8-14-2012
http://finance.yahoo.com/news/superrich-clues-might-romney-returns-135603513.html
How the Superrich avoid paying taxes
On the face of it, Senator Harry Reids explosive but flimsily sourced claim that Mitt Romney paid no income tax seems preposterous. Mr. Romney has denied it, and without his returns no one can say for sure. But for someone who makes millions of dollars a year, would it even be possible?
Evidently it is.
It so happens that this summer the Internal Revenue Service released data from the 400 individual income tax returns reporting the highest adjusted gross income.
This elite ultrarich group earned on average $202 million in 2009, the latest year available.
And buried in the data is the startling disclosure that six of the 400 paid no federal income tax.
The I.R.S. has never before disclosed that last fact.
Besides the six who paid no federal income tax, the I.R.S. reported that 27 paid from zero to 10 percent of their adjusted gross incomes and another 89 paid between 10 and 15 percent, which is close to the 13.9 percent rate that Mr. Romney disclosed that he paid in 2010. (At the other end of the spectrum, 82 paid 30 to 35 percent. None paid more than 35 percent.)
So more than a quarter of the people earning an average of over $200 million in 2009 paid less than 15 percent of their adjusted gross income in taxes.
How do they do it?
The data show that the ultrarich typically pay low tax rates every year, but 2009 was a special case.
In 2008, people with large stock portfolios and other less liquid assets were disproportionately hit with large losses on paper. One of the oddities of the tax code is that capital gains taxes are discretionary, since they must be paid only when gains are realized. And they can be offset by losses. The silver lining in a bad year like 2008 for wealthy people is that they can harvest losses by selling assets, then use those losses to offset any gains. They can also carry forward the losses to offset gains in future years.
Whats abundantly clear, both from Mr. Romneys 2010 returns and from the returns of the top 400, is that at the very pinnacle of taxpayers, the United States has a regressive tax system. The top 400 earn more than 1 percent of all income in the United States, more than double their share in 1992.
These 400 earned a total of $81 billion in 2009 but paid an average tax rate of just 19.9 percent.
Its regressive because capital gains and dividends dominate the top returns and are taxed at a preferential rate, Professor Kleinbard said.
Professor Burman added:
Our tax code has a number of flaws, one of which is that it doesnt do a very good job of discriminating based on income.
It is progressive over all, but very high-income people can pay very little tax.
How they avoid tax is an important and legitimate issue we should be talking about.
http://finance.yahoo.com/news/superrich-clues-might-romney-returns-135603513.html
How the Superrich avoid paying taxes
On the face of it, Senator Harry Reids explosive but flimsily sourced claim that Mitt Romney paid no income tax seems preposterous. Mr. Romney has denied it, and without his returns no one can say for sure. But for someone who makes millions of dollars a year, would it even be possible?
Evidently it is.
It so happens that this summer the Internal Revenue Service released data from the 400 individual income tax returns reporting the highest adjusted gross income.
This elite ultrarich group earned on average $202 million in 2009, the latest year available.
And buried in the data is the startling disclosure that six of the 400 paid no federal income tax.
The I.R.S. has never before disclosed that last fact.
Besides the six who paid no federal income tax, the I.R.S. reported that 27 paid from zero to 10 percent of their adjusted gross incomes and another 89 paid between 10 and 15 percent, which is close to the 13.9 percent rate that Mr. Romney disclosed that he paid in 2010. (At the other end of the spectrum, 82 paid 30 to 35 percent. None paid more than 35 percent.)
So more than a quarter of the people earning an average of over $200 million in 2009 paid less than 15 percent of their adjusted gross income in taxes.
How do they do it?
The data show that the ultrarich typically pay low tax rates every year, but 2009 was a special case.
In 2008, people with large stock portfolios and other less liquid assets were disproportionately hit with large losses on paper. One of the oddities of the tax code is that capital gains taxes are discretionary, since they must be paid only when gains are realized. And they can be offset by losses. The silver lining in a bad year like 2008 for wealthy people is that they can harvest losses by selling assets, then use those losses to offset any gains. They can also carry forward the losses to offset gains in future years.
Whats abundantly clear, both from Mr. Romneys 2010 returns and from the returns of the top 400, is that at the very pinnacle of taxpayers, the United States has a regressive tax system. The top 400 earn more than 1 percent of all income in the United States, more than double their share in 1992.
These 400 earned a total of $81 billion in 2009 but paid an average tax rate of just 19.9 percent.
Its regressive because capital gains and dividends dominate the top returns and are taxed at a preferential rate, Professor Kleinbard said.
Professor Burman added:
Our tax code has a number of flaws, one of which is that it doesnt do a very good job of discriminating based on income.
It is progressive over all, but very high-income people can pay very little tax.
How they avoid tax is an important and legitimate issue we should be talking about.
That blog says that due to there being no data on Romney's intax group, you have to select the top 400 earners (a group he is not even close to being in) and pretend he is in that group.
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