Sort of true, but if I have a company I am invested in, then decide to move it overseas, I can decide to keep my earnings over there and not bring them back.
Which is exactly what I said...you still haven't had the chance to spend said earnings. So, you haven't been taxed, but they haven't done you any good either.
Technically my "Wealth" will remain the same, but my income is lower since I am keeping it outside the country.
Incorrect, your income is the same whether you allowed that value to accrue in the US or abroad, it's still just asset value. You've changed nothing in the eyes of the IRS for having your company based on foreign soils. You pay income tax on it when you take the gain, whether long or short term, or as a salary or dividend.
There are a lot of ways CPAs and other financial experts can decrease your tax burden, move your wealth out, and remain in the country you love.
No, not really. If you know any, as 2lazy2retire says, please educate us...with sources please.
Otherwise, I'll take a guess that your referring to schemes detailed
breathlessly in articles like this. But, if you actually read the article, there are no magic bullets or smoking guns. Just basic maneuvers that many of us already use on a smaller scale, and some downright illegal activity that is landing these people in court.
For instance the article says,"
the wealthy have used their influence to steadily whittle away at the government’s ability to tax them. The effect has been to create a kind of private tax system, catering to only several thousand Americans. The impact on their own fortunes has been stark. Two decades ago, when Bill Clinton was elected president, the 400 highest-earning taxpayers in America paid nearly 27 percent of their income in federal taxes, according to I.R.S. data. By 2012, when President Obama was re-elected, that figure had fallen to less than 17 percent," implying that somehow these rich people have figured out a loophole. Nope, that's just the
Bush Era tax cuts in play. It doesn't take offshoring to see a huge tax reduction when
"prior to the Bush tax cuts, the tax rate on capital gains was 20 percent. Dividends were taxed at the same rate as wage and salary income; therefore, most were taxed at 39.6 percent. The Bush tax cuts reduced both of these rates to 15 percent".
The article makes the accusation that a few hedge fund magnates got out of paying taxes when they,
"exploited an esoteric tax loophole that saved them millions in taxes. The trick? Route the money to Bermuda and back." which is misleading. Going to Bermuda had almost nothing to do with the tax savings. What they did was
turn short term capital gains into long term capital gains by using a reinsurance company to reinvest the money. Bermuda was involved because of its favorable legal/tort structure for insurance companies. This type of investment could be done in the US too. It's a similar slight of arbitrage as tax loss harvesting, that many of us use on this forum.
The article (and much of our popular media) goes on to make claims such as,
"Each of the top 400 earners took home, on average, about $336 million in 2012, the latest year for which data is available. If the bulk of that money had been paid out as salary or wages, as it is for the typical American, the tax obligations of those wealthy taxpayers could have more than doubled.
Instead, much of their income came from convoluted partnerships and high-end investment funds. Other earnings accrued in opaque family trusts and foreign shell corporations, beyond the reach of the tax authorities."Of note, they specifically say that their income wasn't in the form of wages, but don't note that because their income is long term capital gains or dividends that the tax rate is different. It's not a sneaky off-shoring trick, it's the same principle we all use here to reach FIRE. The sinister accusation of
"opaque family trusts and foreign shell corporations"? That's not beyond the IRS because it's foreign, it's because those trust and corporations aren't paying out any money! The wealth is building, but no income is being drawn. Not a loophole, when any of that money is spent by an individual, then income tax will be due, it's just not due
yet.
The NYT wrote,
"The well-paid technicians who devise these arrangements toil away at white-shoe law firms and elite investment banks, as well as a variety of obscure boutiques. But at the fulcrum of the strategizing over how to minimize taxes are so-called family offices, the customized wealth management departments of Americans with hundreds of millions or billions of dollars in assets" They make people doing the normal business of running an international corporation sound sinister....they're just business people.
"But tax planning is a core function. While the specific techniques these advisers employ to minimize taxes can be mind-numbingly complex, they generally follow a few simple principles, like converting one type of income into another type that’s taxed at a lower rate" See above: don't take wages, reinvest value and only take long term capital gains. Nothing sinister here or requiring off shoring.
"Organizing one’s business as a partnership can be lucrative in its own right. Some of the partnerships from which the wealthy derive their income are allowed to sell shares to the public, making it easy to cash out a chunk of the business while retaining control. " That would be income, and taxed as such.
"But unlike publicly traded corporations, they pay no corporate income tax; the partners pay taxes as individuals. " Which is generally a higher rate, and since it's not a corporation they don't get any of the US's strong legal protections for corporations, with the lower tax comes higher risk. Nothing for free.
"The wealthy can also avail themselves of a range of esoteric and customized tax deductions that go far beyond writing off a home office or dinner with a client. One aggressive strategy is to place income in a type of charitable trust, generating a deduction that offsets the income tax. The trust then purchases what’s known as a private placement life insurance policy, which invests the money on a tax-free basis, frequently in a number of hedge funds. The person’s heirs can inherit, also tax-free, whatever money is left after the trust pays out a percentage each year to charity, often a considerable sum." Giving money to charity for a tax break is not esoteric, my public radio station implores me to donate appreciate stock shares to avoid capital gains almost every day. Putting money into a charitable trust is also not esoteric, lots of people do it. The fact that the gains from a trust can be inherited tax-free is covered under the Estate Tax. None of this is fancy or requires off shoring.
I'll stop now. The point is, it's not fancy foreign deals that make the loopholes. It's plain and simple differences in how income is taken, when value is created, and if you give your money away.
As for this
In addition, would you really want people to move their assets overseas for those countries to utilize it and benefit from it? What about those jobs his assets were creating? Now they are producing and working for that other country.
I call baloney. I know a lot of super wealthy people, and they don't create shit for jobs. The job creators I know are the entrepreneurs, boot strapping their passion. All that money being put in trust and reinsurance investments over seas, it's not creating jobs anywhere it goes. It's sitting stale and keeping the next generation of billionaires safe from having to work hard jobs like the rest of the country. Jobs are created when people spend money on goods and when they work to create new tangible value. Billionaires do very little of either. People who make middle income do that a lot.
[phew, that was long. I gotta stop and get back to work. I apologize for misspellings above, and hopefully I didn't a word]
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