this is why raising taxes on the 'rich' never works ...
... as usual, talks by US politicians about raising taxes on the 'rich' sounds good in theory. However, in practice, the 'rich' have the means available to avoid really having to pay high tax rates. In this case, that 'means' requires the establishment of dual citizenship and the hiring of an administrator for a 'shell company' based in the Netherlands ...
Re: this is why raising taxes on the 'rich' never works ...
Re: this is why raising taxes on the 'rich' never works ...
^^^ that could work ... for a year or so ! However, the 'rich' will always have the resources to find ways around the tax laws. In fact, there is a specialized segment of the financial services industry whose whole reason for existance is to come up with new ways around the tax laws ! Passing a new tax law this year sets that specialized segment into action, and by next year they'll come up with a plan to minimize the impact of the new tax law ... for a price !
Unfortunately for the middle class taxpayer, virtually all of the remaining methods of tax minimization require that the person be 'rich' in order to take advantage of them. It usually starts with a requirement that the 'rich' person buy/lease a house in a foreign country in order to establish an alternate legal residence for tax purposes. It then follows with a requirement that the 'rich' person employ attorneys and managers in the foreign country to establish and operate a 'shell company', such that a good part of the 'rich' person's 'income' becomes 'shell company' income. The 'shell company' income is then taxed at lower foreign rates, deposited in foreign banks, invested in foreign stock markets and assets, or channeled into hedge funds or private investments which can then 'anonymously' invest the 'rich' person's money in US stock markets and assets.
For the middle class, the minimum 'buy-in' necessary to establish an alternate legal residence and establish / operate a foreign 'shell company' puts such an approach out of financial reach. However, for a 'rich' person with earnings in the $1 million+ per year ballpark, being able to 'save' $250,000+ a year on US tax bills makes the initial 'buy-in' investment pay off very quickly.
My real point however was not to pour over details of the Netherlands tax shelters, but to point out the larger picture that the Netherlands tax shelter is just the latest fashion in a never-ending series of maneuvers which allow the 'rich' to avoid actually having to pay taxes in amounts anywhere near the officially published tax rates. Thus I encourage everyone to keep this fact in mind when US politicians start talking about spending more money but paying for the extra gov't spending via increasing taxes on the 'rich'. Ultimately, the vast bulk of US tax dollars that are collected to pay for gov't spending always come from the middle class ... who under present US tax law start getting hit hard at annual incomes above $100k, but can't really afford to take advantage of offshore and other tax shelters until their annual incomes start hitting the $500k ballpark. I would also point out that lots of full time dancers now fall into this category !
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