How the Rich Avoid Paying Taxes

[Enoch Root]

Originally Posted by Leondros

Sorry Enoch, the bolded is an outrageous statement and shows a lack of understanding to what most low income families truly go through. It is not at all fair to say the barriers to success are small. As someone who went to private school, had my university paid for, and had every leg up in the world, I can say when compared to my peers I certainly was starting from a huge advantage. That advantage cannot be overstated.

Are there cases of low income individuals being able to be successful? Absolutely. But statistics show that they are far more likely to not graduate university.

As for mom and dad working hard, for sure - they should be able to pass some wealth down to their children. However, I believe to an extent anything over and above a threshold should get taxed heavily. Jury is out on what that threshold could or should be.

I didn't say it wasn't an advantage, in fact I said it was. What I said was, the opportunity exists for everyone to be successful. The opportunity isn't equal, but it is there. And to be clear, I am in no way trying to diminish the struggles that the poor face.

Unlike your experience, I grew up with nothing, and no advantages other than being a 'white male in Canada', which we all acknowledge as being a good one to have. I worked my way through school (5 jobs during my final year in Commerce, for example). I am not saying 'hey, everyone can go do that', I am just saying the opportunity was there for me, despite no financial or familial advantages.

The studies show that most millionaires are self-made - a very high percentage.

Look, life isn't fair. No one is claiming that it is. I was refuting a post that was implying that wealth begets wealth, and that it continually and inexorably separates the haves from the have nots. I was trying to convey that the evidence shows that it is not as cut and dried as they were suggesting.

The bigger point here though, is what actually is the point? What can we do about it? Should families not be allowed to accumulate wealth? (I don't think that is a good solution) Should we redistribute all wealth? (I don't think that is a good solution)

[Enoch Root]

Originally Posted by AltaGuy

This is superficial in the extreme. If an average inheritance is like $5000, I would certainly expect it is spent quickly.

If you're like a friend of mine who inherited about $50M in real estate, none of the principal has been spent and he's worth about double that now.

LOL. No, your example is the extreme.

Yes, inheritance size is pyramid-shaped (most are very modest). But the articles that focus on these issues aren't talking about the $5,000 inheritances (they are completely irrelevant), there is always a minimum size that is considered for relevance (usually either $100k, $1M, or $10M, depending on the purpose of the study).

This discussion has, from the beginning, been about large inheritance. And specifically billionaires. Any inheritance tax, or any policy that is being considered, would always be on some set minimum, and the most common number for that is $10M.

[AltaGuy]

Originally Posted by Enoch Root

LOL. No, your example is the extreme.

Yes, inheritance size is pyramid-shaped (most are very modest). But the articles that focus on these issues aren't talking about the $5,000 inheritances, there is always a minimum size that is considered for relevance (usually either $100k, $1M, or $10M, depending on the purpose of thes study).

This discussion has, from the beginning, been about large inheritance. And specifically billionaires. Any inheritance tax, or any policy that is being considered, would always be on some set minimum, and the most common number for that is $10M.

Source then?

[CorsiHockeyLeague]

Originally Posted by Enoch Root

No, it isn't semantics - tax avoidance is a crime.

What? No it's not. Literally every time you deduct anything from your income you're engaging in tax avoidance. An RRSP contribution is tax avoidance. Tax evasion is illegal, tax avoidance is perfectly legal and literally everyone does it because the system is designed for them to do so.

"Abusive tax avoidance" - the kind targeted by GAAR - is illegal, sort of, but it's not a crime. They can't even charge you penalties or interest for it if you're found to have committed it, much less try to prosecute you. You just have to pay the tax you avoided.

[Enoch Root]

Originally Posted by CorsiHockeyLeague

What? No it's not. Literally every time you deduct anything from your income you're engaging in tax avoidance. An RRSP contribution is tax avoidance. Tax evasion is illegal, tax avoidance is perfectly legal and literally everyone does it because the system is designed for them to do so.

"Abusive tax avoidance" - the kind targeted by GAAR - is illegal, sort of, but it's not a crime. They can't even charge you penalties or interest for it if you're found to have committed it, much less try to prosecute you. You just have to pay the tax you avoided.

Sorry yes - and thanks - I meant evasion, not avoidance. But the post I responded to was suggesting it is all semantics: evasion, avoidance, minimization.

And of course, they are not.

Making an RSP contribution is not avoidance, by the way, it is a deferral. Most tax strategies are deferrals.

