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Actually, it already has been destroyed. Despite declaring $18 billion in profits in 2010, Apple paid just 17 percent in federal taxes. It socked away another $74 billion offshore and tax-free.

Who covers the difference when Apple pretends to be Irish? That would be you.

9. How to lower your taxes by sitting on your ass

Facebook founder Mark Zuckerberg took advantage of a multi-billion dollar tax scam during his company's IPO.
Guillaume Paumier/Creative Commons
Facebook founder Mark Zuckerberg took advantage of a multi-billion dollar tax scam during his company's IPO.
Republican presidential nominee Mitt Romney is the poster child of off-shore tax schemes.
Austen Hufford/Creatives Commons
Republican presidential nominee Mitt Romney is the poster child of off-shore tax schemes.

Back in the 1970s, "hard work" wasn't just something candidates yammered about during campaigns. It was actually imbedded in the tax code. Capital gains — investment income created by things like stock dividends — were taxed at a higher rate than wage income for a very simple reason.

"The theory was that it was tougher to dig a ditch than to watch somebody do it," says Robert McIntyre, director of Citizens for Tax Justice.

Even Ronald Reagan knew that someone shouldn't pay less for sitting on his ass. He made the capital-gains tax the same as the highest personal rate.

But heavy protection payments have since whittled that notion of "hard work" down to a toothpick. George W. Bush finally hacked it to its current low of just 15 percent.

Officially, the theory is that lowering capital gains will spur investment, creating new companies, new jobs, and prosperity for all. But most economists have found it does little to spur savings and investment.

What it does do is deliver a fortune to investment bankers and financiers like Romney and Warren Buffett, both of whom pay lower rates than their secretaries.

Over 70 percent of the $100 billion that capital gains tax breaks cost the government each year goes to those with incomes in excess of $1 million, according the Joint Committee on Taxation. Even more shocking, the 400 highest-income Americans received 16 percent of all net capital gains in 2009, a total of $37 billion.

Congressman Sander Levin (D-Michigan) has tried to shear this golden lamb by requiring those taking capital gains breaks to prove they actually invested. Yet Congressman Dave Camp, a Michigan Republican and chairman of the House Ways & Means Committee, has blocked the bill from ever coming up for a vote.

It's probably just coincidence that since Camp entered Congress in 1998, he's taken a whopping $631,916 from the financial industry. Camp did not respond to repeated interview requests.

8. The Sheryl Crow loophole

It pays to have low friends in high places. Six years ago, legislators from Tennessee, Kentucky and Texas wanted to reward those who provide the star power to their fundraisers: country musicians. So they passed a law allowing songwriters to avoid income taxes and sell their publishing catalogues at capital-gains rates.

Suddenly, Nashville's elite could not only avoid the taxes everyone else must pay, but they could also skirt their Social Security and Medicare bills.

Three years later, Sheryl Crow sold her publishing rights to one of Australia's largest banks for nearly $10 million. Her estimated savings courtesy of this congressional giveaway: $2 million.

The law, however, curiously omitted other creative types who weren't hosting congressmen's rallies. Authors, for example, still must pay standard income taxes for selling the copyrights to their books. The same goes for painters, photographers, screenwriters and sculptors.

7. Getting rich, Facebook style

Before Facebook offered its first publicly sold stock in May, CEO Mark Zuckerberg grabbed 120 million shares for himself, then threw another 67 million shares to his employees.

It may have seemed an unusual act of generosity for a man not known for his grace. That's because it was also a multi-billion-dollar tax scam.

The public paid $38 a share for Facebook stock in initial trading. Yet via a sweet little loophole created by Congress, Zuckerberg claimed the shares he gave employees were worth just six cents apiece. By law, Facebook was allowed to deduct the difference — over $7 billion — as a business expense.

In reality, the employee giveaway cost Facebook nothing. It neither expanded the company's expenses nor increased its liabilities. McIntyre compares it to an airline letting workers fly free in seats that would otherwise have been empty. The airlines don't receive a break because it doesn't cost them anything.

But thanks to some inventive paper shuffling, Facebook will receive a $500 million tax refund next year.

A similar loophole encourages companies to offer executives those bloated compensation packages.

When CEO wages began to spur outrage in the early Clinton years, Congress decided that companies could no longer deduct executive salaries over $1 million as a business expense.

But it also created a loophole that rendered its crackdown meaningless. Exempted were "performance-based" bonuses that surpass that $1 million threshold. A grand new corporate giveaway was born.

Suddenly, CEOs were being slathered with stock options. Companies expensed the giveaway without ever opening their wallets, leaving taxpayers to subsidize caviar compensation plans.

Last year, the five highest-paid CEOs collectively took home $232 million — while their companies received a tidy $81 million in tax breaks.

6. My other home's a yacht

Established in 1913, the mortgage-interest deduction is one of the oldest and most sacred breaks in the code. It's meant to encourage home ownership and stabilize communities.

