The Biggest Cheats: Rich Folks

[Microferk ~ Miki Ferkul]

Interesting in view of some of the discussions about the two candidates' tax plans, as well as the discussions of Flat Tax and Fair Tax.

http://articles.moneycentral.msn.com/Taxes/AvoidAnAudit/the-biggest-tax-cheats-rich-folks.aspx

Excerpt, (see link for full article):

"A new study based on unpublished Internal Revenue Service data shows the rich are different when it comes to paying taxes: They hide more of their income.The previously unreported study estimates that taxpayers whose true income was between $500,000 and $1 million a year understated their adjusted gross incomes by 21% overall in 2001, compared with an 8% underreporting rate for Americans earning $50,000 to $100,000 and even lower rates for those earning less."


and:


"In its 2001 tax gap study, the IRS estimated that individuals underreported business income by 43% overall. Sole proprietors, who report self-employment income on schedule C of their tax returns, underreported their incomes by a stunning 57%."

[HLWalter725]

Yikes. Interesting, but not surprising. Maybe its the honest folks that are getting screwed.

[txmusicmom]

By increasing taxes.........this is going to lower the standard of living for everyone all the way down. One person in another thread admitted that in Europe that they are taxed higher and wages are lower there.

Yes there are rich that beat the system-- but there are also poor who beat the system.... and yes....most of us are stuck in the middle.......obviously we haven't learned how to beat the system- :shrug

I've known rich people that lost EVERYTHING .......including their house- when their business went under.

Dave Ramsey has also had a lot- and lost a lot.

It's really easy to think life would be better if-----

but even in Africa-- the ones with a simple roof want a newer roof like the next person-

I think it's just human nature.

If we clean up the mess at the top- we need to clean it up at the bottom as well.

[NellieRose]

It'ds amazing how some people carry on about morality and what is right and wrong when it comes to the disadvanatged yet when it comes to the not so disadvantaged, those same people who were carrying on are not only able but more than willing to excuse bad or illegal behavior. :shrug




If we clean up the mess at the top- we need to clean it up at the bottom as well.

Which is exactly what Barack Obama's plan is proposed to do...clean up both at the same time. :)

As for people having a lot in material wealth and losing all or most of it...I feel bad but I feel worse for people who have a slim, if any, chance to do better for themselves...even if that better is as small as earning a few thousand dollars a year more.

[Scorpiosue1102]

Yes some poor abuse the system, but I'll be truly honest it totally gets my goat that someone that makes SO much money cheats the system. I guarantee that if you added the amount of money that the poor cheat the system with as compared to the rich, the rich would win.

[HLWalter725]

Well I think this is really indicative of the NEED for better tax reform, closing the loopholes, and making every single member accountable for their contributions. Perhaps if the rich paid what they should instead of shirking that responsibility and using their money to find a way out of it, there wouldn't be a need to increase their taxes at all.

[NellieRose]

By increasing taxes.........this is going to lower the standard of living for everyone all the way down. One person in another thread admitted that in Europe that they are taxed higher and wages are lower there.

What are all these "raising taxes" statements regarding? The repeal of a huge tax cut given to the wealthy and nobody else????

And, for those who are wealthy or rich, whatever you want to call them, they beat the system for much more money than those who have nothing.

[Microferk ~ Miki Ferkul]

Well I think this is really indicative of the NEED for better tax reform, closing the loopholes, and making every single member accountable for their contributions. Perhaps if the rich paid what they should instead of shirking that responsibility and using their money to find a way out of it, there wouldn't be a need to increase their taxes at all.

:clap:clap:clap

[kjbstevens]

Well the rich no matter what are going to hide stuff and I think one side of taxing them more really means they are going to end up stashing more stuff illegally. They will still find ways and it will lead to more accounting fraud and corruption. Easing taxes can be one way to encourage honesty because they don't feel as squeezed. Many will still lie regardless though.

There are many, many middle class that hide income too. A good percentage of watermen around here don't pay any income taxes at all. The entire industry is a cash industry. By doing this they are totally screwing over their children's education because the main watermen county next to us has horrible, horrible schools. They don't even have walls. They have blankets between classrooms and not enough desks. They still get purchase of care, food stamps, welfare, energy assistance, all of that because they claim the absolute minimum to have a tax return to be able to get them. I know many that do that that would normally have $35-75k in this area. The number is well into the thousands in this state pretty easily.

[Gina.Maria]

I hope that no one is actually surprised by this.

ETA: I actually responded to this about 2 hours ago but my internet went dead and the post went up now.