Making a TFSA contribution is avoidance (legally).

Engaging in aggressive tax strategies to try and reduce or eliminate taxes is usually avoidance, which as you say, isn't 'illegal', but can result in fines, if CRA deems warranted.

Engaging in practices that are actually illegal, is evasion.

So, - as was the point of my prior post - the differences are real, and it is not a simple matter of semantics.

[Enoch Root]

Originally Posted by AltaGuy

Source then?

source for what?

[CliffFletcher]

Originally Posted by Enoch Root

So if mom and dad work hard and save some money, you don't think they should be able to pass that on to their children? Are we going to eliminate all personal motivation from the system and share everything equally? Because if we are, please let me know so that I can retire tomorrow and stop working so hard.

Also, your premise that all wealth creates class division is just not as cut and dried as you are suggesting.

Wealth itself doesn’t create generational class differences. The extent to which a child’s economic status in adulthood corresponds to their parents’ does.

That intergenerational ‘stickiness’ varies substantially by country. As I’ve noted, Canada has historically had more intergenerational mobility that the U.S. and UK. I consider that a good thing.

Originally Posted by Enoch Root

First of all, anyone can be successful - the barriers to success are small. Yes, there are advantages to being wealthy, and yes, there are barriers from being poor, but everyone has some opportunity at success.

That’s simply not true. If parental money and influence do little to improve the outcomes of children, then why do they spend so much time and money on schools, classes, programs, a house in the right neighbourhood, tuition, etc?

In fact, if you honestly believed bright and ambitious children will succeed no matter what, then you would not devote any resources to aiding your own children - they’ll either make it or not make it on their own, right?

Originally Posted by Enoch Root

Second, receiving that inheritance is not the automatic ticket to wealth building and class segregation that you are suggesting. Again, there are various informal studies that give a wide range of data, but the aggregate message is clear: people who receive an inheritance are often inclined to blow it, and the numbers for the 3rd generation (the grandkids), appear to be even worse. I have seen studies that suggest as many as 80% of inheritances are gone within 2 generations. Actual numbers are impossible to determine, but we can be confident that a significant number evaporate or largely evaporate.

That may be so. But you don’t think a couple where each set of parents can kick in $100k towards a new house and a couple that has no support will have very different experiences on the property ladder? And that this will impact their own children in turn?

The argument boils down to parental money doesn’t have much of an influence on generational wealth, but it’s absolutely vital I’m able to provide it anyway. And that doesn’t make any sense.

[CorsiHockeyLeague]

Originally Posted by Enoch Root

Making an RSP contribution is not avoidance, by the way, it is a deferral. Most tax strategies are deferrals.

Well, okay, but from the standpoint of Canadian tax law on abusive tax avoidance there's no difference - tax deferred is tax avoided. Hence a deferral strategy that includes an RRSP contribution can be targeted as abusive tax avoidance and subject to GAAR, if the strategy is found to be an abuse of the rules.

The point that we agree on is that there are three different types of reducing your tax burden, broadly speaking:
1. Tax avoidance - perfectly legal and expected, and the system is designed to allow for it.
2. Abusive tax avoidance - legal in the sense that you have technically complied with the rules, but have engaged in shenanigans to avoid the spirit of the rules to minimize or defer your taxes in a way that is contrary to the intention of the rules in the tax act.
3. Tax evasion - stuff like lying on your tax returns or misreporting transactions, illegal and criminal.

These are all very different things, but obviously 3 is the most different (it can in some cases be hard to tell the difference between 1 and 2).

[Enoch Root]

Originally Posted by CliffFletcher

That’s simply not true. If parental money and influence do little to improve the outcomes of children, then why do they spend so much time and money on schools, classes, programs, a house in the right neighbourhood, tuition, etc?

because every little bit helps? Again, I never said there weren't any advantages - why is nuance always such a challenge? No one suggested that parents shouldn't try to help their children.

In fact, if you honestly believed bright and ambitious children will succeed no matter what, then you would not devote any resources to aiding your own children - they’ll either make it or not make it on their own, right?

this is just brutal logic, sorry

Why shouldn't people be free to pursue any path they like, any potential source of an advantage they believe might help them? If you think reading a particular book will help you get a particular job, why wouldn't you do it?

Please explain to me what you think we should do? Should families not be allowed to try to improve their children's lives? Pursuit of success is the driving force of our economy and society.

