Not wanting to join in this bashing of taxes--my views are clear, as evidenced in the title of this thread--but I have to point out that I paid approximately 60% of everything I made last year to the tax collectors! This counts the Federal income tax (about 32%), the California income tax (about 11%), the "self-employment tax" (FICA) for some consulting I did (15%), property tax on my old residence ($2200), property tax on my new residence ($4200), sales tax on purchases (8.25%), gasoline taxes (about 30-40 cents per gallon), a special tax on my Ford Explorer ($300), and probably some miscellaneous other taxes I have neglected.

And of course the corporations that pay me dividends and whose stock price shows gains have _already_ paid roughly 45% or so in taxes, depending on how clever they were at allocating costs to minimize taxes. This is the famous "double taxation" of corporate earnings one hears about. Intel, for example, pays 45% of its considerable income in taxes, sends some of the remaining profits to me in the form of capital gains and dividends, and I then pay another 40% or so in income taxes on this share. The math is pretty simple...there ain't much left over. (The much-derided Laffer Curve is actually quite important here...when overall tax rates get high enough, people choose to do less work. Some of us even retire early.)

Although your viewpoint is well expressed, I feel you've overlooked the possibility of socialism to solve the high tax outrages detailed. Socialism, a truly progressive economic system, would have an actual graduated income tax, to discourage useless make-work by the rich. There are so many other benefits to patriotic socialism, it would take a book the size of Das Kapitol just to list them. For instance: Taxes on trade, will act as a tonic on the national economy. The tax on trade, of course, prevents it; relieving the national security apparatus of 90% of its reason for being. The state itself as a unifying theme, rather than patho meanderings like crime, anti-racism, and religion. Tcmay, you've already acted on your socialistic urges without even knowing it; your successfully operating a free people's spontaneous propaganda bureau. Please develop this further and thumb your nose at the members of your class.

On Sat, 4 May 1996, Timothy C. May wrote: [Much about Mr. May's taxes and methods of filing as well as interesting discussion about entitlements and taxes deleted]

One area where I mostly agree with Jordan Hayes and disagree with Sandy, Uni, and Duncan, is that I don't think it's as easy as they sometimes claim it is to avoid taxes by the offshore stratagems they espouse. Believe me, I looked into this a while back (it is never illegal to investigate ways to minimize tax burdens), and even considered moving out of the U.S. to a tax haven of some sort.

You don't have to disagree with me here. I've said this all along. It can be expensive and difficult to set up a system to reduce tax offshore. But the expense is mostly in setup costs and very front ended. Once a structure is in place, it's not that hard to continue to benefit.

It turns out, as it does for many people I know, that my assets are relatively traceable. Salaries and even consulting fees are reported assiduously. Stocks can certainly be moved offshore, but the IRS obviously knows where they are (the institutions that keep records of stock ownership will tell them, for one thing...this may take a few years for the records to catch up, but they ultimately will).

I have to strongly disagree here. But now you're talking about evasion, not avoidance. It's trivial to hide stock ownership from the IRS. This is perhaps one of the easiest things one can do. Consulting fees? These too can be concealed. It takes more work, but its possible.

Certainly I could liquidate one form of my assets (stocks, real estate, etc.) and simply move the money out of the country. Tax evasion is always an option. But the price paid if one gets caught tends to be rather high.

Were you to liquidate and move out of the country and renounce citizenship, and consult from abroad, and if you did this properly with your t's crossed, you could very easily and legally avoid (not evade) U.S. tax. The question is whether this is an option for you or not for other practical reasons.

(Despite what you hear anecdotally about the IRS "settling" for pennies on the dollar.)

The IRS almost never settles like this. Not in my experience anyhow, unless they have a feeling that an aggressive auditor was over zealous with your returns (and this should have been caught before you get to the settlement phase in any event).

Call me a skeptic.

You're a skeptic, but a reasonable skeptic. You have an idea about what you're willing to spend, and what your willing to "pay." Your decision seems to be (quite logically) based on those factors.

