Tax avoidance/Tax evasion

J

justeccentricnotinsane

Community Member
MBTI
INFJ
Tax avoidance = legal. People pay lawyers and accountants to exploit loopholes in tax law or offshore their money to avoid tax.
Tax evasion = illegal. Lying about what money you make, paying people cash in hand.

Whenever this discussion is brought up, people tend to say it is perfectly fine to avoid paying tax if you can, as it is legal. However, it is awful to lie in order to evade tax or let down your responsibility to pay tax. Why on Earth people put so much trust in the law (a line in the sand) I do not know.

I'm not sure I see the distinction. Should tax avoidance be legal? While it is legal, it means that people (normally the rich) are able to not pay tax into the country, even though they live here, use the roads, have the police to protect them, are entitled to everything everyone else is. Billions of pounds are lost through tax avoidance from the very rich.

Is there really a distinction between evading and avoiding tax? Doesn't it just mean the law is not working properly? Should tax avoidance be clamped down on just out of the need for equality? To make sure that money does not buy you impunity from certain responsibilities?

Some lecturer wrote in the Guardian a while back that part of her way to fix the economy would be to change this law and give thousands of jobs to people to root out tax avoidance. She got slammed, of course, and I'm uneasy about it but I'm not totally sure why. I mean, it would mean that more money would be coming into the country (money that should be there anyway) and we'd be increasing employment, which is good for the economy too.

I don't know. I wanted to open it up to debate.
 
This is the American pastime. The simplest solution is to close the loopholes and make the tax code bullet proof.
 
From what I understand there is actually no law in the USA that says you HAVE to pay taxes. Taxes were a voluntary thing introduced during one of the World Wars. People allowed themselves to be taxed voluntarily during this time to help fund their country's efforts over seas. It's just that when the war ended, the government kept collecting taxes and now if you don't pay them they'll come after you.

You can fight paying your taxes and court and you will ALWAYS win because nowhere in the law does it state that you have to pay them. But most people don't want to go through the trouble of all of the legal proceedings and thus you get both tax avoidance and tax evasion.
 
sandra_b said:
From what I understand there is actually no law in the USA that says you HAVE to pay taxes. Taxes were a voluntary thing introduced during one of the World Wars. People allowed themselves to be taxed voluntarily during this time to help fund their country's efforts over seas. It's just that when the war ended, the government kept collecting taxes and now if you don't pay them they'll come after you.

You can fight paying your taxes and court and you will ALWAYS win because nowhere in the law does it state that you have to pay them. But most people don't want to go through the trouble of all of the legal proceedings and thus you get both tax avoidance and tax evasion.
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Interesting, although I am in the UK. But have they seriously not put it in to law? And beyond that, how the hell did they fund the country before the World Wars?!
 
justeccentricnotinsane said:
Interesting, although I am in the UK. But have they seriously not put it in to law? And beyond that, how the hell did they fund the country before the World Wars?!
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I'll have to look up that information and get back to you. But yeah, it's not written into their laws, taxation is voluntary. I am from Canada so here it is different as well in terms of how tax works.
 
Enough said: http://usgovinfo.about.com/od/incometaxandtheirs/a/whopaysmost.htm

According to the Office of Tax Analysis, the U.S. individual income tax is "highly progressive," with a small group of higher-income taxpayers paying most of the individual income taxes each year.

In 2002 the latest year of available data, the top 5 percent of taxpayers paid more than one-half (53.8 percent) of all individual income taxes, but reported roughly one-third (30.6 percent) of income.

The top 1 percent of taxpayers paid 33.7 percent of all individual income taxes in 2002. This group of taxpayers has paid more than 30 percent of individual income taxes since 1995. Moreover, since 1990 this group’s tax share has grown faster than their income share.

Taxpayers who rank in the top 50 percent of taxpayers by income pay virtually all individual income taxes. In all years since 1990, taxpayers in this group have paid over 94 percent of all individual income taxes. In 2000, 2001, and 2002, this group paid over 96 percent of the total.

Treasury Department analysts credit President Bush's tax cuts with shifting a larger share of the individual income taxes paid to higher income taxpayers. In 2005, says the Treasury, when most of the tax cut provisions are fully in effect (e.g., lower tax rates, the $1,000 child credit, marriage penalty relief), the projected tax share for lower-income taxpayers will fall, while the tax share for higher-income taxpayers will rise.

The share of taxes paid by the bottom 50 percent of taxpayers will fall from 4.1 percent to 3.6 percent.

The share of taxes paid by the top 1 percent of taxpayers will rise from 32.3 percent to 33.7 percent.

The average tax rate for the bottom 50 percent of taxpayers falls by 27 percent as compared to a 13 percent decline for taxpayers in the top 1 percent.
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Nearly 47% DO NOT PAY FEDERAL TAXES!!! (not certain if it is total population or US Citizen popuation, omitting illegal aliens) http://www.usatoday.com/news/opinion/editorials/2010-04-16-editorial16_ST_N.htm


ETA: Though I do believe "Flat Tax" would work for the upper and middle classes, it would only make the poor poorer. No solution will ever be entirely fair.
 
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sandra_b said:
From what I understand there is actually no law in the USA that says you HAVE to pay taxes. [...] You can fight paying your taxes and court and you will ALWAYS win because nowhere in the law does it state that you have to pay them...
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Absolutely wrong.

