Moguls Rent South Dakota Addresses to Dodge Taxes Forever
bloomberg.com
bloomberg.com
No wonder the high-income individuals are fleeing high-tax states and "tax-the-rich" ideology is failing to fill the states' coffers. Raising taxes hurts poor people more than the rich. http://www.forbes.com/sites/trulia/2013/02/12/jobs-arent-lea...
Most don't make much money at all. Many more make none at all. The reason the tax rate is high on the ultra-well-to-do is to help cover the rest.
How are you getting to 60%?
So it's absolute worse case scenario then. Reading the rest of the article, it sounds like he can get it to below 50% with some moderate effort. Since rich people can afford professional accountants, I conclude he actually could get it to below 50% if he wanted or his accountants could suggest some tax loophole in another state to get it below 50%.
A further improvement could be to move from California to say Nevada and pay no state tax at all. The next step would be reorganizing the business structure to keep most income / assets in the offshore jurisdictions. So on, so on, so on...
See, you are starting to justify cutting the tax rate from 60% to 50%, but why stop there?
The problem is created by the government/public asking for 60% to begin with and creating the sticker shock.
2) There are many tax-regimes that are specifically targeted to prevent the movement of business assets offshore. In the US, running afoul of these rules is a minimum of $10,000 per violation (depending on the circumstances, potentially meaning per asset), plus the possibility of criminal sanctions. Moreover, locating assets offshore doesn't eliminate tax jurisdiction--you still owe income taxes in the jurisdiction in which you earn the income. (Basic international tax law.) All you really accomplish is to make yourself subject to additional income taxes in another jurisdiction, and worse--you may have rendered yourself out of eligibility for tax treaties that would have eliminated the double taxation.
3) Stop spreading FUD. The government isn't asking for 60%. And that's besides the point. Before the Reagan "Revolution", the marginal rate was greater than 60%. Right now, taxes are at near-historical lows. If you would prefer not to pay taxes, you could always move to a zero-tax haven like Somalia. I hear it's a lovely place this time of year.
Dubai is a pretty lovely place this time of the year (21C/70F temperature), and you'll pay exactly zero income and corporate tax.
For example, public kissing is a felony in Dubai. A woman walking around in public "indecently clothed" is a felony (though exceptions are provided for hotel guests and beach visitors). Drinking is a felony, though hotels and other tourist spots are excepted. There is no free speech in the UAE. If you badmouth the royal family, you've committed a felony. If you badmouth Islam, you could be put to death (but most likely would be killed by religious zealots long before trial). Worse, for expatriates--if you aren't a UAE citizen and you commit a violation of your employment agreement, you've committed a felony and your visa is subject to destruction, effectively barring you from leaving the country without the assistance of your embassy.
Oh...and by the way...if you're a foreign corporation, you end up paying a 50+% income tax. While there technically is no income tax in Dubai, all companies doing business in any UAE member state must be at least 50% owned by a local company, and by law, all eligible local companies are owned by the state or a member of the royal family.
I have quite a few clients that operate in Dubai. Without exception, they limit their time in Dubai to strictly what is necessary for their business, because it's a decidedly unpleasant place to be once you've experienced the very limited touristy options.
I would suggest that you hire a local (to you) lawyer. Since it appears that you also have accounting needs, you should look for a firm which provides both legal and accounting services.
As for the Dubai Internet City: it's intended for specific business activities within the Free Zone. It's not a panacea that gives you access to the rest of Dubai or the UAE (for that you still need a 50% local owner.) That's great if you want to do business in the Free Zone, but if you're not a local to that region then there are far superior jurisdictions to be located if you plan on having international business operations.
Also, the royal family has a tendency to radically change laws every time a new generation comes into power, so the current business-favorable laws may change for the worse in a few years. If that happens, it could be very difficult to get out.
State taxes are deductible for federal income tax purposes (meaning that they reduce your taxable income as determined for federal purposes). Also, Medicare and Medicaid taxes are part of payroll taxes (or FICA, for the self-employed), so you don't pay them both.
As every tax advisor in the CNBC article pointed out, Michelson knows diddly squat about taxes. He was taking every single tax rate and adding them together, but he should have been averaging them out. For example, the 20% rate on his capital gains and dividends replaces the 39.6% rate; he's double-counting some of the FICA taxes, and worst of all, he thinks his marginal rate (the highest rate he pays) applies to all of his income.
How does that work, considering federal taxes must be figured before the state?
Edit: looks like itemize and sched A are necessary.
Also, dividends to shareholders are not subject to a 39.6% rate. By definition, any dividend from a U.S. corporation is a "qualified dividend" subject to the 0-20% rates (plus potentially up to 4.3% in Medicare and Medicaid investment taxes).
When your making say 50k the amount of taxes they take from you is no sweat. Though when your hard work pays off and you start making six figures you wonder huh I'm not making six figures and wont see six figures in my pocket until I start making north of 160K a year.
Ridiculous!
Since I have operated companies with substantial payrolls in California and therefore been privy to the cost details, I can say that the total outlay to various government authorities when a paycheck is cut can exceed the total value of the paycheck in California but not much beyond that; maybe 52% to government, 48% to the employee.
In summary, you will only approach 60% if you include all possible taxes on the income including the spending of said income, which does not happen often in practice. Even in California, the worst case is closer to 50% if you manage your income reasonably well.
This still adds up to a lot of money if you compare it to a state like Washington with similar software engineering wages and no income tax, since that adds up to tens of thousands of extra income.
Would you?
Fees for these services generally start at $10,000, and only go up from there.
US federal tax laws change every year, and are so interconnected that quite frequently small changes in one tax law can have massive impacts on entirely different areas of law. And that doesn't even take into account state and local taxes, or the taxes of the foreign jurisdictions you'd be dealing with, or the impacts that tax treaties could have, or even the impact that non-tax laws may have on financial transactions.
http://blogs.reuters.com/felix-salmon/2013/12/10/how-online-...
http://www.bloomberg.com/news/2013-12-17/accidental-tax-brea...
http://www.overcomingbias.com/2010/03/parable-of-the-multipl...