Hypothetical: You spot an article about a weird loophole that was found in the tax laws (I’m assuming of the USA, but this could apply to any country) where a small percentage of the population, say 0.1%, can perform a perfectly legal monetary maneuver and pay no federal income tax this year. (Say it has something to do with one parent who’s a veteran, one who owns property in another state, and having traveled to a specific part of the world within the last year, or some such confluence that just doesn’t apply to most people.)
You check, and sure enough, you fit all those qualifications.
So, it’s entirely legal for you to do something which allows you to pay zero income tax for this year only. But it’s clearly due to an unintended interaction between various complicated laws, it’s absolutely not something that anyone involved in making the laws ever intended.
Would you do so? Why or why not?
This year we’re facing a choice between paying a couple hundred in federal taxes and paying for food in April. So, were it possible, this year, yes. A couple hundred is a drop in the bucket for the IRS, but it’s a shit-ton of money to us.
If our household income was anywhere near middle class, I wouldn’t bother, though. I benefit from living in a society, so I ought to contribute to it too.
Calling it a “loophole” sort of poisons the well. When the law clearly benefits you it’s just “the law.” When the law clearly benefits someone else in a way you don’t like, it’s “a loophole.”
That said, I would pay exactly what I owe, which according to the law is nothing.
Absolutely I would take advantage of such a thing. But I wouldn’t vote for a person based on the idea that they would create such a loophole for me, nor would I vote for such a loophole if I happened to be a member of a legislative body. But once its there? Taking advantage of it is exactly as ethical as any other deduction.
Note that as I phrased the question, it’s not quite that simple. That is, if you go into H&R Block and tell them every truthful and comprehensive piece of information about your financial situation, your tax bill will be what it normally would be. BUT, if you go out tomorrow and engage in a fairly simple and fully legal financial maneuver, doing so will reduce your tax bill to zero.
Not sure if it affects your (or anyone’s) answer, but you have to go out and take a proactive action for this to apply to you.
“I like paying taxes. It buys me civilization.” - Oliver Wendell Holmes.
Unlike the really foolish Republican propaganda that says taxes are evil or theft, an intelligent and educated person understands what they buy us in terms of society.
No. My husband and I are middle class, but we already don’t claim all of our potential return by not claiming our charitable deductions. We would be fine with paying some more (along with others at our financial level, and with an increase to those making more as well) as we can afford to, and you need to pay taxes to fund our society’s necessities like infrastructure, police, fire department, etc.
Boy did I blow this one. I meant to say I would still pay taxes because that is what good Americans do. I would not take advantage of a loophole as described.
It depends on how easy it is to do and how likely the loophole will be closed and how plausible it is. I’d have to spend time not only implementing it but also researching it to make sure it’s legit and then if the loophole’s closed it’s all for naught. Might not be worth it for only a few thousand a year. Now, if it were all federal taxes, not just income taxes, that’s another story cause it would (roughly) double the amount saved. Then again I’d have to put even more time into making sure it’s safe and would not jeopardize my future social security.
If there’s a public article about it, and the lawmakers do nothing to change things, then I’m not sure how we can assume that “it’s absolutely not something that anyone involved in making the laws ever intended”. I’m not a mid-reader, so I can’t tell what any given lawmaker intended. But I can read the law, and if what I’m doing is legal, then so be it.
I am an American living overseas. I have not lived in the US in more than a decade.
Call it a loophole, or not. My salary is low enough that the Foreign Earned Income Exclusion (US$95,100 for tax year 2012) means I owe no US income tax. I still have to pay the various taxes and fees associated with my country of residence.
And I don’t feel bad about it at all. I file my tax forms. I have to disclose far more financial information than someone without such overseas accounts. And I do pay my part to support police, schools, roads, and all the various governmental services where I live.
No, of course not. It’s unethical and I have a duty to pay my taxes even if the negligible amount the government receives means a huge financial benefit to myself.