As to lower wages and higher taxes in Europe - yes, it's true. But we get every day that we are sick off, with pay. We get every day that our children are sick off, with pay. We get 20 days of vacation every year and we are encouraged to take it. Our healthy foods (almost everything is prepared in a more healthy manner, so it's relative when compared with the U.S. - no preservatives, no HFCS, no artificial dyes, etc.) are cheap when compared with those in the U.S. Good healthcare is something that EVERYONE has and children are 100% free. You can live here for less and businesses do not have the same profit mentality that you find in the U.S. Nothing but restaurants and bars are open on Sundays, stores close daily by 6pm (or 10pm for some grocery stores) and people spend time with their families without any pressure to get something else done before the workweek starts. The quality of life is excellent and I don't have to worry about my children's safety unless they flaunt a traffic law and get hit by a car. There's so much more that we have here but it would take hours to type it all out.

[HLWalter725]

Well the rich no matter what are going to hide stuff and I think one side of taxing them more really means they are going to end up stashing more stuff illegally. They will still find ways and it will lead to more accounting fraud and corruption. Easing taxes can be one way to encourage honesty because they don't feel as squeezed. Many will still lie regardless though.


That may very well be true, but I don't see how the answer is to tax them LESS. I don't think anyone who is shirking their responsibilities should be rewarded by lessening those responsibilities. The answer HAS to be in higher accountability -- and yes, I know, so many of you hate this, because in order to patrol accountability you need to let some governing body do it -- and I guess that means bigger (hopefully just BETTER) government.

[lunafaerie]

Well the rich no matter what are going to hide stuff and I think one side of taxing them more really means they are going to end up stashing more stuff illegally. They will still find ways and it will lead to more accounting fraud and corruption. Easing taxes can be one way to encourage honesty because they don't feel as squeezed. Many will still lie regardless though.

I'm just quoting this part of what you said, I'm not specifically calling you out on this, it's just an example of what I wanted to point out.

I really feel like the wealthy and the corporations in this country our blackmailing us right now. "Don't raise our taxes or we'll take your jobs away", "don't raise our taxes or we'll find more loopholes to get out of them".

Why are we letting them blackmail us? We far out number them, and I guarantee when the American people stand up and say enough is enough, they will change their behavior. We have the power in this country. We can decide what and where we purchase our goods, and our pocketbooks can speak much more loudly than our politicians. It's high time we started taking our business to companies that support their employees, and if I have to pay a little more money to do that, I'm going to do it.

[NellieRose]

I really feel like the wealthy and the corporations in this country our blackmailing us right now. "Don't raise our taxes or we'll take your jobs away", "don't raise our taxes or we'll find more loopholes to get out of them".



Tania, on point, as usual.

Now, the population that talks of increased taxes means less jobs...well, haven't they been reading the newspapers, watching TV or maybe standing on an unemployment line to realize how many jobs have ALREADY been shipped elsewhere????

[NellieRose]

Well the rich no matter what are going to hide stuff and I think one side of taxing them more really means they are going to end up stashing more stuff illegally. They will still find ways and it will lead to more accounting fraud and corruption. Easing taxes can be one way to encourage honesty because they don't feel as squeezed.

What the_________________!?!?!?!?!?!?!?!?!? Sorry, but I call BS! :smurf


So, because people continually speed and lie to the officer that pulls them over should we suspend speed limits? :shrug

Reward people for bad and illegal behavior with the hopes they might do the right thing if we ease up on them?!?!?!? And you have the audacity to speak about Barack Obama being looked at as soft??? He is all for self-accountability.

The hypocrisy here beyond comprehension at this point.........

[kjbstevens]

If you notice the last line is some are going to do it no matter what. If small businesses know they are just a few dollars over hitting a point they'll be totally ate up in taxes do you think all would do the right thing and put the real amount or find a way to shave off a little? I think human nature would say shave off a little. There are good and bad in every group but the threat of harsher punishment for being honest doesn't always make people do the right thing.

[Scorpiosue1102]

If these rich guys feel that they are going to hide more money illegally and use more loopholes after a tax increase I have one word for them: J-A-I-L.

[kjbstevens]

But then you'll have them in jail and they are already overcrowded to where not even all violent offenders are in jail and it is expensive to put them in. The entire prison system has to be reformed and redone in order for that to happen. They've been having to stick to violent people letting others off for a while now. It's a never ending cycle of our broken gov't systems.

[Chreamps]

This doesn't surprise me at all. The wealthy want to get wealthier and they have. People are more upset that there are people not paying taxes that are on the bottom of the income bracket than the wealthy and corporations not paying any taxes. We see things very differently.

IMHO, some of the biggest "crooks" in this country are not in our prisons, they are running these huge corporations that we've given a handout to. "We" are the ones making them rich. What are they going to do when "we" can't afford to buy their products anymore?

