(05-14-2017 07:30 AM)tanqtonic Wrote:  Lad --
If you want a deduction/loophole that is a real issue, look up what is known as a 1031 exchange. Completely legal (therefore not a 'loophole', but an explicit and specific procedure), and allows an entity that disposes of an asset held for business or investment purposes, and re-invests the proceeds into a like-kind asset within a certain amount of time, to defer all capital gains on the divestment of the first asset.
It is repeatable in that you wash, rinse, repeat over and over again. I have known entities to roll over assets 14-15 times, and each time kick the capital gains on each transaction back to the next. That means through every transaction no capital gains is paid --- only when a final sale is made and no rollover is made will capital gains tax be due.
Heck, I've used it almost a score times at this point......
To be honest, this type of deduction is a far better target for liberals/progressives to highlight as to the actual impact. But attention seems to always be paid to the murkier items hat have more emotional impact --- like yacht usage.
https://en.wikipedia.org/wiki/Like-kind_exchange

Yes, the things that would actually make a difference are not the ones about which the left can stir up a lot of emotional hate and discontent.

Let me try a hypothetical as a way of trying to explain. Let's compare two taxpayers. One makes $100,000 a year, probably mostly the fruits of his own labor, one way or another. He probably spends $95,000 and saves/invests $5,000. The other makes $20 million a year, probably mostly in the form of profits/gains from investments. She probably spends $1 million or less (it's really hard to spend more a million or more on consumption in a year) and saves/invests $19 million. So one spends 95% and saves/invests 5%, the other spends 5% and saves/invests 95%. From a tax planning standpoint, those are two entirely different scenarios. Almost all of the loopholes that the left likes to rail about--quite frankly, even including the yacht--apply to that $100,000 person, but only to the first million for the $20 million person.

If you want to understand how to tax the "rich" more, you need to understand what goes on with the $19 million in my hypothetical. And the first thing to understand is that while that $100,000 person needs to be able to get his hands on every penny of that $100,000 pretty easily, that $20 million person doesn't need nearly the same access to that last $19 million. That opens up a lot of opportunities for her. They come with assorted transaction costs, so probably she would be happier avoiding some of them. But if their tax efficiency is great enough, she will put up with the hassles, and the fees she pays to the people who set it up for her. Case in point, let's say that $19 million is profits from a factory she owns. If she puts that factory in the US, she pays roughly $7.5 million in taxes on it. If she puts it in a Swedish corporation, she pays roughly $4 million in taxes on it, or in Germany roughly $6 million, or in Poland roughly $3.6 million, or similar numbers in other countries. The administrative costs probably run $200,000 a year, and she can get her hands on the money a little easier if she does it in the US. But she will gladly put up with that to gain $4 million in tax efficiency on money that she doesn't need and can leave in the company for her kids to inherit. If she wants to do it here, she can run it through a trust, or foreign holding company, or set it up to take her profits later as capital gains, or use other means to shelter even more from taxation. And she can start giving her kids pieces of equity now, so that those don't hit her estate taxes.

Suppose the US takes the corporate tax rate down to 20%. Now Swedish taxes are still generally going to be lower (assuming US state taxes), but not enough to offset the admin costs and accessibility hassles. That money comes home and gets invested here. Suppose the US takes all rates down to 15% flat tax. Now the only place with a lower nominal rate is Ireland at 12.5%, and the transaction costs and access restrictions more than offset that. By lowering the rate to 15-20% across the board, you gave her a break of $200-250,000 on that first million, which is where the left focuses its vitriolic attacks on giveaways to the "rich," but you brought in $2.9 million (at 15%) to $3.8 million (at 20%) out of the $19 million, where otherwise you were going to get zero. And oh, by the way, the making of that $19 million created 1,000 jobs that go here if we tax at 15-20%, but somewhere else if we keep the current 40%.