How the Richest Get Richer

Here’s how half of the richest people in the country take advantage of a Congressional fumble 30 years ago.

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Im not a fan of estate taxes…but I understand why those that think the money belongs to the government support them.

You don’t have to be uber rich to take advantage of estate planning trusts as there are plenty of options available. I would hope that people are preparing for the expiration of the TCJA in 2 years and establishing their estates now before the lifetime exemption drops significantly.

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Here is another along the same vein:

Brilliant !! Buying pre-IPO shares in a Roth IRA and exempting the growth from taxes. Well done !!

Same principal applies to those people that bought GameStop in Roth IRAs and rode it all the way up to over $400 per share. Large tax-free gains…

The Roth IRA is a great vehicle. The objective is simple…max out contributions and grow the account as high as possible until retirement. Then, shift the portfolio into a high yield strategy and live off the tax-free dividends.

Totally, we’re all trying to do the same thing.

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The links appear to have a lot of access to what they admit is confidential tax info.

confidential Internal Revenue Service data shows.

ProPublica has obtained a trove of IRS tax return data on thousands of the country’s wealthiest people

What this secret information reveals

To identify those who have amassed fortunes in retirement accounts, ProPublica scoured the tax return data of the ultrawealthy

I think most people with assets in excess of a couple of $M use trusts to convey assets to heirs. And, as of this date the estate tax threshold is $12.92M.

The article speaks to the fact that many of the ultra-rich folks are using a loophole inadvertently created by congress thirty years ago. And, left alone, will continue to avoid estate taxation on many billions of dollars.

The average person using a trust to pass on their assets doesn’t come close to what these guys are doing. It’s not done for the same reasons.

Don’t be silly… these guys do not have “retirement accounts.”

They have grantor retained annuity trusts, aka “GRATs.”

Plain ordinary working slobs like you and me have retirement accounts. My entire net worth would probably be consumed by paying the lawyers working to avoid taxes for one year for just one of these guys.

I never understood why something that is legal is called a loophole. If congress has let it exist for 30 years just how inadvertent is it?

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The word comes from the slits, called loopholes, in fortress walls through which the defenders could shoot bullets or arrows. So a loophole represents the antithesis to the wall protecting the people inside of it.

So a law written to collect taxes containing loopholes for the rich is saying that law has exceptions, usually because of ambiguities or inadequate terms written into them by the people creating them.

And those loopholes will probably remain for as long as the flow of dark money exists in our political system.

Any law was written the way it exists because the writers want it to exist the way it does. Loopholes, exceptions, inadequate or inadvertent are subjective terms that any reader may apply.

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That’s a pretty bold statement. :face_with_raised_eyebrow:… are you saying that incidents of unintended consequences never occur? That the results of a legislative action are always intentional?

If so, you are in the small minority who believe that our congress is doing a good job. When the subject law was created that approval rating was 20% and today it’s just 16%.

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No I don’t think they are doing a good job, in fact in this instance you are giving them more credit than I am giving them. You said earlier that the rich are taking advantage of a loophole that was inadvertently created by congress 30 years ago. I contend it can’t be inadvertent if it stands for 30 years.

This is the way it is because that is the way congress or I should say enough of congress wants it to be. Its not a loophole or inadvertent or unintentional.

So, if their lack of corrective action is intentional, do you think that dark money is playing a role in this scenario? Could “campaign contributions” from unidentified sources be having an effect on it?

I would say that is a different topic. With what limited knowledge I have of it I couldn’t agree more.

I suggest that the sources of dark money likely have the most to gain from tax laws which contain extraordinary advantages applying to the top one percent of income earners. Why else would they go to the expense?

What I don’t understand is this obsession with Wealthy people. They have access to the exact same laws, tax or otherwise, that everyone else is subject to. Besides if you change the laws to punish the wealthy, they will find a way around it anyway. You have to remember that these laws are made by mostly wealthy law makers. It’s rare that any of them get poorer while in office. How does a poor man that claims to be the poorest in Washington become a multimillionaire? If we spent more time studying how people become successful and wealthy instead of criticizing and trying to punish, more of us may be getting wealthy ourselves. Just imagine a USA without them. Ever thought of where your money comes from?

