Upper-Income Taxpayers Look for Ways to Sidestep Obama Tax-Hike Plan

[OldNewby 27]

Upper-Income Taxpayers Look for Ways to Sidestep Obama Tax-Hike Plan

President Would Slap More Taxes on Those Who Make Over $250K to Fund Health Care

By EMILY FRIEDMAN

March 2, 2009

President Barack Obama's tax proposal – which promises to increase taxes for those families with incomes of $250,000 or more -- has some Americans brainstorming ways to decrease their pay, even if it's just by a dollar.

A 63-year-old attorney based in Lafayette, La., who asked not to be named, told ABCNews.com that she plans to cut back on her business to get her annual income under the quarter million mark should the Obama tax plan be passed by Congress and become law.

So far, Obama's tax plan is being looked at skeptically by both Democrats and Republicans and therefore may not pass at all.

"We are going to try to figure out how to make our income $249,999.00," she said.

"We have to find a way out where we can make just what we need to just under the line so we can benefit from Obama's tax plan," she added. "Why kill yourself working if you're going to give it all away to people who aren't working as hard?"

The attorney says that in order to decrease her income she'll have to let go of clients, some of whom she's been counseling for more than a decade.

"This means I'll have to tell some of my clients we can't help them and being more selective in general about who we help," she said. "I hate to do it."

Obama's budget proposal calls for $989 billion in new taxes over the next 10 years, most of which will be earned from increased taxes on individuals who make more than $200,000 and from families who make more than $250,000.

The expiration of the Bush administration's tax cuts at the end of 2010 would garner an estimated $338 billion, $179 billion would come from the elimination of some itemized deductions for higher-income taxpayers and $118 billion would be brought in from a hike in the capital gains tax. The remaining $353 billion would come from taxes on businesses.

Dr. Sharon Poczatek, who runs her own dental practice in Boulder, Colo., said that she too is trying to figure out ways to get out of paying the taxes proposed in Obama's plan.

"I've put thought into how to get under $250,000," said Poczatek. "It would mean working fewer days which means having fewer employees, seeing fewer patients and taking time off."

"Generally it means being less productive," she said.

"The motivation for a lot of people like me – dentists, entrepreneurs, lawyers – is that the more you work the more money you make," said Poczatek. "But if I'm going to be working just to give it back to the government -- it's de-motivating and demoralizing."

Can Obama's Tax Plan Be Gamed?

Gary Schatsky, a financial adviser and the president of N.Y.-based Objectiveadvice.com, said that it is possible to successfully remove yourself from the bracket Obama plans to target in his new plan.

"It's very possible that there are plenty of things you can do with general tax planning techniques – attempting to recognizes loses, pushing gains to years when your income is lower and increasing retirement plan contributions – to come below $250,000," said Schatsky.

"But Obama's proposal has yet to be hammered out and the devil is in the details," he added.

Because we have a marginal tax system, said Schatsky, what Obama's plan means is that the amount of tax you pay on each incremental dollar is higher only when your income is pushed into a higher tax bracket.

"But to focus keeping your income below a quarter million dollars is not going to have any spectacular magic for individual tax payers," said Schatsky. "The difference between $249,999 and $251,000 will probably have zero tax impact."

Schatsky said that the incentive to get under $250,000 may be more so if the tax plan outlines that an individual who goes over a prescribed limit would face a reduced value of their itemized deductions.

"If the value of all your itemized deductions goes from a 33 percent level to a 28 percent level than there would be a reason for people to do dramatic things to reduce their incomes," said Schatsky.

Peter Morici, a professor of business at The Robert H. Smith School of Business at the University of Maryland, agrees that while it may be possible to sneak around the taxes, it won't be as simple as some may think.

"You have to be pretty close to $250,000 in terms of your income to get underneath it," said Morici.

Does Obama Tax Plan Promote Class Warfare?

Morici says that he believes Obama's tax proposal could spark a kind of class war.

"What Obama is doing is pitting the poor against the upper middle class," said Morici. "He'll tax the rich for the health benefits everyone else wants."

Obama has said the new taxes on those making over $250,000 would go toward a fund that would support a gradual move to universal health care coverage.

Supporters of Obama's budget plans say that those who are at the top and complaining need to look at the bigger picture.

"Those who are going to be taxed more are obviously going to complain but I think they may miss the point," said Lisa Rotenstein, the chair of the Harvard Healthcare Policy Group at the Institute of Politics.

"This could have broader implications for the American economy as a whole – improved health care means a healthier workforce that is more productive," said Rotenstein.

But Colorado dentist Poczatek says those who support the increase in taxes misunderstand what it means for those who will end up paying more.

"I'd like these people to know that we pay a lot of taxes, and have been paying a lot of taxes through the past administration," said Pcozatek.

"We make a lot of money, it's true, but we also already pay a lot of taxes," she said.

"So maybe we got a little bit successful but we worked very hard," she said. "It's taken us over 30 years and it didn't happen overnight. Every day is a lot of work.

"We're working for it and we're still overtaxed."

link: http://abcnews.go.com/Business/Economy/Story?id=6975547

Comments?

