10 Tax Dodges That Help the Rich Get Richer

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http://www.alternet.org/economy/10-tax-dodges-help-rich-get-richer



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1. No income means no tax. Imagine two men living in the same town. Joe owns an oil exploration corporation. Pete, a geologist, works for Joe. Pete finds oil, billions of dollars worth, and when he does, Joe gives him a $1 million bonus.


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2. Why investment managers pay lower tax rates than their secretaries. Some of the wealthiest people in America manage hedge funds, private equity funds, or real estate partnerships, and typically, these investment managers receive a very small salary, relative to their total compensation. But don’t feel too sorry for them—they’re not working for free. Instead, most of their compensation comes in the form of a share of the fund or project they manage. This ownership share is called a “carried interest.” And currently, it’s usually taxed as a capital gain instead of ordinary income.

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3. How tax delayed can become tax never paid. Taxes on the appreciation of assets—the value of a company, a stock portfolio, or the increase in real estate held for investment purposes—qualify as capital gains, rather than ordinary income. We’ve already seen the big advantage of calling something a capital gain: it’s taxed at a lower rate.

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4. The charity scam. Another way the wealthy avoid paying taxes on their billions is to make charitable donations. If you donate property, you never have to pay income tax on that donation, whatever it costs you and how much it’s worth right now. Well you might say, at least someone benefits from the charity. Whether or not the charitable donation is a scam in whole or in part depends on the answer to that old question: qui bono? Aka, who benefits? That’s where the real scam takes place.