If you stop and think about it, both candidates' tax plan is a "spread the wealth" tax plan. Think about it. Obama's, spreads it to the poor and middle class and McCain's largest portion goes to the rich. America has always had a progressive tax since before these two started campaigning.

[kjbstevens]

Well like everything says though neither of their plans is going to pass like they say and more stuff has said that neither can cut now no matter what they promise because Congress is wanting to push out more relief out of funds they need the taxpayers to pony up. It's not up to them so if you have congressmen up think of that. They are part of a say that can totally shut down either of the plans to help anyone. Just because say it doesn't mean they can, will, or even want to do something. Campaign promises is all they are.

[Gina.Maria]

Well, if we want to make room for the wealthy scofflaws, we can let out those convicted of "victimless crimes." It's high time we do this anyway.

[daly]

I believe that people who are breaking the law should be held accountable whether they are disadvantaged or whether they are rich.

I was just thinking some more about taxes today....everyone please forgive my ignorance about this...:blush...but I don't know what to type in to 'google' to answer my question.

EXAMPLE...

Say person 'A' starts out with nothing and then gets really rich by earning it not by inheriting it. (think Oprah? or Bill Gates). For purposes of this illustration let's say they are completely honest and pay their taxes with no cheating or dishonesty. They pay all the taxes they are legally required to.

Person A bequeaths their fortune to person B (ok, ok.....I know that Bill Gates and Oprah would probably leave a huge fortune to private charity but to keep this illustration simple....they leave it to a person.

When person 'B' inherits the the money, he must then also pay income tax on the money (again)......right?

Because we pay 'income tax' not a flat, one-time tax on the money that was earned.....right?

Sooooooo, isn't the US government eventually getting more money back from the RICH than say if 100,000 persons had earned the same money (divided by 100,000) and not been required to pay any taxes (INCOME TAXES) on the money earned.


Is anyone following my logic....? Or where is my misunderstanding....?

lol.......please understand I am not using this as a case to state that we need more wealthy people in the world.

[NellieRose]

I believe that people who are breaking the law should be held accountable whether they are disadvantaged or whether they are rich.

I was just thinking some more about taxes today....everyone please forgive my ignorance about this...:blush...but I don't know what to type in to 'google' to answer my question.

EXAMPLE...

Say person 'A' starts out with nothing and then gets really rich by earning it not by inheriting it. (think Oprah? or Bill Gates). For purposes of this illustration let's say they are completely honest and pay their taxes with no cheating or dishonesty. They pay all the taxes they are legally required to.

Person A bequeaths their fortune to person B (ok, ok.....I know that Bill Gates and Oprah would probably leave a huge fortune to private charity but to keep this illustration simple....they leave it to a person.

When person 'B' inherits the the money, he must then also pay income tax on the money (again)......right?

Because we pay 'income tax' not a flat, one-time tax on the money that was earned.....right?

Sooooooo, isn't the US government eventually getting more money back from the RICH than say if 100,000 persons had earned the same money (divided by 100,000) and not been required to pay any taxes (INCOME TAXES) on the money earned.


Is anyone following my logic....? Or where is my misunderstanding....?

lol.......please understand I am not using this as a case to state that we need more wealthy people in the world.

As an Estates & Trusts paralegal the Inheritnce Tax is technically an income tax on the beneficiary.

Let me dig out the long winded post I made on this topic a couple weeks ago.....I am too swamped at work to retype it when DST is slow as molasses today.

[Gina.Maria]

The argument that money has already been taxed once before doesn't hold water because there's a finite amount of money and it's always shifting hands. A single dollar will be taxed far beyond its face value, in the end.

[NellieRose]

OK, here is a direct copy and paste from this thread (http://www.digishoptalk.com/boards/showthread.php?p=1491897&highlight=sunset+clause#post1491897):

Quote:
Originally Posted by opeysmama http://www.digishoptalk.com/boards/images/buttons/viewpost.gif (http://www.digishoptalk.com/boards/showthread.php?p=1490526#post1490526)
Raise taxes on business, and the death tax as well, and he wants to expand goverment programs.

Talk me about your position on the "death tax". As a paralegal handling Estates & Trusts and filing the tax returns for both I am sure I could answer your questions and clear up any myths you may believe in regarding the taxation system applied to them.

Some facts:

When Bush took office the exemption was $675,000 which means, if you die and don't have assets equaling $675K, the Estate does not pay a Federal Estate Tax. Depending on what state you live in you may or may not have to pay an inheritance tax there. If the Estate has assets that amount to more than $675K you pay a 55% tax on the value of the assets over the exemption amount of $675K.