It doesn't really work, since most people will buy homes whether they receive a break or not. Countries like Australia and Canada have similar ownership rates to ours without offering the deduction.

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10 comments
TruthHurts
TruthHurts

Wow, just wow. What uneducated drivel. Why hasn't Obama told us about these tax loopholes? Just hasn't done a good job of telling the story? We have one of the most progressive tax policies in the world, on average the more one makes, the more taxes they pay. The buffet/secretary line has proven to be incorrect (look up what an effective tax rate is), stop pandering to the lies. #10. If the US corporate tax rate was competitive (ie. lower) corporations wouldn't do this. The same happens when a state with a higher income tax sees citizens move to one with a lower rate. #9. Capital gains are not taxed the same as dividends, maybe do some research. Dividends are taxed lower because as profit (ie. earnings) they are already taxed once at the corporate level. Looks like you forgot to mention that Senior citizens (anyone over 60) are the largest group of citizens dependent on dividends for income, that is why this has not changed and has actually been lowered over time (buying votes). #8. Agreed, that's just nonsense, this shows how corrupt Congress is. #7. While yes, the corporation gets the write-off, the individuals will pay taxes on the capital gains. This money does not just get handed out freely as you infer. #6. Yes, it is absurd Yacht's can be claimed, but there are still restrictions on how much interest can be claimed (both monetary and on only up to 2 homes) and there are habitation restrictions as well. Agreed this is dumb. #5. Agred, end all energy subsidies. Solyndra, A123, wastes of money. Let China do it cheaper and better than America can (as is the case already). #4. "It's not just cheap labor that pushes work overseas. The U.S. tax code allows companies to expense every last cost of sending your job abroad." Wow, thanks for the insight, what a joke you are. There are no tax breaks for shipping jobs overseas, only MUCH cheaper costs vs paying payroll taxes of 20%+ of salary/employee in taxes (Medicare/SS/SUTA/FUTA), not to mention healthcare costs that are rapidly rising. #3. Agreed, this is bullshit. #2. See #10. Maybe more states should follow Delaware's lead to be competitive? Sounds like a lot of whining, especially from the caymen islands. #1. Moving a business to a state willing to work with you, instead of against you is blackmail? Im sure California's higher taxes and pro-union atmosphere had nothing to do with this decision. Typical liberal bullshit, read a book or two Chris, maybe start with the tax code if you're going to pretend to know what you're talking about.

RouseMouse
RouseMouse

We can only assume those off shore companies, that have recently been declared individuals by the supreme court, at their request for political reasons, are paying common personal income tax or the AMT (alternative minimum tax) on their personal income like the rest of the individuals living in the country allowed to use the same forms, and those stating their residence out of the country have the appropriate work visas for their business dealings inside the U.S. like any other individual needs and are no longer able to finance any U.S. election campaigns and are registered as foreign lobbies?

 

Does Apple have a work Visa to do business in the U.S.? and do they have to leave in 3 to 6  months or some time limit like every other foreign individual must comply with?

cowade45
cowade45

So the many years the Democrats had control of both houses and the White House they couldn't have eliminated these loopholes. Sounds like a lot of "Loopholes" in your article. Your bias was definitely on display.

raktmn
raktmn

Unfortunately the only way to get rid of this tax code problem is to get rid of the lobbyists.  The problem is that the 5 Republican-leaning US Supreme Court justices keep ruling over and over (like Citizen's United) that businesses can use unlimited money to influence politicians.  They claim that buying off the government is "free speech".  A claim that is tantamount to claiming that bribery is the same as writing a newspaper.

 

There is no way to solve this problem without getting rid of these Supreme Court justices who derail all legislation designed to remove corporate influence from government.  Once this is solved, only then can the lobbyists be defeated.  Only after the lobbyists have been dealt with can we make meaningful changes to our tax code.  Otherwise we are just playing whack-a-mole trying to eliminated individual tax loopholes, and 100 new loopholes will be added for every 1 loophole that gets public ridicule like the loopholes in this story.

 

Elect people who will fix the Supreme Court, or don't bother complaining about the results...

trollmeat
trollmeat

Romney 2012. The president had 4 years to fix this and he hasn't so whats that really say?

Mary Durocher
Mary Durocher

Great article!! Just wish others could read it without thinking someone must be "lying"....since lying has just become the new "truth"....

cowade45
cowade45

 @trollmeat So the many years the Democrats had control of both houses and the White House they couldn't have eliminated these loopholes. Sounds like a lot of "Loopholes" in this article. Chris Parker's bias was definitely on display.

moreliberalthanjesus
moreliberalthanjesus

 @trollmeat Of course you choose to ignore the many references to Congress trying to close these loopholes, with zero success.  The president can't just change the tax code on a whim.  

 

“If you vote against Obama because he can’t get stuff done, it’s kind of like saying ‘This guy can’t cure cancer. I’m gonna vote for cancer.’”~Chris Rock  

 
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