The 16th Amendment: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

You can disagree with it, but it does provide the legal foundation for levying a federal income tax in the US.
 
SpilledMilk said:
Absolutely wrong.

The 16th Amendment: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration."

You can disagree with it, but it does provide the legal foundation for levying a federal income tax in the US.
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This is, in part, where I am getting some of my information from:
http://www.voluntarytax.info/#realities

According to this:
"The power to tax income is not the 16th amendment; it is Article 1, section 8, clause 1." It addresses a few other things about the 16th Amendment as well.

Anyway, I'm not from the USA so my knowledge on your tax laws is not complete or precise. I can only go by other sources, that website just being one of many.
 
Sriracha said:
Enough said: http://usgovinfo.about.com/od/incometaxandtheirs/a/whopaysmost.htm



Nearly 47% DO NOT PAY FEDERAL TAXES!!! (not certain if it is total population or US Citizen popuation, omitting illegal aliens) http://www.usatoday.com/news/opinion/editorials/2010-04-16-editorial16_ST_N.htm


.
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25% of the US pop is under 18 years of age, we have at least a 9% rate of unemployment so that 34% of the population , the other 13% make less than 12,000 dollars a year.

I am fed up with these deadbeat millionaires intent on ruining our country.
 
Sriracha said:
Nearly 47% DO NOT PAY FEDERAL TAXES!!!
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Yeah, 47% don't pay any "income tax", but they still pay federal taxes on their income (completely different thing, apparently) in the form of payroll taxes, i.e. the SS and Medicare taxes.
 
I remember first hearing about the distinction between tax avoidance and tax evasion at my half brother's wedding, when my dad was talking to the bride's father about it. My dad is a CPA, and is pretty good at tax avoidance. I remember one time he came up with a completely legal way to allow a wealthy client to pass on his fortune and company to his 3 children without paying any estate taxes. (I forget the details, but it involved breaking up one company into three that were deeply in debt to each other.) I tend to think of such things as at least bordering on unethical, but didn't want to complain too much about that which was responsible for my family's sole source of income. (My dad sold his company and retired at the end of June, but is still doing the occasional consulting work for the company. Some of his personal clients that moved to the new firm are churches and charities, and the new guys have zero experience dealing with non profit corporations.)



Prior to WWII, most of the Federal Government's income came from Tariffs. Income taxes certainly existed before then though, They were first introduced during the Civil War, but were then struck down as unconstitutional. (Abraham Lincolns use of fiat paper currency was likewise considered unconstitutional.) After the passage of the 16th amendment they were introduced again. I believe that the first constitutional income tax was something like a 1% tax on all income levels, but before World War One we moved to a progressive system with a tax rate higher than we have today. Between the world wars the Harding-Coolidge administrations reduced income taxes so that only the wealthiest 2% payed any, and their effective rates were reduced to about 2%. (At the same time a substantial estate tax and gift tax were implemented, and the economy grew to the point that the government ran surplussed large enough to pay off most of the national debt.) After World War II rates rose dramatically, and were more than double what they are now before they were lowered under JFK. During the great depression we started paying payroll taxes, which would be the worst sort of tax even if it wasn't only paid on the first ~$106,00 of income.
 
magister343 said:
.... Income taxes certainly existed before then though, They were first introduced during the Civil War, but were then struck down as unconstitutional. .
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um when did the Supreme Court rule that income taxes are unconstitutional? I found this but you must have better knowledge.

"In Pollock v. Farmers
 
sandra_b said:
..."The power to tax income is not the 16th amendment; it is Article 1, section 8, clause 1." It addresses a few other things about the 16th Amendment as well...
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You're right as well about Art. I, Sec. 8 being another source of federal taxation power. The 16th Amendment reiterated the Art. I, Sec. 8 power while at the same time removing the apportionment requirement, thus broadening Congress' taxation powers.

Either way, both areas give Congress taxation authority.

Any quack can post stuff online (including myself) making a claim. However, my claims are based on facts as they've turned out from the executive/administrative and judicial enforcement of federal taxation power. You may disagree philosophically about whether it's right, but nobody can deny that it doesn't exist. The IRS and DOJ make sure of that.
 
There are two certainties in this world: death and taxes. You can avoid death, but the IRS will find you.

Tax avoidance is by definition legal. If it wasn't legal, people wouldn't be able to do it.

Obviously nobody can stop the rich from creating and living in tax havens. We can't forcefully tax the properties of other countries. We can tax their income, however, but we also have a significant political party that seems to believe that raising taxes on the rich will cut their ability to "create jobs". Never-mind that the average bonuses for CEOs today are many times what they were during our industrial boom.

As for 'avoidance' by regular people, a lot of people would argue with your calling it 'avoidance'. Specific tax breaks and provisions are created to help people or to provide incentives for certain actions. Making these people pay would undermine the incentive structure, so yes, it should be legal.
 
sandra_b said:
This is, in part, where I am getting some of my information from:
http://www.voluntarytax.info/#realities

According to this:
"The power to tax income is not the 16th amendment; it is Article 1, section 8, clause 1." It addresses a few other things about the 16th Amendment as well.

Anyway, I'm not from the USA so my knowledge on your tax laws is not complete or precise. I can only go by other sources, that website just being one of many.
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There's also the "necessary and proper" clause congress can use in almost any situation.
 
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