
Moguls Rent South Dakota Addresses to Dodge Taxes Forever - bradleyjoyce
http://www.bloomberg.com/news/2013-12-27/moguls-rent-south-dakota-addresses-to-dodge-taxes-forever.html
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dmk23
What would you expect? If you live in a state like California and are in the
highest tax bracket, your total tax rate (federal + state + local + various
surtaxes) would be close to 60%. It is ludicrous to expect most people to just
fork over such an outrageous percentage of their earnings without complain.

No wonder the high-income individuals are fleeing high-tax states and "tax-
the-rich" ideology is failing to fill the states' coffers. Raising taxes hurts
poor people more than the rich.
[http://www.forbes.com/sites/trulia/2013/02/12/jobs-arent-
lea...](http://www.forbes.com/sites/trulia/2013/02/12/jobs-arent-leaving-
california-for-texas-but-people-are/)

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superuser2
Say your income is $406,750 (highest federal tax bracket for an individual).
Federal income tax is $118,188.75. California income tax is $37,941.45.
Effective tax rate is 38%. San Francisco could add 1.5% so now we're at around
40%.

How are you getting to 60%?

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gamblor956
(Tax advisor here.) You don't get a 60% rate in the US. Anyone who claims
otherwise doesn't understand the basic principles of U.S. taxation or is lying
to try and make a political point.

State taxes are deductible for federal income tax purposes (meaning that they
reduce your taxable income as determined for federal purposes). Also, Medicare
and Medicaid taxes are _part of_ payroll taxes (or FICA, for the self-
employed), so you don't pay them both.

As every tax advisor in the CNBC article pointed out, Michelson knows diddly
squat about taxes. He was taking every single tax rate and adding them
together, but he should have been averaging them out. For example, the 20%
rate on his capital gains and dividends replaces the 39.6% rate; he's double-
counting some of the FICA taxes, and worst of all, he thinks his _marginal
rate_ (the highest rate he pays) applies to all of his income.

~~~
anigbrowl
Thank you. I am so tired of seeing this 'federal + state income taxes are
cumulative' lie. Not only is it dishonest, it's an insult to the intelligence
since anyone who who has ever done their own taxes knows they're deductible
just by filling out the 1040.

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furtivefelon
A quote from the article: "Just $1 million invested in a dynasty trust, and
earning 12 percent a year, would swell to $1.9 billion in 85 years". So my
question is how do I find a investment vehicle that gives me 12% return
compounded year after year?

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bradleyjoyce
When I read stories like this I often wonder, would I do things any
differently if/when I have that much money?

Would you?

~~~
mudil
No, you wouldn't. The thing is that all that top wealth is managed by a group
of accountants and lawyers. Highly professional accountants and lawyers. (My
friend is an accountant here in Silicon Valley who manages wealth for
billionaires in a large accounting firm. He describes me some ways how they
manage wealth.) So these people's role role, their only role, is wealth
preservation, meaning tax minimization and avoidance. They know all the laws,
rules and regulations, and they have fiduciary duty to manage the wealth
efficiently and conservatively. Hence they will go to tax heavens and
offshore, if needed.

~~~
bagels
So, every time a story like this comes up, it makes me wonder... Does anyone
offer services like this for non-millionaires and non-billionaires?

~~~
gamblor956
If you're not in the highest marginal rate bracket, or most of your income is
not investment income, it's generally not worth the expense of paying for
these services.

Fees for these services generally start at $10,000, and only go up from there.

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w1ntermute
Out of curiosity, is any of this process of moving money around amenable to
automation? Can the "rules" be systematized in software?

~~~
gamblor956
Yes, but the process of creating _and more importantly updating_ that software
would involve so much human input that you wouldn't end up with much of a net
gain in terms of time or costs saved.

US federal tax laws change every year, and are so interconnected that quite
frequently small changes in one tax law can have massive impacts on entirely
different areas of law. And that doesn't even take into account state and
local taxes, or the taxes of the foreign jurisdictions you'd be dealing with,
or the impacts that tax treaties could have, or even the impact that non-tax
laws may have on financial transactions.

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vinhboy
It's really stupid of me, but everytime I read about taxes, I am always
"re"-amazed at how much money get spent on protecting money.

~~~
fedups
It's surprising how prone we are to forget that people act on incentives.

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brianbreslin
This reminds me of an article recently in businessweek about the tax loophole
with trusts that Sheldon Adelson uses.

[http://www.bloomberg.com/news/2013-12-17/accidental-tax-
brea...](http://www.bloomberg.com/news/2013-12-17/accidental-tax-break-saves-
wealthiest-americans-100-billion.html)

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sanxiyn
The article considers the rule against perpetuities to be an obviously good
thing, but I have my doubt. Consider this argument for example:

[http://www.overcomingbias.com/2010/03/parable-of-the-
multipl...](http://www.overcomingbias.com/2010/03/parable-of-the-multiplier-
hole.html)

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eigenvalue
Wow, who would have thought the Rule against perpetuities had actual
implications in modern American law! I thought it was more of a trivia
question that law professors might ask about in a property law class. Next
thing you know, we'll be reading an article discussing the Rule in Shelley's
Case!

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IvyMike
To steal a great phrase, every time I hear a story like this, I know the
guillotines are coming closer.

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zaqokm
The rich may be reducing their tax, but look how the government spends their
own tax revenue, not much will change when the government spends trillions on
their war effort.

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tn13
Sounds like a good strategy. If I had so much money I would hire some of the
smartest people in the world to save my taxes whatever way possible as long as
the government (read as legal extortion gang) cant put me behind bars for it.

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gamblor956
Tax shelters are very tricky. Unlike most other crimes, it's possible to be
convicted of tax fraud even if the tax shelter was legal (or at least _not
illegal_ ) at the time the shelter was put into place. This is generally
because many tax provisions look to the facts-and-circumstances of a
transaction or an item of income rather than to the strict letter of the
regulations.

