How to not pay your taxes legally, apparently
Legal ways for entrepreneurs and the wealthy to dramatically reduce or avoid taxes—such as U.S. Qualified Small Business Stock exclusions, favorable treatment of business entities, and moving to low‑tax jurisdictions—are examined alongside similar mechanisms in Europe. Commenters debate whether these provisions are smart incentives for risk-taking or structurally unfair “loopholes” accessible only to the rich, noting that exploiting them often requires expensive advice and complex setups. Many argue that the real problem lies in a convoluted tax code shaped by lobbying, which shifts the burden onto regular wage earners and makes genuine reform politically difficult.
Scope and Practicality of the Article’s Advice
- Many point out the article is specifically about avoiding tax on exits (e.g., using QSBS), not “never paying taxes.”
- Several note it only applies if you first create something worth many millions; that’s “step 0” and is non‑trivial outside of VC fantasy scenarios.
- QSBS details and caveats:
- Works for C‑corps, not S‑corps; state treatment varies.
- Acquirers often prefer asset purchases to avoid liabilities, which can break QSBS benefits.
- The real benefit is exclusion of up to $10M in capital gains, not $10M of tax.
- Five‑year holding is hard to game legally; “creative options” are disputed.
- Some warn following aggressive schemes is a good way to get audited; “LLC is not a tax entity” is reiterated.
Who Can Actually Avoid Taxes
- Repeated theme: serious tax optimization is mostly available to the already wealthy—those who can pay top firms and set up complex structures or move jurisdictions.
- Counterpoint: forming an LLC and using small‑business incentives is accessible and encouraged by many governments, so “little guys” can do some optimization.
- But many “loopholes” only make economic sense above high income/wealth thresholds.
Morality vs Legality
- One camp: nothing wrong with legally minimizing taxes; if the state wants money, it should write airtight, simple laws.
- Another camp: legality and morality don’t fully overlap; exploiting intentional or accidental gaps shifts the burden to lower‑earners and undermines social trust.
- Debate over whether paying taxes is itself moral when governments also fund wars or policies some consider immoral.
- Some frame taxes as a “defector game”: free‑riding via avoidance invites backlash and political instability.
Loopholes, “Bugs,” and Policy Design
- Disagreement over whether loopholes are “bugs” (unintended) or “backdoors” (deliberate favors). Likely both exist.
- Complexity of the code is likened to complex software: impossible to make bug‑free, heavily tested “in production.”
- Many exemptions began as policy tools (to encourage investment, avoid double taxation), but function as opaque subsidies to the rich.
- Suggestions include radically simpler systems with few or no deductions, even removing charity exemptions; others argue this is politically impossible.
Inequality and Political Power
- Widespread belief that wealthy individuals and corporations lobby for and shape these exemptions, then use political donations to prevent reform.
- Perception that ultra‑rich exploit global arbitrage (Monaco, Portugal NHR, Puerto Rico, etc.), while ordinary workers pay “sticker price.”
- Several note US citizenship‑based taxation is unusually sticky, making true escape costly (renunciation, exit taxes, potential penalties).
Government, IRS, and Enforcement
- Strongly mixed views on the IRS: from “honest backstop” to “dishonest grifters” based on personal horror stories and long disputes.
- Some argue enforcement focuses on easy targets while those with elite advisors can push the envelope.
- Others emphasize the IRS does punish blatant schemes (e.g., aggressive deduction shells) and that some popular “just deduct everything” ideas are clearly unsafe.
Meta: What Counts as a ‘Loophole’?
- Observation: commenters call exemptions they dislike “loopholes” and ones they support “incentives.”
- No agreed objective standard emerges for distinguishing a fair incentive from an illegitimate loophole.