The billionaire’s guide to doing taxes

Posted on by Lone Candle

“Do you want to pay less taxes? Great. Step one, be a rich person. Then, buy a yacht. Or a sports team. Give a lot to charity. Lose some money in the stock market. Above all, make sure most of your money exists in the form of assets, not cash — stocks, real estate, a Dutch master painting, fine jewelry, or whatever else strikes your fancy.
They say that money is a universal language, but it speaks at different volumes. When you have a fathomless bounty of wealth, money doesn’t quite register as an expense until you add a lot of zeros to the end — so spending a lot to save a lot is a no brainer. It’s why the mega-rich often hire expensive tax lawyers, wealth managers, or even set up a whole office dedicated to tax strategy. “It’s not just preparing the return,” says Paul Wieseneck, a tax accountant and director of the Fuoco Group. “There’s so much more involved in planning, in accumulating, offsetting, and trying to mitigate the taxes as best as possible.””

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“Jeff Bezos, when he was still Amazon CEO, had a base salary of around $80,000 a year. Elon Musk doesn’t take a salary at all at Tesla. Apple CEO Tim Cook does get a $3 million salary, but it’s a small slice of the $63 million he received overall last year. Most wealthy entrepreneurs are paid in bountiful stock rewards; Musk is currently fighting to keep his record-breaking Tesla pay package, made up of a bunch of stock options and now valued at almost $56 billion. ProPublica found that, because their income fell below the threshold, at least 18 billionaires got a Covid-19 stimulus check.

Paul Kiel, a ProPublica reporter who was an integral part of the newsroom’s billionaire tax return stories, says the income versus wealth divide was crucial in helping the public understand how differently the wealthy operate. “If you can avoid income as it’s defined in our system, and still get richer, that’s the best route,” he tells Vox.

Stocks aren’t taxed until they’re sold — and even then, what’s taxed is the profit on the sale, called a capital gains tax. Billionaires (usually) don’t sell valuable stock. So how do they afford the daily expenses of life, whether it’s a new pleasure boat or a social media company? They borrow against their stock. This revolving door of credit allows them to buy what they want without incurring a capital gains tax. Though the “buy, borrow, die” strategy isn’t quite as sweet right now because interest rates are high, a Wall Street Journal piece from 2021 notes that those with $100 million or more could get interest rates as low as 0.87 percent at Merrill Lynch. The taxable value of a stock also resets when it’s passed on to an heir, so that if a wealthy scion chooses to sell their inherited stock, they’d only pay a tax on the increase in value since the original owner’s death.”

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““We’ve talked to a lot of former IRS agents, and they would often hear the line that for wealthy taxpayers, their tax return is like an opening offer,” says Kiel.”

https://www.vox.com/money/2024/3/13/24086102/billionaires-wealthy-tax-avoidance-loopholes

The Economy Is Doing Way Better Than Many Believe

Posted on by Lone Candle

“A new paper by the American Enterprise Institute’s Kevin Corinth and Federal Reserve Board’s Jeff Larrimore looks at income levels by generation in a variety of ways. They find that each of the past four generations had higher inflation-adjusted incomes than did the previous generation. Further, they find that this trend doesn’t seem to be driven by women entering the workforce.”

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“as early as 1978, 50 percent of married couples were dual earners and just 25.6 percent relied only on a husband’s income. I also assume that there are more dual-income earners now than there were in the ’80s. While this may in fact be true for married couples (61 percent of married parents are now dual-earners), because marriage itself has declined, single-earner families have become relatively more common.”

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“Another report by Angela Rachidi looks at whether the decline in marriage, fertility, and the increase in out-of-wedlock childbirths are the result of economic hardship. She finds that contrary to the prevailing narrative, “household and family-level income show growth in recent decades after accounting for taxes and transfers.” Not only that, but “the costs of raising a family—including housing, childcare, and higher education costs—have not grown so substantially over the past several decades that they indicate an affordability crisis.””

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“So, what exactly is bumming people out? We may find an answer in the 1984 Ronald Reagan campaign ad commonly known as “Morning in America.” It begins with serene images of an idyllic American landscape waking up to a new day. It features visuals of people going to work, flags waving in front of homes, and ordinary families in peaceful settings. The narrator speaks over these images, detailing improvements in the American condition over the past four years, including job creation, economic growth, and national pride.
I believe this feeling is what people are nostalgic about. It seems that they are nostalgic about a time when America was more united and it was clearer what being American meant. Never mind that this nostalgia is often based on an incomplete and idealized memory of an era that, like ours, was not perfect.

This is a serious challenge that we need to figure out how to address. One thing that won’t help, though, is to erroneously claim that people were economically better off back then and call on government to fix an imaginary problem.”

https://reason.com/2024/02/29/the-economy-is-doing-way-better-than-many-believe/

The Armenian-Azerbaijani Conflict Comes to Michigan

Posted on by Lone Candle

“In September 2023, the Azerbaijani military stormed the Armenian-majority territory of Nagorno-Karabakh, driving out almost the entire population, an act that many outside observers have called ethnic cleansing or even genocide. It was the ugly coda to a long, brutal conflict between Armenia and Azerbaijan.
During the collapse of the Soviet Union, the Armenians of Nagorno-Karabakh had attempted to declare their independence from Azerbaijan, leading to a war that involved atrocities and mass displacement on both sides. (The territory is also called Artsakh in Armenian.) The conflict froze in the mid-1990s and restarted with an Azerbaijani offensive in September 2020.

