The most prescient thing I saw about the Panama Papers leaks was that the biggest reason so few americans were present in those is that America is basically already a tax haven for rich people.
A flat income tax rate is not progressive by the usual definition, even with a flat deduction (imagine trying to scale _that_ to inflation and the endless debates). And we already have a solution for what you propose: gradual increase in the tax rate based on income levels! It has the added advantage of actually handling inflation (since the dollar amounts will go up over time anyways), and don't require a single "big tax number".
If you believe what you say, just argue to remove various deductions and exceptions. We already have percentage-based tax system, there's no need to be that much cleverer.
I missed the part where they are suggesting any of these things.
> If you believe what you say, just argue to remove various deductions and exemptions.
That's exactly what they are arguing?
>> Of course this is fantasy; lobbyists for CPAs and for attorneys would never support anyone who voted for this kind of simplification.
>> And, Congress would f* it up immediately by restarting the "let's use the tax code to reward our donors and punish our enemies" process.
I think it's a bit defeatest to just say that it's just intrinsincly impossible for better things... but I'm maybe reading into those comments too harshly.
They're arguing to rip out everything and replace it with a flat tax + a deduction.
What I'm arguing instead is to do a line-by-line removal of exceptions and deductions, and don't try a "novel" flat tax (instead sticking to a tax with income brackets and different rates, that we _already have_), as it is a better system. And you get the advantage of the optics of "making the tax code simpler" rather than "replacing the tax code".
A universe in which we just removed the number of IRS forms that exist is _roughly_ as good as the universe in which replaced all the forms with one form, except that removing the number of forms and still having a W2 would be much easier to migrate to, and doesn't involve nearly as much philosophical debate (even if the result is roughly equivalent). We don't need a novel solution here, we can just move more towards what other nations do (and where we are actually not that far from!)
Their campaigns are bankrolled by the people benefiting from the loopholes.
OTOH, many politicians do want to see the tax code vastly simplified- they want the sort of system where you could fill out your taxes on a form small enough to fit on the back of a post card.
Everyone has their favorite thing that they want exempted (farms, capital investments, social security / welfare disbursements, medical expenses, school expenses, mortgage interest, rent, etc), and there are millions who would be put out of work by it- accountants, tax preparers, much of the IRS would be redundant, etc.
All of these competing interests keep us where we are. Blaming it on the "rich people" is lacking in any sort of honest intellectual rigor.
ProPublica had to commit intense intellectual fraud recently - in their recent tax propaganda rush which is being directed by the Biden White House as part of its hike taxes program - to try to pretend the rich weren't paying their fair share. The rich and upper class are the only ones paying their fair share in fact. Everyone else in the US pays extraordinarily low tax rates by and large. ProPublica had to pretend that unsold stock assets should be called income, that we should calculate rich persons income tax rates based on unsold stock holdings (and the con-artists at ProPublica of course invented new terminology to shoehorn the fraud in), and then that we should lambast those rich people for not paying enough income taxes for said unsold stock. What a joke.
All that's going on right now is the culmination of decades of wildly irresponsible fiscal behavior in Washington DC, and the bill is finally coming due, so they have to drastically increase taxes just to keep the government solvent and to keep the entitlement programs from collapsing. To assist with that agenda, outlets like ProPublica are willing to lie as much as necessary to spin whatever message is required to get the job done.
I don't think the fact that Peter Theil has a billion dollars hurts me in any way, and no I'm not some unrealistic person who thinks that I, too, can be a billionaire! Only a petty person would be disturbed that someone else has more money than him. It's not a zero-sum game. The fact that there are some outlier billionaires doesn't hurt the ordinary Joe.
Roth IRAs are not some bizarre tax loophole. They're an extremely common vehicle for people planning for retirement - unless their income is too high, that is. Many companies even offer Roth 401(k)s or other Roth vehicles for retirement as well. And taxes are indeed paid when the money is put in.
If someone follows the rules and is extremely successful with their investment strategy with money in a Roth IRA, then what's the problem?
Seems the law is working as intended.
There are clearly some kind of shenanigans going on to artificially lower the price he paid to smuggle it into the IRA. Those shenanigans may well be legal, but they shouldn't be.
> In an interview with ProPublica, Pensco founder Tom Anderson recalled how Thiel and other PayPal executives had wanted to put startup shares of the company into traditional IRAs.
> Anderson dangled something sweeter.