If a “loophole” is inadvertently created, and it happens, it will be corrected. I know people who have gotten rich that way, but at least they worked to discover it and paid a price to try it out. There are few true loopholes out there. Most of them are in the minds of the envious. All loopholes, if that’s what you want to call them, are available to everyone. We are have a two tiered justice system now, do you also want a two tiered tax system? You do realize those wealthy you hate, pay >70% of all income taxes. Are you willing to make up that ground?

If you are correct, then why, after thirty years, hasn’t the loophole referred to in my OP been taken care of?

There are hundreds of “true loopholes” in our tax codes. A lot of money has been paid to put them there.

I don’t hate “those wealthy,” I live among them and many are my friends. I’m simply trying to make the people who do not have the advantage of my experience as having lived in both poverty and wealth understand what’s going on.

Many of them are victims of the propaganda and misinformation that big money pays to convince the 1 to 95th percentile of income earners and wealth holders that those tax laws are in large part not responsible for the wealth gap which exists.

Below is an excerpt from a publication sponsored by Warren Buffet in 2012. Since then the taxes paid by the very wealthy, as a percentage of their income, have continued to decrease, at the same time our national debt continues to grow.

“The average tax rate paid by the very highest-income Americans has fallen to nearly the
lowest rate in over 50 years. The wealthiest 1-in-1,000 taxpayers pay barely a quarter of their
income in Federal income and payroll taxes today—half of what they would have contributed
in 1960.”

And, I have some of those in my family and know many more. My point is to make people realize that hate, and it is hate, of the wealthy is not profitable and that they should turn their energy to understanding why some are wealthy and some are. I heard a Wall Street guy tell a story recently. He was working in London for a while and he and a British coworker were walking down a sidewalk and passed by a car parked on the side of the curb. It was Bentley or a Ferrari or something quite expensive. The buddy said I should “key” that thing. It probably belongs to some lazy wealthy so-and-so. The Wall Street guy didn’t say anything, but he was thinking at the same time, I want to learn how I can buy one of those. Hate vs Ambition! I’m not a wealthy person myself, but that is my choice. I don’t blame others for my failures, lack of effort, or my desires otherwise that may keep me from becoming wealthy. The wealth gap is the problem of the people at the bottom side of the gap, not the ones on top. I do get irritated at hearing people whining about the rich as if it’s some kind of Zero-sum game. If a wealthy person makes a dollar, a poor person doesn’t lose a dollar. Actually, who supports most of the charities out there? The tax laws are not made just for the Rich and wealthy but for the whole US economy. Warren Buffet is absolutely wrong about the tax situation. He pays Capital Gains taxes and most likely doesn’t even take a salary that would require the regular rate. If he feels that bad about it, he could pay the higher rates. There is no law against it, but I haven’t seen him offer that. I’m not a big fan of his bc he misinforms people about the tax system. I’ve never heard him speak of reform, such as a Flat Tax or the Fair Tax. Maybe he has, but all I’ve heard from him is it isn’t fair that he pays a higher net rate than his secretary. And, it sounds like you have enough sense to know what would happen if they made the capital gains tax rate the same as the individual rate. There wouldn’t be much progress and the gap would get mega-larger. Tell me what would happen if there were no high-income earners and wealthy, what would the little people have? How many of them out there got jobs from a Poor person? Again, check the tax data. The top 2%, or less, pay around 30% of all income taxes. Tell me how that is fair. The bottom 50% pay No Income Taxes. How is that fair? If you want to compare 1960 with today, remind people of the 90% tax brackets. Ronald Reagen said the 90% bracket improved his golf game. Tax too much and people will quit earning. And, if the high-income earners and the wealthy quit earning, where does our income come from?

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