That may be so. But you don’t think a couple where each set of parents can kick in $100k towards a new house and a couple that has no support will have very different experiences on the property ladder? And that this will impact their own children in turn.

The argument boils down to parental money doesn’t have much of an influence on generational wealth, but it’s absolutely vital I’m able to provide it anyway. And that doesn’t make any sense.

[/quote]
Again, the logic is flawed.

I never claimed that advantages weren't beneficial. Pursuing advantages is a logical - and desirable - behavior for people to pursue.

What I was saying with respect to inheritance is this: someone claimed that inheritance creates this unbridgeable advantage and class separation. I suggested that the evidence doesn't really support that.

Most importantly, I keep coming back to the question: should we eliminate the pursuit of advantage? Working for an advantage for yourself or your children is a good thing. Having societal infrastructure that permanently creates a class system that separates the haves from have nots is not desirable. However, the evidence suggests this doesn't happen as much as some people think. Also, the alternatives aren't good.

[you&me]

Originally Posted by CliffFletcher

Wealth itself doesn’t create generational class differences. The extent to which a child’s economic status in adulthood corresponds to their parents’ does.

That intergenerational ‘stickiness’ varies substantially by country. As I’ve noted, Canada has historically had more intergenerational mobility that the U.S. and UK. I consider that a good thing.



That’s simply not true. If parental money and influence do little to improve the outcomes of children, then why do they spend so much time and money on schools, classes, programs, a house in the right neighbourhood, tuition, etc?

In fact, if you honestly believed bright and ambitious children will succeed no matter what, then you would not devote any resources to aiding your own children - they’ll either make it or not make it on their own, right?





That may be so. But you don’t think a couple where each set of parents can kick in $100k towards a new house and a couple that has no support will have very different experiences on the property ladder? And that this will impact their own children in turn.

The argument boils down to parental money doesn’t have much of an influence on generational wealth, but it’s absolutely vital I’m able to provide it anyway. And that doesn’t make any sense.

While all of these points can be considered valid, I can't see how any of them will be remedied by increases in inheritance tax?

I think the issue some opposing posters have is not that they don't want to see mobility and opportunities for lower income families, but that the 'solutions' being proposed seem to focus more on punishing upper class families as a sort of means of leveling the playing field...

What are the proposed solutions? Is an increased inheritance tax intended to fund better public schools? Provide $10 daycare so families can afford to have dual incomes (which can create its own issues)?

[Locke]

I tried to get my kid to go to University in Lichtenstein.

Did you know if you live there for 5 years as a student you can get Citizenship and then Naturalize your parents?

Thats the dream....

[Jason14h]

Originally Posted by you&me

While all of these points can be considered valid, I can't see how any of them will be remedied by increases in inheritance tax?

I think the issue some opposing posters have is not that they don't want to see mobility and opportunities for lower income families, but that the 'solutions' being proposed seem to focus more on punishing upper class families as a sort of means of leveling the playing field...

What are the proposed solutions? Is an increased inheritance tax intended to fund better public schools? Provide $10 daycare so families can afford to have dual incomes (which can create its own issues)?

This is my beef. The government has no shortage of money. Its not like they even pretend to run a balanced budget. They could fund schools more if they wanted/if the voters wanted.

Acting like we need a revenue source and that the restrictive reason we dont fund these things is disingenious

So the argument comes down to bring the top level down instead of the bottom level up.

No society betters itself with that mantra

[GGG]

Well eventually the top level is brought down through revolution.

One might think some form of wealth based taxation is preferable to that.

The closer you get to the point of revolution the less likely the elite will be willing to part with the wealth they have accumulated so it’s probably politically easier to do something now.

Now this is more abstract philosophy because no one can specify at what point the wealth gap is too much but at some point we will see it. The US as evidenced by the Capitol riots and BLM protests are showing signs of a dissatisfied lower class

[puckedoff]

Originally Posted by CliffFletcher

Wealth itself doesn’t create generational class differences. The extent to which a child’s economic status in adulthood corresponds to their parents’ does.


The argument boils down to parental money doesn’t have much of an influence on generational wealth, but it’s absolutely vital I’m able to provide it anyway. And that doesn’t make any sense.

Relevant article recently on this, statistically showing that having wealthy parents is a greater indicator of future success than having a good first job, or having good grades.

https://ofdollarsanddata.com/the-bes...ntage-in-life/

Study... "suggests that you will probably do better economically if you are dumb and from a rich family than if you are smart and from a poor family

[you&me]

Originally Posted by puckedoff

Relevant article recently on this, statistically showing that having wealthy parents is a greater indicator of future success than having a good first job, or having good grades.

https://ofdollarsanddata.com/the-bes...ntage-in-life/

I don't see how anyone would find this surprising, but again, what's the goal? Are we supposed to limit wealth so no one has those advantages?