“If they do not leave our lands of their own free will, we will chase them away like dogs and we are doing that,” Azerbaijani President Ilham Aliyev said in an October 2020 speech. Aliyev also stated that he would welcome Nagorno-Karabakh’s Armenians as fellow citizens, a claim that Armenians were inclined to disbelieve after Azerbaijani troops beheaded two elderly Armenian men on camera.

Azerbaijan’s wars have been funded, in part, by the American taxpayer. Congress initially tried to stay out of the conflict, banning military aid to Azerbaijan in 1992. A decade later, the U.S. government reversed course, hoping to gain a new strategic ally, because Azerbaijan is located between Iran and Russia and along key air routes to Afghanistan.”

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“U.S. military aid, which mostly focuses on border security, is not a make-or-break issue for the Azerbaijani army. Between 2010 and 2020, the majority of Azerbaijan’s weapons came from Russia, with smaller contributions from Israel, Belarus, and Turkey. Russia also supplied nearly all of Armenia’s weapons in the same period.

In addition to selling weapons to both sides, Russia has had peacekeepers in Nagorno-Karabakh since November 2020. Those troops have largely not acted to protect the local population.

However small U.S. aid was in the grand scheme of things, Hamparian believes that the very existence of that aid was “morally emboldening” to Azerbaijani leaders, who thought they had an American green light.”

https://reason.com/2024/02/29/the-armenian-azerbaijani-conflict-comes-to-michigan/

Putin’s war economy ‘has grown weaker’ as West considers ‘zero trade option’ | Timothy Ash

Posted on by Lone Candle

https://www.youtube.com/watch?v=kXQlmpdydPY

American Steel Production Has Fallen to Pre-Tariff Levels

Posted on by Lone Candle

“Former President Donald Trump’s decision to impose huge new tariffs on imported steel came with an explicit promise about resurrecting the American steel industry.”

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“But nearly six years after those tariffs were announced, government data show that America’s annual steel output has fallen below the level recorded in 2017—the last full year before Trump’s tariffs were imposed.”

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“The USGS data show that Trump’s tariffs may have helped goose domestic steel production in the first few years after they were implemented. Production rose to 86.6 million metric tons in 2018 and 87.8 million metric tons in 2019, before cratering in 2020 as a result of the COVID-19 pandemic. Production bounced back in 2021, as American steel mills produced 85.8 million metric tons of raw steel that year.
Those modest gains in the immediate aftermath of the tariffs seem to have faded away over the past two years—despite President Joe Biden’s unwillingness to remove the Trump tariffs, which have hammered steel-consuming industries and have added to inflation.

That pattern—a short-term boost in production followed by a decline later—is exactly what economists would expect to happen after tariffs are imposed, wrote Ed Gresser, a former assistant U.S. trade representative and vice president and director for trade and global markets at the Progressive Policy Institute.

Gresser noted that large new tariffs typically create a four-stage chain of events: First, an increase in prices; then, a shift toward domestic production as buyers try to avoid paying the new tax; next, a decline in consumption by domestic industries that consume the tariffed product as they fall behind competitors elsewhere in the world; and finally, that decline in domestic demand rebounds onto the protected producers who see fewer orders for their products—in this case, steel.”

https://reason.com/2024/02/29/american-steel-production-has-fallen-to-pre-tariff-levels/

The Myth of the Migrant Crime Wave

Posted on by Lone Candle

“There’s no question that some undocumented immigrants have committed heinous crimes. But there are many reasons to be doubtful that recent incidents are evidence of a surging migrant crime wave.
For one, crime is down in the cities that received the most migrants as a result of Texas’ busing operations under Operation Lone Star, per an NBC News analysis. “Overall crime is down year over year in Philadelphia, Chicago, Denver, New York and Los Angeles,” NBC News reported.

David J. Bier, associate director of immigration studies at the Cato Institute, a libertarian think tank, echoes that finding. “We don’t have real-time data, but the partial crime data that exist for this year show consistent declines in major crimes in major cities,” he says. “The most significant crime spike in recent years occurred in 2020—when illegal immigration was historically low until the end of the year.”

“National crime data, especially pertaining to undocumented immigrants, is notoriously incomplete,” since it “comes in piecemeal and can only be evaluated holistically when the annual data is released,” cautions NBC News. What’s more, “most local police don’t record immigration status when they make arrests.”

However, several analyses conducted at both the state and federal levels find that immigrants—including undocumented ones—are less crime-prone than native-born Americans. Looking at “two decades of research on immigration and crime,” criminologists Graham Ousey and Charis Kubrin found that “communities with more immigration tend to have less crime, especially violent crimes like homicide,” wrote The Washington Post’s Glenn Kessler. A 2015 Migration Policy Institute report indicated that undocumented immigrants have a lower rate of felony convictions than the overall U.S. population does.

The Cato Institute’s “research has consistently shown that immigrants are less likely to commit crimes and less likely to end up incarcerated than natives,” Bier continues. An article this week by Alex Nowrasteh, vice president for economic and social policy studies at the Cato Institute, indicated that illegal immigrants have a lower homicide conviction rate in Texas than native-born Americans do, while legal immigrants have a lower conviction rate than both groups.”

https://reason.com/2024/03/01/the-myth-of-the-migrant-crime-wave/