equities will still be screwed up
Better get on your fainting couch with your n95.
Nursing a grudge?
Bless your heart.
A grudge for what?
no idea, feel free to share
You brought up the "grudge".
offers the needle, then feigns indifference
Its strange that you think you're witty.offers the needle, then feigns indifference
I was laughing at you
and maga supporters who belong to the bottom99% and probably lower are still voting republican. This is mind blowing. I guess that they are hoping to be rich one day, which will never happen for 99.999999% of them, to avoid paying high taxes.
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