Why can’t a middle class individual use the same tax avoidance methods as the ultra rich to pay little to no income taxes?
In: Economics
Well I don’t know all the tricks in the book but I know one of them is buying a vehicle over 6000lbs (Mercedes g wagon as the only vehicle I know of) which allows them to write off 100% of the purchase and claim it on the tax they pay which is upwards of 250k. I’m not 100% certain on the specifics but it’s something like that. Ofcourse middle class families can’t normally afford the deposit on a g wagon let alone make all the payments and as such they can’t write it off on tax
As soon as you can, pay a mortgage instead of rent. More than half of your mortgage payments will interest that are tax deductible in the beginning, and you will be building wealth in an asset that gains value.
It’s like leasing a car vs owning a car that appreciates instead of depreciates.
There is a huge population of people that build wealth with simple smart tax decisions that are not poor and are not billionaires.
My boss had a weird friend who did this. He hated the idea of paying taxes at all, so he structured all of his income such that it (IIRC, YMMV, ETC) was funneled through a single non-profit estate which he then had pay his bills, etc. There were a bunch of hoops the guy had to jump through in order to work, but he paid nearly nothing in taxes.
The rich can afford to pay people to research, develop and execute tax avoidance strategies and the poor can’t. This has actually been a persistent bug in civilization since the beginning of civilization. Each time the regime creates new laws to plug holes, the rich are going to find the new holes first.
A key reason middle class people can’t do the same things is that some of these strategies require real lawyer-type work: creating documents (that incorporate a company, for example) getting them authorized… and these expenses are out of reach for most people.
The rich can afford to pay people to research, develop and execute tax avoidance strategies and the poor can’t. This has actually been a persistent bug in civilization since the beginning of civilization. Each time the regime creates new laws to plug holes, the rich are going to find the new holes first.
A key reason middle class people can’t do the same things is that some of these strategies require real lawyer-type work: creating documents (that incorporate a company, for example) getting them authorized… and these expenses are out of reach for most people.
It costs money to hire the lawyers to set up the loans he needs for his living expenses. These loans allow him to dodge the ludicrously low capital gains tax he would have to pay if he sold some of his stock. These loans are paid off with more loans, as he will never default. I think these can also be claimed when filing taxes. Normal people don’t have the money to pay all the lawyers, nor are they trying to dodge capital gains as they don’t own substantial stock.
Jeff Bezos has $$$$$$$$$$$$$$$$$$$$$$$$$$$$$
he can afford to spend $$$$ on lawyers and accountants in order to save $$$$$$$ in taxes
you and I have $$
we cannot afford to spend $$$$ on lawyers and accountants to save $ on taxes
The offshore method requires a lot of money to set up. This applies to business owners or brand owners of the super rich. They pay to set up a business in a tax haven (e.g. Panama) and pay lawyers to make that business (in the tax haven) the legal owner of the IP. All the profits are given to this Panama entity as the legal owner of the IP. The business in the USA doesn’t make any profit because they are paying the Panama business a “fee” for the right of using the brand/business assets owned by the company in Panama.
This is how they avoid making tax in the USA and other countries they operate. They then pay themselves a “wage” for being on the board of both companies.
The middle class do not have access to this sort of set-up.
Because most people pay little to no taxes and a such have almost no taxes to avoid.
No tax = no way to avoid the tax
Another reason is that the rich often invest the profits from their business back into that business, or another business, which deducts it from their income because they aren’t profits anymore. The average person can’t invest half their money into a profitable business they own because they don’t own a business. There are plenty of people who own a small business, but many of them are profiting not much more than minimum wage per hour after all the time and efforts they put into their business is factored. Some of them are earning less than minimum wage even, before they call it quits. Why invest your valuable profits into your business when your business isn’t that profitable?
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