Bush signed into law a $1.3trillion (yes, trillion) tax cut bill...in it, he provided for the Estate Tax exemption to be raised from $675K to $1M (at a tax rate of 50%) in the following year. That tax cut also provided for the Estate Tax exemption to gradually grow over the next few years to follow and land squarely at an exemption of $3.5M in 2009 & a tax rate of 45%. As you can see, in accordance with these exemption increases the actual tax rate on assets over the exemption have gone done....clearly, it is a case of the rich get richer. This tax cut has done nothing to help the "average joe".

Now, come 2010 there is no Estate Tax whatsoever. Anyone who stands to inherit a decent set of assets will get lucky if their benefactor dies in the year 2010.

Come 2011, the exemption rate falls back down to $1M at a rate of 55%.

This is known as the "sunset clause" because while the exemptions and tax rates rasied/lowered in an arc they come back down to almost where they were.

So, don't let any politician fool you about "raising death taxes"...chances are it doesn't apply to you because it does not apply to most Americans.
__________________

The laws were put into place back in the day of big/old money people a la the Rockefellers.......

Here's a quote from Warren Buffet on the matter...he thinks to repeal it would be a terrible mistake and greatly effect the economic growth as well as large charitable contributions made:

"We have come closer to a true meritocracy than anywhere else around the world," he said. "You have mobility so people with talents can be put to the best use. Without the estate tax, you in effect will have an aristocracy of wealth, which means you pass down the ability to command the resources of the nation based on heredity rather than merit."

[NellieRose]

Forgot to mention...depending on where you live the average home value may be $500K-$700K which would put you on the cusp of the exemption amount and you may be nowhere near being "wealthy". So it doesn't just apply to the rich any more.

The exemption amount clearly needs to be adjusted however Bush's plan with the sunset clause is horrendous.

[NellieRose]

The argument that money has already been taxed once before doesn't hold water because there's a finite amount of money and it's always shifting hands. A single dollar will be taxed far beyond its face value, in the end.

The money "shifting hands" is right in step with why Warren Buffet is just one of the ultra-wealthy people, not to mention one of the wealthiest in the world, that is AGAINST repealing the tax.

Here's an interesting article (http://www.commondreams.org/headlines01/0214-01.htm).

http://www.commondreams.org/headlines01/0214-01.htm

ETA: On the full blown snark front, I find it interesting that these people are more than happy to pay taxes on mney they "already paid taxes on" in an effort to help those that CAN NOT make ends meet on their own.

[NellieRose]

And before I leave the office.....even with Estate Tax in place the "rich" still get around paying much of the taxes due by placing their assets in Trusts and tax shelters. ;)

[Babette]

Interesting in view of some of the discussions about the two candidates' tax plans, as well as the discussions of Flat Tax and Fair Tax.

http://articles.moneycentral.msn.com/Taxes/AvoidAnAudit/the-biggest-tax-cheats-rich-folks.aspx

Excerpt, (see link for full article):

"A new study based on unpublished Internal Revenue Service data shows the rich are different when it comes to paying taxes: They hide more of their income.The previously unreported study estimates that taxpayers whose true income was between $500,000 and $1 million a year understated their adjusted gross incomes by 21% overall in 2001, compared with an 8% underreporting rate for Americans earning $50,000 to $100,000 and even lower rates for those earning less."


and:


"In its 2001 tax gap study, the IRS estimated that individuals underreported business income by 43% overall. Sole proprietors, who report self-employment income on schedule C of their tax returns, underreported their incomes by a stunning 57%."

It's not surprising at all - in fact, I truly thought that everyone knew this. The rich get richer off the backs of the poor & middle class - this is a truth that no one can argue. All we have to do is look at all the tax shelters, etc that someone rich can set up to hide money.

My husband constantly states that he'd rather pay his taxes and sleep well at night. Of course, he has morals ... this may not work with those that are just greedy. LOL

[DirtyFeetDesigns (heb1976)]

Perhaps if the rich paid what they should instead of shirking that responsibility and using their money to find a way out of it, there wouldn't be a need to increase their taxes at all.

What do you think is a reasonable amount or percentage for someone who makes over say $250k a year. And I am being serious, not snarky. My FIL who made almost $200K last year, paid over $40K in taxes. We paid about $4K in taxes last year but got 98% of it back.

So what is a reasonable amount?

[NellieRose]

What do you think is a reasonable amount or percentage for someone who makes over say $250k a year. And I am being serious, not snarky. My FIL who made almost $200K last year, paid over $40K in taxes. We paid about $4K in taxes last year but got 98% of it back.

So what is a reasonable amount?

Before we can make a fair assessment we need to know how much your FIL got back...that part of the equation is missing.