[Bottomfeeder 244]

Own non-profit organizations. Start businesses or non-profits that will benefit from the policy changes.

[rexbo 104]

This may work in the first year, but if Obama isn't getting the taxes he needs to keep the deficit under a trillion or so, he will simply lower that $250k number. That's what he meant by Change, he is always open to it as long as it meets his goal of changing the USA to a socialist country...

[autigeremt 7,550]

We will all pay! Mark it down! Matter of fact, when he rolls back the Bush Tax cuts that will raise taxes on us all. Don't think it's just for those who make $250,000 or more a year. It's going to take more than that to get what he wants.

He's great at bait and switch. He likes to divert your attention while he plans to cut your throat.

[arnaldoabru 11]

Why don't they just send the money to off-shore accounts like the other good Americans

[OldNewby 27]

George Soros could offer experienced advice.

[3328 0]

Why don't they just send the money to off-shore accounts like the other good Americans

I feel like the mob during prohibition! Great job dems, wonderful ideas, Al and the boys gotta be lovin' 'dis!

Founding Fathers, don't really think is what was intended.

I'm so impressed Barry, whatever country you were born.......

Can you say Constitutional violation? All will be revealed in the light of truth.

[OldNewby 27]

We will all pay! Mark it down! Matter of fact, when he rolls back the Bush Tax cuts that will raise taxes on us all. Don't think it's just for those who make $250,000 or more a year. It's going to take more than that to get what he wants.

He's great at bait and switch. He likes to divert your attention while he plans to cut your throat.

Any advice on 401K funds (what's left, that is) that remain untaxed until removed? In my case, we'll have to start removing a portion of it within the next several years anyway. Do we get a portion before the Bush Tax Cuts expire, and pay the current tax rate versus what the Obama Gang chooses to spring on us?

Being a freelancer, my 2008 income was half of my 2007 income. From early indications, 2009 will drop even more. So, I do not foresee removing a small portion (enough to say, pay off a car) bumping us to a higher bracket. By saving the amount of that car payment each month (in post tax dollars), would we be less exposed to future government greed?

[au2004ece 30]

I really think I remember a liberal (cough*ruinred*cough) telling me that Obama's healthcare policies would pay for themselves by reducing costs and that nobody would be paying for somebody elses healthcare. That the healthcare plan wasn't welfare. Hmmmmmm, I guess I was right.

Ruinred, now that Obama has released details of how he is going to start to fund healthcare, can we definitively say that it is welfare and that some people (above 250K) are going to be FORCED to pay for the healthcare of others (under 250K)?

I haven't found anybody to answer these question for me, so I will pose them in their own thread:

Why should I be FORCED to pay for somebody else's healthcare? Shouldn't I have the choice to be charitable or not? Why are they ENTITLED to having me pay for them?

Who is forcing you to pay for somebody else's healthcare? Who is even suggesting this?

The government (taxpayers) would be paying for Obama or Clinton's healthcare program. Those that don't pay taxes or pay less taxes would be receiving a benefit from those that pay more taxes. Therefore, I would be paying for the healthcare of those who the government would be funding through the new programs. If it is not clear to you how I would be paying for the healthcare of others through taxes, please let me know where I can clarify my point.

So back to my questions:

Why should I be FORCED to pay for somebody else's healthcare? Shouldn't I have the choice to be charitable or not? Why are they ENTITLED to having me pay for them?

Based on your answer, I don't think you understand either candidates proposals. They are not about handing out healthcare at the expense of the taxpayers. This isn't welfare, it's an attempt to solve the healthcare crisis, to make medicare sustainable, to reduce costs for all.

http://www.aunation.net/forums/index.php?showtopic=47080

[SouthLink02 8]

Why don't they just send the money to off-shore accounts like the other good Americans

IRS is about to shut down a hefty amount of those haven accounts

Well, not technically the IRS but Congress giving the ability to close them off

[autigeremt 7,550]

Mr. Soros will be spared......no doubt!

[Tigermike 4,286]

Why don't they just send the money to off-shore accounts like the other good Americans

IRS is about to shut down a hefty amount of those haven accounts

Well, not technically the IRS but Congress giving the ability to close them off

How will Congress have any sort of jurisdiction and carry any legal weight over international companies operating in another country? They might pass a law which makes it illegal for Americans to have accounts in off shore banks which at first thought would seem to be unconstitutional. Don’t you think? How can Congress pass any law which would limit citizens of the U.S. access to banks anywhere in the world?

If for instance I being a diver, take 5 or 6 dive vacations to the Cayman Islands, Aruba & Belize. How can they stop me from taking $$$$$$$ to the islands and making deposits? It would be easy to say I lost it in one of the many casinos. Not that I would ever do anything like that.

[SouthLink02 8]

How will Congress have any sort of jurisdiction and carry any legal weight over international companies operating in another country? They might pass a law which makes it illegal for Americans to have accounts in off shore banks which at first thought would seem to be unconstitutional. Don’t you think? How can Congress pass any law which would limit citizens of the U.S. access to banks anywhere in the world?