> “I said, ‘If you really think this is going to be big, you know, you might want to consider this new Roth,’” recalled Anderson, who is now retired. If the investment ballooned, he remembered saying, “‘you’re not going to pay tax on it when you take it out.’ It’s a no-brainer."
> The math was compelling. Thiel wouldn’t get a tax break up front, but he’d avoid an immense tax bill later on if the investment surged in value.
For everyone else who is open minded:
Thiel's IRA held Confinity shares. In 1999, Confinity wasn't worth much. In 2021 the company now known as PayPal is worth quite a bit. Confinity could have just as easily folded, been a victim of the dot com bubble, failed to make a deal with Elon Musk's x.com and lost to them, or had any number of disasters along the way that would have wiped out that portfolio.
Even ProPublica's reporting admits this was a risk. The investment adviser's words are "If you really think this is going to be big, you know, you might want to consider this new Roth."
Ironically, because startups fail so much more frequently than they succeed and because the federal government doesn't tax wealth but income, which can be artificially minimized in relatively simple ways, the government would probably be better off if all startup shares in all companies were held in Roth IRAs, since they'd be taking an up-front cut of a likely failed investment.
Thiel's vast fortune held in a Roth IRA is a corner case, but any talk of it "depriving" the government of revenue when he pre-paid taxes in good faith according to the law and thereby took a fairly significant risk without the benefit of hindsight seems like pure envy.
Only if the alternative was holding it in some other tax-advantaged account like a traditional IRA.
Most start-up shares are held in normal taxable accounts because the holders haven't performed shady sales below market value to launder them under the IRA contribution limit. Compared to that the government only loses money by having them in a Roth account.
How much revenue (income tax, capital gains, whatever) does the IRS receive for an investment whose value drops to $0?
Also, no fraud needed to happen. He earned the money from Confinity, paid taxes on it, invested in some of his (very risky) shares with the IRA and then it paid off over the next 2+ decades.
If you have evidence of this kind of fraud, please let us know. If it were to exist, you'd probably see some evidence (e.g. parallel books, skepticism from investors). ProPublica has tax and other records and they seem to have no evidence that supports your claim whatsoever.
Isn't the most likely story that he put his shares in this account, his company did take off and now he has continued to grow it?
The company’s future is very unclear and subjective, and informed investors make bets using their experience and the market determines the price.
But that’s for the preferred stock.
The employees are compensated with common stock, which is valued at some fraction of that. There is often no market price since it’s not sold to investors. It’s also very unclear and subjective, and the reported value is picked by the company in a situation where everyone wants it to be low.
The first result Googling it (DLA Piper) says it often used to be determined by just dividing the preferred stock price by 10, until accounting rule changes in the early 2000s.
I think “fraud” is a bit strong here - it’s very subjective after all - but it may not exactly be a fair market price either.
It's probably not illegal, but it should be (buying below market value in an IRA, not buying below market value in general), because it makes a mockery of the contribution limits for IRAs.
The only way to stop this process is a grassroots wave of politicians who refuse the support of corporate donors and have the political will to ban corporate political donations and put something like a $500 yearly cap on individual political donations. This would basically be the end of lobbying. I hope to see this happen in my lifetime. It seems like something zoomers might be willing to do in 20 years when they have more political relevance and the boomers are dying out.
I wonder who is financing campaigns of people who keep those loopholes open?? It must be illuminati.
Its a open 'secret' that organised lobbing entities control legislature on a tight leash. Doesn't matter if you vote blue/red/purple the outcome will be the same, you just get different packaging.
https://www.propublica.org/article/inside-turbotax-20-year-f...
If you make $10k a year, vs someone who makes $10M a year, and both are taxed the same, the lower income person loses more purchasing power. At 15%, The hit of $1.5k is a harder loss than than the $1.5M.
Personally, I think that we should ditch the entire tax code, set a flat income tax rate - a single rate that applies to everyone and every kind of income - and a standard deduction of say, 1.5x - 2x of whatever "poverty level" income is.
Such a system is triple-progressive: first, high income earners pay more because x% of a lot of income is a lot bigger than x% of a little income. It's progressive in that poor people pay nothing due to the standard deduction, and middle income earners pay a pittance for the same reason. And it's progressive in that it eliminates all loopholes so there's no way for high earners to game it. But it only works if you eliminate all deductions and special income treatments including the sacred cows (mortgage deduction and capital gains).
Of course this is fantasy; lobbyists for CPAs and for attorneys would never support anyone who voted for this kind of simplification.
And, Congress would f** it up immediately by restarting the "let's use the tax code to reward our donors and punish our enemies" process.
Sigh.