[quote gandalf]I don’t think your post really addresses the core issue of what constitutes ‘taxable’ in the first place, which is where most of the avoidance occurs at higher levels, especially in corporate finance/accounting departments.[/quote]
I didn’t want to write a blog post that was as long as the tax code. One thing I do worry about is what makes something ‘taxable’. I have a close relative that deals with Financial Accounting and who started with Corporate Auditing. This person doesn’t always have a good opinion of the ‘knowledge’ of some of the people they have dealt with – even from some of the accounting firms. Most of the dirty games seem to be at the ‘corporate’ level vs personal income tax level. A company making over 100M/year can afford more/better accountants than an individual.
[quote gandalf]I’d be interested in your assessment of this underlying tax policy issue, avoidance strategies at the high-end. And I would dispute your assertion that ‘real tax’ is distributed fairly.[/quote]I never asserted it is fair. I was dealing with the statement
The thing that (rightfully) pisses people off is that the brunt of our nation’s tax revenue is generated by the bottom 80% of citizens who take home about 40% of income.
One of the current problems with tax structures, is that money is ‘mobile’. If you tax too heavily in one locale/state/country, it will move and along with it goes the income it can generate and the associated jobs. Tax too hard and the state/fed will get a boost in tax revenues, but that boost is fleeting because those taxed will adapt to the change(Un-intended consequences of tax policy changes). Too many people feel that the simple solution is just tax them.. but reality is much more complicated.
[quote gandalf]Substantial wealth is accrued by corporations and HNW-individuals without officially reporting the YOY differences as wealth as income or even as gains.[/quote] The problem with doing it YOY is that some of the gains are long term, and could be easily eaten up with just one bad year. Some of these are on owned assets. Should the government be able to tax you on the year to year change in value of object held? Imagine the situation with owning a car. If the value of the vehicle goes up, you will owe tax on it. You did nothing to do cause this, and the value change was most likely due to inflation. Imagine the games with inflation that the government would play if YOY asset value changes were handled as taxable income. This is why it is dependent upon a taxable event, ie sale or conversion to cash.
When I look at the house my parents owned way back in the ’60s and ’70s and know how much they paid($35k) when they bought it and how much it is worth now($2.5M).. is that difference caused by any improvement(not really), others driving up real estate prices(definitely) inflation(definitely). The period involved was quite long (almost 50 years). So is this considered ‘weath’ or is it devaluation of the currency due to inflation?
[quote gandalf]In particular, numbers associated with offshore tax havens are unacceptably large at a time when public budgets everywhere are under duress.[/quote]
There is a lot of statements relative to offshore tax havens. The truth there is that many of the procedures they claim are illegal. The problem is catching them. It is also easy for politicians to claim the problem is due to tax evasion for the purposes of preventing people from looking behind the curtain and seeing that a lot of the behavior is due to the politicians spending behaviors and governmental money allocation and budgeting techniques.
[quote gandalf]. My view is, I think taxes can be lower, and one of the mechanisms for reducing tax rates in a responsible way would be to reform the tax system to reduce avoidance at the high-end.[/quote] I agree they can be lower, but I think that the amount loss to high-end avoidance is less than people think. I do know for a fact, that if you are making more than $100k a year, your taxes get looked at much closer than those at lower incomes.
It should be interesting what happens as the updated requirements with respect to capital gains reporting hits the brokerage companies.
