|Quoting N231YE (Reply 48):|
that the wealthy probably won't ever need these things, so no need to pay on them.
Whether or not the will need it doesn't matter - the fact is they pay many times more into SS
than most people, but there is a cap as to how much they pay each year.
In 1984 & 85 an hourly employee working for Intenational Paper in it's maintenance department at a papermill could make enough money with substantial overtime to max out the social security contribution. My father did. That amount was about 47-48,000.
However, the maximum amount has risen more than wages and will rise in the future. The federal government executive branch and Congress know that increasing that maximum contribution is a source of 'free' money they will not have to repay.
|Quoting N231YE (Reply 48):|
I will try to look further, but as another poster stated, no one should be getting any breaks nor "socked" with taxes, nor any loopholes.
Reagan got rid of most of the loopholes. There are some, but very few and with the alternative minimum tax most of those don't apply over $200,000 per year.
The main way to avoid paying taxes is deferred salaries.
Take the CEO of the company I work for as an example. He has been awarded a bonus for performance for eight of the past 10 years by the board of directors.
He has elected to defer the bonus payment each time, placing the money into the company stock fund instead.
Over that time period the bonus amounts have added up to about $24,000,000
He has paid no income tax on that $24,000,000 because he was never paid that money. Just the same as I have not paid taxes on about $40,000 over that same period which I have put into the 401K plan.
Had he accutally taken the bonuses, he would have paid about $8,000,000 in taxes.
By deferring the payments, two things have happened. The value of the stock was $49,500,000 at the end of our last fiscal year. The money must be paid out at least 10% per year for 10 years after he leaves the company.
So total taxes to eventually be collected on that money will be at least $20,800,000 at today's tax rates.
So when someone says our CEO made $4,600,000 last year, but only paid taxes on $1,250,000 = $500,000 - they are technically correct - but he did not actually get paid the $3,350,000 on which no taxes were paid.
Many executives with our company who make over $150,000 yearly do defer their a portion or all of their bonuses. Which make up from 20 to 50% of their total compensation packages.
And as I noted, normal employees can put 10% of their salaries into tax deferred savings (up to $15,500 per year + a $5,000 catch-up contribution if they are over 50).
While the CEO and the top executives will not really benefit from deferring the money unless there is a future tax rate cut, I and most folks with me on the peon level will because I won't be paying 28% taxes when I take the money out of my 401K.
Another way the ultra-rich avoid taxes is trust funds. I wish I could have someone setup a fund like Joseph Kennedy did for his family. Amazing that it has survived and grown so much for so many years.
These trust funds are legal entities which pay taxes on the money they earn. However the payment to the individuals can be tax free, because it is POST-TAX money.
i.e. The trust fund is 100 million dollars.
It made 4.5 million dollars last year.
It paid 1.665 million dollars in taxes.
Of the remaining 2,835,000 dollars - 835,000 is retained in the fund.
2,000,000 is paid out to the beneficiary of the fund.
So it is reported that the person "made" 2 million dollars tax free. That is incorrect because taxes were paid on the 2 million dollars - just not by the individual.