[Mathgod]

Originally Posted by Enoch Root

Sorry yes - and thanks - I meant evasion, not avoidance. But the post I responded to was suggesting it is all semantics: evasion, avoidance, minimization.

And of course, they are not.

I very clearly made the distinction between legal and illegal means of tax reduction. I used the term avoidance when referring to legal means, not evasion.

Originally Posted by Enoch Root

Unlike your experience, I grew up with nothing, and no advantages other than being a 'white male in Canada', which we all acknowledge as being a good one to have.

There are types of advantages that some have over others besides wealth of family born into, skin color, or gender. Those are probably the main 3 but there are others.

The studies show that most millionaires are self-made - a very high percentage.

No one is self made. Maybe with the exception of those who live in the wilderness with little to no interaction with civilization, but that's it. The rest of us utilize the economic system of global corporate capitalism (or any economic system in general) to further our ends, and are therefore not self made.

I was refuting a post that was implying that wealth begets wealth, and that it continually and inexorably separates the haves from the have nots. I was trying to convey that the evidence shows that it is not as cut and dried as they were suggesting.

Not inexorably, but a relatively few exceptions doesn't disprove the general rule. People are generally products of the environments they were raised in. Much of the data does actually point to it being nearly that cut and dry.

The bigger point here though, is what actually is the point? What can we do about it? Should families not be allowed to accumulate wealth? (I don't think that is a good solution) Should we redistribute all wealth? (I don't think that is a good solution)

My belief is that if the rich have access to passive income (and they do, for some of them inordinate amounts), then everyone should have access to some passive income.

[you&me]

Originally Posted by Mathgod

My belief is that if the rich have access to passive income (and they do, for some of them inordinate amounts), then everyone should have access to some passive income.

Passive income... how?

[Enoch Root]

Originally Posted by puckedoff

Relevant article recently on this, statistically showing that having wealthy parents is a greater indicator of future success than having a good first job, or having good grades.

https://ofdollarsanddata.com/the-bes...ntage-in-life/

Yeah, no surprises here.

However, correlation isn't causation. Maybe the reason that having rich parents is advantageous could be that they have passed on good genes to their children?

Regardless, there is no doubt that having rich parents is advantageous, but again, what should we do about that? Punish them?

[kermitology]

Originally Posted by Azure

Plus, what are you actually taxing? Bezos has a lot of wealth, but it is all tied up in assets, and is by no means liquid. He sells a certain percentage of that wealth each year to finance his companies like Blue Origin.

So if you want to tax him say 10% on his 'wealth' you would force him to sell his assets in order to generate liquid to pay the actual tax.

Aren't we better off trying to get him to sell his assets to generate economic activity? Or donating to charity? Albeit the wealthy donating to charity as a tax write off is a problem in itself, but as an example his wife has donated billions since they got divorced.

Personally, I would much rather someone like Musk or Bezos take their billions and invest it into space companies that employ people and drive innovation.

Musk has basically created a worldwide internet system for $100 / month, and it didn't require any taxpayer money. How much money taxpayer money have governments funneled into internet access programs the last 25 years in an effort to make internet access available? Billions & billions.

Just wondering.. did you watch the video? One of the loopholes is that guys like Musk and Bezos are able to borrow using their unrealized stocks as collateral, which gives them liquidity without taxation and allows them to further buy things, real estate, etc. and just continue to increase their wealth.

The plebes on this site will never be in a situation where we can do the same thing. The biggest issue I have is with wealth hoarding. There should be some limits on things like this. You get to a certain point and your actual wealth is meaningless to you.

Additionally, these billionaires should be investing in projects to do things like revolutionizing energy, transportation, fighting climate change, etc. instead of going to space. Space travel is meaningless while our planet burns.

[Enoch Root]

Originally Posted by Mathgod

My belief is that if the rich have access to passive income (and they do, for some of them inordinate amounts), then everyone should have access to some passive income.

Well, as Canadians, they do.

It's the same argument - yes, it is advantageous to be born in Canada. And by the same token, Canadians have access to many advantages.

This whole thread has been the same point over and over: life isn't fair! Yes, that is absolutely true, life isn't fair.