If for instance I being a diver, take 5 or 6 dive vacations to the Cayman Islands, Aruba & Belize. How can they stop me from taking $$$$$$$ to the islands and making deposits? It would be easy to say I lost it in one of the many casinos. Not that I would ever do anything like that.

The point of the new bill (well, there are many points BUT, imo the main point) is to stop people from continuing fraudulent business whose sole purpose is to simply avoid paying taxes through numerous procedures in dealing with off-shore accounts. Every year people come up with brand new ways to find ways around the laws or to break them but still not break them (I know, complicated) and the NEW ways seem to be through hedge funds or other Wall Street moves.

In addition to your current job, Mike, let's say you are mad that you have to pay $1,000 in taxes this year. To get around paying those taxes, you decide you are going to start a fake corporation at Southlink Island near the Bahamas with the sole purpose of trying to find ways in that corporation to off-set that $1,000 thus meaning you pay NO TAXES this year. This bill will give the IRS the ability to possibly seize that account (depending on exactly where the account is) OR freeze your assets in the US to pay the taxes originally owned AND charge you with fraud and a variety of other issues.

Now, like I said....that is an INCREDIBLY SIMPLISTIC EXAMPLE and people these days find ways of doing just that through MANY, MANY clever moves and the new way to do that seems to be through Wall Street these days.

[autigeremt 7,550]

SL.....you should keep your private holdings out of this discussion. The Feds are watching.

[SouthLink02 8]

SL.....you should keep your private holdings out of this discussion. The Feds are watching.

King Kong ain't got **** on me

[Bottomfeeder 244]

Why don't the rich just move to Anguilla?

http://www.onetax.co.za/Tax%20Haven%20Seminar.pdf

[Bottomfeeder 244]

SL.....you should keep your private holdings out of this discussion. The Feds are watching.

I say let 'em watch. They have to earn their illgotten retirement benefits somehow. I like to see 'em running around in circles looking for something that doesn't exist, it's entertaining and exemplifies the waste that is government. And, I would support legislation that would remove guaranteed retirement and healthcare benefits for all government employees (fed, state and local). The taxpayer can no longer support such entitlements. I know I don't want to pay for that $#@! anymore. They need to learn how to fund their own retirement like the rest of us.

[jared52 4,358]

I hate to bring this up, but the FairTax would remove many of these issues because you can't dodge the tax at the register.

[Bottomfeeder 244]

I support nothing to replace the income tax. I hold Ron Paul's position on taxes, entitlement programs and spending. If it doesn't line up with the constitution, then it's illegal; the constitution is the law of the land.

Any agent of the government can use Google the way I just did and find hits on "tax havens." The internet is the greatest thing since sliced bread.

[jared52 4,358]

So the income tax is constitutional?

[SouthLink02 8]

I like to see 'em running around in circles looking for something that doesn't exist, it's entertaining and exemplifies the waste that is government.

Are you talking about the Feds and tax havens? If anything, I would say the Feds do an excellent job these days catching more and more illegal tax havens offshore. Far from perfect but several new advances in the system will help catch even more in the immediate future.

[RunInRed 19,662]

For all the bickering about the top tax bracket, how many of our members do you guys think make more than 250k/year? Do you think it would be more or less than the national average of 1/10th of 1%?

Also, some historical perspective:

U.S. Federal Income Tax Rates Since 1913 (Top Bracket)

1913-1915 - 7%

1916 - 15%

1917 - 67%

1918 - 73%

1919-1920 - 73%

1921 - 73%

1922 - 56%

1923 - 56%

1924 - 46%

1925-1928 - 25%

1929 - 24%

1930-1931 - 25%

1932-1933 - 63%

1934-1935 - 63%

1936-1939 - 79%

1940 - 81.1%

1941 - 81%

1942-1943 - 88%

1944-1945 - 94%

1946-1947 - 86.45%

1948-1949 - 82.13%

1950 - 84.36%

1951 - 91%

1952-1953 - 92%

1954-1963 - 91%

1964 - 16% 77%

1965-1967 - 70%

1968 - 75.25%

1969 - 77%

1970 - 71.75%

1971-1981 - 70%

1982-1986 - 50%

1987 - 33%

1988-1990 - 28%

1991-1992 - 31%

1993-2000 - 39.6%

2001 - 39.1%

2002 - 38.6%

2003-2009 - 35%

http://www.taxfoundation.org/taxdata/show/250.html

[autigeremt 7,550]

I don't care who makes it or not! It's WRONG to take from one and give to another without their approval. PRINCIPAL!

It actually exists out there somewhere.

[OldNewby 27]

Democracy and socialism have nothing in common but one word, equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.

Alexis De Tocqueville

[jared52 4,358]

For all the bickering about the top tax bracket, how many of our members do you guys think make more than 250k/year?

So because it only effects a few people, it's ok? I know that the guy who owns the company I work for makes $250k a year and he makes the employment decisions. If he has less money, he can't hire more people or can't keep the ones he has. I would like to make $250k per year at some point, but then it begs the question of will I actually cost me more money to make that much, i.e. will I actually take home less when I make more?