I will do my best not to be drawn into a debate that has been held here several times before. If Sandy, Duncan, etc., believe it is so easy to avoid taxes--on the resources we are talking about, not sheltering small amounts--or if they claim that I am obviously not following their advice, I'll let them make these claims without any attempt to rebut them. I've been there and done that before.

I'll not claim its easy, and I know too little about your financial situation to make specific recommendations. (This is not, by the way, an invitation for discloseure of anyone's financial dealings). I will say it's possible, and your mileage will depend on several factors. How much you're willing to spend. What you're willing to risk. How risky you want to get. etc. etc. The nature of some people's business makes it costly, others, who have mostly passive income, have an easier time of it.

I have no doubt that "tax planning" works for some people, and I think certain people like Vince Cate may do well in places like Anguilla, essentially starting a business from scratch. I even have longterm hopes for tax havens, cyberspace tax havens, anonymous systems, etc. But this ain't happening soon.

Here I'm not so sure I agree. Several of us are working on making it happen, soon.

But I see no clear way that X shares of Apple, Y shares of Sun, Z shares of Intel, etc. can be converted into other forms without taxes being paid, or evaded. (Evaded, not avoided.)

Expatriate, have your expatriation pass the "Furstenburg" test and be certified as being made for non-tax avoidance reasons, and you will pay $0.00 in capital gains when you liquidate. Should you be unable to pass the "Furstenburg" test, you can still enjoy your dividens for 10 years before liquidating tax free. If you don't want to wait 10 years, you can do a installment sale of your stock via an exchange mechanism, tax free. All 100% legal, until the Clinton "Death on expatriation" tax reform bill passes and is signed.

I recall Sandy claiming some scheme where I would use my shares as collateral and borrow tax-free against them. Sure, it's what I do everyday with my margin account. But to ultimately pay off a margin debt by selling assets involves taking capital gains (if there were any, of course--a safe bet in the last 10 years), and at this point the IRS and California Franchise Tax Board want their 40-45% cut.

I don't know what Mr. Sandfort suggested exactly, but I suspect he was talking about an exchange of stock for debt instruments. In some cases such an exchange can be a non-realization event. A form of this is one way IPO execs still get cash from their options without being able to exercise them and thus avoid the time restrictions on sale of stock and condequently, often the realization of such sale. I have to brush up on my U.S. tax to tell you exactly when this works. Let me know if anyone is interested.

Not being prepared to risk imprisonment for tax evasion, and being desirous of living in the United States rather than on a coral atoll, I answer the questions that Macintax asks me, gulp when I see the final figure, and write out a check (which I then have to sell even more stock to cover...perpetuating the cycle).

Coral Atolls are not the only jurisdictions you can live in and enjoy low or no tax. Consider Monoco, Liechtenstein and Panama for starters. Imprisonment is another matter. None of my clients have ever gone to prison, only one has ever been audited. (Issue was recommended for referal then dropped for lack of evidence) Then again, I don't have as many clients now as I once did. Is it easy to minimize taxation? No. The United States has intentionally made it so. Is it impossible? No. Never will be. Part of the problem is inertia. There is a (not unreasonable) view that taxes to the extent that the U.S. imposes them are a fact of life and that no efforts can mitigate them which will not cost more to implement than will be saved. The truth of this view varies in degree with each taxpayer. As to the future, I predict powerful tax evasion options at the click of a WWW button in 2-3 years. Not that I would ever advise anyone to break U.S. law.

--Tim May

--- My preferred and soon to be permanent e-mail address:unicorn@schloss.li "In fact, had Bancroft not existed, potestas scientiae in usu est Franklin might have had to invent him." in nihilum nil posse reverti 00B9289C28DC0E55 E16D5378B81E1C96 - Finger for Current Key Information Opp. Counsel: For all your expert testimony needs: jimbell@pacifier.com