How to avoid federal income taxes: Make $200 million a year
Two things you can’t dodge, right? Death and taxes.
Make that one thing _ if you’re fabulously wealthy, that is.
According to The New York Times, the Internal Revenue Service this summer unveiled data from the 400 individual U.S. income tax returns with the highest adjusted gross income in 2009 _ those with an average income of $202 million in 2009.
And what did it show? That six of the 400 paid no federal income tax.
The Times notes that the “… data demonstrates that many of the ultrarich can and do reduce their tax liability to very low levels, even zero. Besides the six who paid no federal income tax, the I.R.S. reported that 27 paid from zero to 10 percent of their adjusted gross incomes and another 89 paid between 10 and 15 percent … ”
How’d they pay so little (or nothing at all) when they took in so much?
“The data show that the ultrarich typically pay low tax rates every year, but 2009 was a special case,” the report states. “In 2008, people with large stock portfolios and other less liquid assets were disproportionately hit with large losses on paper. One of the oddities of the tax code is that capital gains taxes are discretionary, since they must be paid only when gains are realized. And they can be offset by losses. The silver lining in a bad year like 2008 for wealthy people is that they can “harvest” losses by selling assets, then use those losses to offset any gains. They can also carry forward the losses to offset gains in future years.”
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14 comments Add your comment
NPS
August 14th, 2012
9:27 am
Taking a loss on one’s tax return is a perfectly legitimate way to reduce one’s tax burden. It is not odd that a capital gain is only taxed once it is realized. You bought Apple stock for $20 in the 90s. You don’t get taxed until you sell the stock and actually make money. If you sold the stock today, that would be a gain, and you don’t really have a gain until you sell the stock. If you have a loss from selling Facebook, it is reasonable and proper to take that loss and offset a gain. This piece implies that losses should be ignored and all gains should be taxed. That is absurd. While we should investigate why people who make so much pay so little, taking a legitimate loss to offset a gain should continue to be a part of our tax code.
monroe
August 14th, 2012
9:54 am
rich people should be paying a lot more taxes. I’m tired these superrich using a bunch of loopholes to pay no tax. The government needs to crack down and get more taxes from these crooks!
Not So Casual Observer
August 14th, 2012
9:55 am
What is the point of this article?
Would that point be the people who paid $20 million in tax did not pay enough? That losses for one person are a bad thing for the rest of the public because losses offset gains?
To recap, 122 taxpayers out of 400 paid less than 20% of their income in federal taxes. On the other hand, 278 taxpayers paid more than $30 million in one year in federal income tax.
The New York Times has demonstrated over the years that FACTS are simply an impediment to reaching the desired conclusion. The 400 taxpayers had a combined tax bill in excess of 10 BILLION dollars!
Now let us take 400 typical Democrat, liberal voters. This sample paid nothing!Since 48% of “taxpayers” pay no federal income tax and are generally identified with the Democratic Party, you could easily assume the Democratic voters contribute NOTHING in comparison, although many of the 400 could, like Warren Buffet, be so delusional as to vote for a Democrat.
Laurie
August 14th, 2012
10:20 am
I’ve benefited from this rule myself, and I’m by no means a wealthy person. You know who else benefited from this rule over the last few years? Middle class families who had to cash in investments due to job loss. NPS is right, trying to attack this part of our tax code is absurd.
Doug B
August 14th, 2012
10:25 am
The loopholes are out of control if you can make anywhere in the neighborhood of $202,000,000 in a year and not pay a dime in taxes. All loopholes should be phased out at these income levels. I can accept the carry-forward of losses, if that’s what it was, but I doubt any of these people lost that much money the previous year.
dc
August 14th, 2012
10:38 am
missing out on the point……….obviously they didn’t “make” that much on their adjusted gross income (you know….that same number that we ALL pay our taxes based off of), or they would’ve paid taxes. that’s like saying one division of a company made $200 million, while another lost $200 million. The net is zero for the company. But the company should pay taxes based only on the profitable division??
talk about cherry picking to support a BS ideological point…wow
southpaw
August 14th, 2012
11:08 am
In the late 1960s, about 155 high-income people were reported as paying little or no income tax. “WE’VE GOT TO DO SOMETHING!” The cure was worse than the disease. Because the government had to do SOMETHING about these rich people not paying enough, the alternative minimum tax was introduced. Since then, its gone from affecting less than 200 to affecting millions. I shudder to think what solution might be suggested for this “problem.”
Abdullah
August 14th, 2012
12:18 pm
This country’s tax system is created to reward the entrepreneur, the job creator not job taker. Most of these wealthy people make money buying/selling assets & interests in companies. These are not W-2 incomes. Profit is not a hate word.
Joetavius
August 14th, 2012
12:22 pm
“One of the oddities of the tax code is that capital gains taxes are discretionary, since they must be paid only when gains are realized.”
How is that “odd” David? The alternative would be to tax unrealized (paper) cap gains and losses, which literally change day to day. Wouldn’t that be a sweet bookkeeping exercise.
The tone of your remarks could almost lead one to believe that you’re not that big into capitalism and that mayhaps you’d be more comfortable helping Bookman with his blog.
Mike
August 14th, 2012
12:38 pm
“The silver lining in a bad year like 2008 for wealthy people is that they can “harvest” losses by selling assets”
The “silver lining” is that you can sell things for less than you paid for them?
No mention at all of the millions in charitable contributions, which also reduce taxable income.
MrTy
August 14th, 2012
2:27 pm
The Democratic Party absolutely depends on the ignorance of a growing segment of the population to remain viable. These morons probably believe the gross income of these individuals were reported on a W-2(s). And people like Mr. Markiewicz, who is either a talented liar (in my book, if you intentionally deceive as in this article by not explaining what adjusted gross income is you are a liar) or guilty of gross misconduct by not bothering to run this by people who are actually knowledgeable about accounting and taxes, depend on the ignorance of those people to be able to manipulate them.
And what really gets me is how liberals try to attack conservatives as stupid! Did anybody else notice that it was only Democratic voters of Florida who were claiming they didn’t know how to vote in 2000? I did not see one Republican voter stand up in front of a TV camera and say they were too stupid to know how to vote. Geez!
Nobody78
August 15th, 2012
10:57 am
So let’s get this straight, if you lose your job (a huge loss), you can write that off on next years taxes. Sounds fair to me!!!!
How to avoid federal income taxes: Make $200 million a year | Electric Cigarette
August 15th, 2012
11:00 am
[...] How to avoid federal income taxes: Make $200 million a year Cancel reply [...]
Nobody78
August 15th, 2012
11:00 am
That was supposed to be “can’t” in the above comment. Can a conservative please tell me and everyone else how it is fair that ANYONE that makes $200,000,000 and doesn’t pay one dime out of it to support our military is somehow fair?