How Do Some Rich People Avoid Taxes? (No One Knows)

“How can you earn $200,000 or $200 million and pay no federal income tax? Well, to be honest, we don’t know.”

*Head explodes.*


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ImASadGiraffe (#982)

“Bloomberg reporter Jesse Drucker recently found out that, for the most part, the richest people in America pay nothing close to 35 percent.

“Larry Paige or [Sergey] Brin at Google, these are men who are extremely wealthy,” Drucker says. “They get salaries of a dollar a year.”

That’s because the wealthiest Americans make their money from money; from stocks and investments. And from a tax perspective there are huge advantages to that.

A wage is taxed automatically, but capital gains from stocks are only taxed when you cash them in. So Drucker found that many of the so-called super rich don’t sell their investments at all. To buy cars and houses and groceries and clothes, they borrow money — often at very low rates.

Since 2003, the richest investors have been able to do even more, thanks to a rule change from the IRS. To avoid paying taxes, wealthy clients can make deals with investment banks for something called a variable prepaid forward contract.

“It basically [says]: ‘I agree to give you my stock at a certain point in the future in exchange for cash now,’” Drucker says.

Drucker says the IRS doesn’t necessarily consider that a sale of stocks, even though the bank may pay that investor hundreds of millions of dollars to temporarily own his shares. It allows the investor to avoid paying capital gains taxes, which right now are 15 percent.”

If you have tons of these kind of riches, you can get away with it. Those of us who earn a wage, even very high wages, cannot.

MuffyStJohn (#280)

@ImASadGiraffe Which is why we need a Robin Hood tax on financial transactions. Seriously. I’m tired of being part of the unwashed, hard-working masses who pay the lion’s share of the taxes while these assholes hoard money like this is some kind of fucking game. Especially since they’re doing their damndest to make sure I get nothing out of my tax dollars except bombs, prisons, and “crisis pregnancy centers.”

Genghis Khat (#584)

And somehow instead of seeing this as cheating all American people there are tons of people who think this is good and just and right and bootstraps. So much money! Give a little bit back! You can still afford like, thousands of yachts.

MuffyStJohn (#280)


Seriously, the accumulation of wealth at the top is so obscene I can’t even comprehend the reasoning behind it. Probably all of these people are sociopaths.

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