Here’s a relatively simple example. During the dot com bubble, many companies acquired other companies for inflated prices. Let’s say company A buys company B for $100 per share and puts that new asset on its balance sheet at a total value of $1 billion based on that share price. After several years of owning company B, actual earnings of company B and the valuations of other similar companies reveal that company B is only worth $10 per share, or a total of $100 million. Company A would do a paper transaction to adjust its balance sheet value by $900 million. That transaction would reduce earnings by $900 million in the year in which it was booked. While this was going on, the company might actually have more money in the bank or tangible assets on hand than it did the year before, but its P & L would reflect a paper loss.
My theory is he has been lying about how rich he is and doesn’t want people to know he isn’t actually a billionaire.
2% of the whole takes a special talent… Oh hell, even I can’t spin that. How surreal that Trump is the nominee.
Do you have any investments? Do you actively trade them? If so you may do tax loss harvesting to offset future capital gains.
The point there is nothing to do with how much Buffett and his secretary individually pay. Of course anyone could make a donation to the federal treasury; you don’t even have to change anything about your particular compensation. But nobody is talking about that. The issue is the laws.
People can legally avoid paying taxes. But they should not expect to be elected president. Behavior that disqualifies candidates does not have to rise to the level of criminal conduct.
Most people deduct losses in the year they incur them and still have a positive net income.
So when all is going well and I’m making money hand over fist, I’m a job creator and a captain of industry and self-made man who don’t owe nothing to no one, and don’t you dare make me pay taxes or I’ll go Galt, I’ll really do it this time, I swear.
But when it all goes tits up and I lose money, haha, no you see, the company lost that money, not me, so I don’t have to pay anyone back.
Then when it’s time to file in tax reports, I guess I lost that money after all!
Am I getting the gist of this right?
Not really.
Anyone who has taken a bonafide tax deduction has legally avoided paying taxes.
Only if you are going for absurd parody.
I know I’m oversimplifying, but seriously, if your business lost money and not you, why do you get to write it off your personal taxes? And if you lost the money and not the business, why do you get out of debt when the company declares bankruptcy but not you?
And you can hardly deny that shareholders blame the corporation itself when things go wrong but are more than happy to take the credit and the money when it all goes well.
Blaming a corporation for anything is like a child blaming his doll, except everyone goes along with it.
Just to clear this up again – I specifically said I don’t care about accusations of hypocrisy, I said that the position of urging higher taxes on poor people and lower taxes on rich people is WRONG – just like it is wrong when some politicians propose that women who have abortions should be put in prison. Or that kids shouldn’t get vaccines when they go to public school. In such cases, the policy is objectionable regardless of whether the politician is speaking out of both sides of his mouth.
I think one of the lessons we ought to be learning from this Trump tax thing is that the wealthy get from the government a whole lot of favors, and the term “moral hazard” is rarely used except in extreme cases of the whole banking industry teeters on collapse. To apply the term “moral hazard” to the poor, who get much fewer favors compared to what they ask for, makes me chuckle from the bottom of my belly.
“Oh yeah, be careful about making sure the poor get health care – we could be on shaky ground there. Oh, carried interest loophole? Sure, let’s make sure billionaires pay lower tax rates than their secretaries!!”
The rich pay vastly more in taxes. I care about absolute numbers far more than percentages.
I have never managed to be able to pay $0…except for those years I was living on the street.
My understanding is that this favorable tax implications for losses encourages more risky investment behaviors. For example, investing money into a space delivery company is very risky. If the company goes under, the investor losses all their money in that company. Seems perfectly fair that the investor can offset these losses against any profits they had for all their other investments.
The question is whether in the case where for any given year, the losses are more than the profits. Here there are situations where the investor need only use enough of the losses to offset the profits, thus showing 0 taxable income; and then use the rest of the losses the following year to offset the profits for that following year.
Seems fair to me, these losses are real and the income tax savings aren’t all that much. If The Donald is paying 10% in taxes, then the $1 billion is only $100 million in taxes, chump change really. If it were otherwise, then fewer people would invest less money into these high risk investments. It’s certainly fair, this tax loop hold is available to everybody, I’ve had occasion to use it myself.
ETA: Only about 200 pages of tax code apply to the 99%'ers … the other 19,000 pages apply to the 1%'ers … elect better Congressmen …
I don’t.
It’s parody, obviously, but it’s not absurd.
Why? And rich people benefit much more from the stuff tax money is spent on, too.
Because you don’t understand math and you think framing the argument in terms of percentages is advantageous for your political preferences.
Yeah that stop sign has value proportional to my wealth.
What percentage of total taxes paid as a function of earned income do the poor pay? If they have no job and receive no earned income and pay $500 per annum in sales tax their tax rate is infinite as a function of earned income.
How’s that fair? $500/$0 is vastly larger than $3,000,000/$20,000,000. Yet that $3,000,000 does vastly more for society than that $500. Framing it in terms of percentages is just a mechanism to manipulate the same electorate that thinks we could legislate wealth by increasing minimum wage.