Monday, October 29, 2012

On Taxes, Loopholes and the Like

Mitt reportedly does the same thing that the rest of the elite do -
In 1997, Congress cracked down on a popular tax shelter that allowed rich people to take advantage of the exempt status of charities without actually giving away much money.

Individuals who had already set up these vehicles were allowed to keep them. That included Mitt Romney, then the chief executive officer of Bain Capital, who had just established such an arrangement in June 1996.

The charitable remainder unitrust, as it is known, is one of several strategies Romney has adopted over his career to reduce his tax bill. While Romney’s tax avoidance is legal and common among high-net-worth individuals, it has become an issue in the campaign. President Barack Obama attacked him in their second debate for paying “lower tax rates than somebody who makes a lot less.”

In this instance, Romney used the tax-exempt status of a charity -- the Mormon Church, according to a 2007 filing -- to defer taxes for more than 15 years. At the same time he is benefitting, the trust will probably leave the church with less than what current law requires, according to tax returns obtained by Bloomberg this month through a Freedom of Information Act request.

In general, charities don’t owe capital gains taxes when they sell assets for a profit. Trusts like Romney’s permit funders to benefit from that tax-free treatment, said Jonathan Blattmachr, a trusts and estates lawyer who set up hundreds of such vehicles in the 1990s.
Where to start with this mess? For starters, I do not hold it against individuals that abide by 'the rules of the game' and in many situations, that's exactly what they are doing. I do oppose the rules to the game in general however simply because it has become so complex, so asinine and so burdensome to comply that the whole thing becomes a separate career unto itself. As a general rule, if you need a CPA just to figure out what your personal tax burden is, the whole thing is far too complicated. But this is exactly what is needed to destabilize things.

I would go so far as to argue that a decent percentage of our current woes come from the very concept of 'structuring' itself. Don't want to pay taxes? Form a charity, call it the 'Me Charity', send all of the income you make to charity, as a donation from the goodness of your heart of course, pay someone to give some real needy kids something they need and pay yourself an exorbitant salary to oversee this whole hassle. (In line with other compassionate salaries of course.) Then, if you're questioned, your supporters can attack someone for the temerity of suggesting that you don't pay 'your fair share'. After all, what's my fair share? And what I did was legal.

It is this constant inanity that has people screaming about rich (relative term) people ducking (ambiguous) their fair share (another relative term). Just who is rich? Who's ducking? (After all, it's legal.) And what is a fair share? All these questions serve to do is enrage a base into a form of class warfare. Get the producers! is the war cry as "saving" becomes synonymous with "hoarding". After all, you're not spending enough to avoid the paradox of thrift!

Overall, this kind of discussion is like playing a game of football with moving end zones, impossible to make progress or figure the rules out.

What to do? Just give the cash to the banksters and politicians, they know what to do with it.

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