What on earth is wrong with not paying taxes legally? What taxes does anyone pay other than those that they must pay?
If the government wants a tax to be paid they need to make it simple and unconditional. If there are loopholes or ways to legally avoid it, they will be discovered and people will take advantage of them.
capitol_ · 6h ago
What is legal and what is moral are two circles in a venn diagram.
In a good and just society there is a large overlap between them, and in others there is less overlap.
But it's impossible to build a legal system where there is a 100% overlap, and it would most likely be a broken society in other ways.
I totally agree with your second paragraph, that the government needs to remove loopholes and other ways for people to weasel out of contributing to society. But there will always be some corruption and a lot of money to be earned by only taking from our shared resources and never contributing back.
ffsm8 · 5h ago
> But it's impossible to build a legal system where there is a 100% overlap, and it would most likely be a broken society in other ways.
I strongly disagree with this one.
It's not that hard to not define loopholes and exceptions. Really, a simplified tax system without such should be the goal, and then the circles so match.
const_cast · 31m ago
> Really, a simplified tax system without such should be the goal
Yes, it should be, because in addition to complex tax systems introducing loopholes and exceptions, they also become more complex to collect.
If taxes were simple and straightforward, you would sink an entire industry in the US. There's a whole money pit around just getting money from people to their government. That's money you could, instead, be getting as taxes.
RHSeeger · 4h ago
I expect it is _much_ harder than you think it is.
ffsm8 · 4h ago
I didn't think it's easy in practice at all. Frankly, I don't think it's politically feasible, even.
the people with money prefer being able to employ someone to essentially skip paying altogether.
But if they couldn't - because there are no exceptions and loopholes - society would be better off.
RHSeeger · 4h ago
I think it's about as easy as writing bug-free software. And I can count the number of non-trivial pieces of software that are likely to be bug-free on one hand.
reillyse · 4h ago
I would agree and it’s what we should be aiming for. As it is people are just throwing up their hands “what can you do”. Well close all the loopholes for one.
I would go as far as to say the vast majority of the loopholes are just grift in one form or another. Some pork barrel BS is the rest (and I think these should be gotten rid of too).
I’m actually in favor of removing all charity exemptions too. They are just used by rich people to spend our money (the taxes they owe) on pet projects depriving everybody of that income.
RHSeeger · 4h ago
> our money (the taxes they owe)
I'm all for removing loopholes where it's possible. However
- It's not "our money". It's money that, we a society, feel validated in taking from members of our society to pay for things that make our society better. But it is, in no way, "our money". We're taking it from people, at force, because we believe it's worth it.
- The only taxes that are "owed" are the ones defined by the rules (laws); pretty much by definition. If the rule doesn't say they owe it, then they don't owe it.
jemmyw · 3h ago
Although you could argue that all money is our money, if "our" means our society and government and collectively all of us. It exists by social agreement, as do all the rules around it that mean some have more and some have less.
Analemma_ · 4h ago
To have a tax sytem with no loopholes would almost certainly require having no credits or deductions. I actually think there's something to that idea, but politically it's an absolute non-starter: taxpayers love the credits and deductions they have now and don't want to give them up, and governments love using them to shape policy and don't want to give up that particular tool in the toolchest.
alpinisme · 2h ago
One of the quirks of the current system is that subsidies are pitched as decreases to what one owes in taxes. There would be more transparency (but more overhead) if everyone paid full sticker price for taxes and then the govt separately gave money to the groups whose behaviors it wanted to encourage or whose challenges it wanted to help with (or fined the ones whose behaviors it wanted to discourage).
This would not be feasible either politically. But it would bring transparency and clarity.
ada1981 · 4h ago
Paying any tax supports genocide and other US colonization projects, so not paying is the moral path.
danaris · 1h ago
Paying any tax supports programs that provide life-saving food to poor women and children, health care to sick, injured, and disabled people who have no other way of getting it, and enforcement of justice for everyone in the country.
If you're only going to pick one thing that a government does, yeah, it's easy to cherrypick something awful. But the alternative is literal anarchy, which is a) much, much worse for the vast majority of people, and b) 100% guaranteed not to last, as the people either organically organize a government from the bottom up, or some violent strongman (gender-neutral) (but let's face it, probably a man in practice) emerges and enforces an authoritarian government from the top down. And in either of those cases, they'll levy taxes very soon, whether it's to make sure that the things that a representative government needs can happen, or just to take as much as they can from everyone else.
swat535 · 4h ago
Who defines objective morality here ?
If you’re going to argue the majority, then I’ll remind you that the majority had no problem with slavary either not too long ago in Western nations.
If you’re goning to argue democratic values, then I’ll remind you that many brutal dictators also rose to power by the same values.
So put another way , by which definition of morality are we drawing this diagram?
ben_w · 5h ago
Sometimes law is analogised to software; in this analogy, loopholes are bugs.
One who exploits a bug is a hacker. An example of a life-hack is to arrange things to have lower taxation than those who wrote the laws were expecting.
But just as bugs in software are not meant to be exploited even though they can be, there are many loopholes in laws that are not meant to be exploited even though they can be.
Unless the law has a generic catch-all for tax minimisation schemes*, such minimisation may be legal, and yet frowned upon because it wasn't meant to be legal. Or even if it was meant to be legal, but you're rich and the general public thinks you're being unreasonable.
* I think the UK does? Or at least that's what it looked like HMRC was saying last time I was able to file my own taxes there…
antman · 4h ago
They are not bugs, they are backdoors introduced on purpose. No one is forgetting how to close them, its on purpose.
general1726 · 5h ago
I think that we are not really far from time, when law text will need to be formally verified to either prevent these kind of loop holes or at least point them out.
spwa4 · 5h ago
Don't we have a separate name for intentional bugs? I mean it's not like tax loopholes are there accidentally. They are fully, 100%, intentional features of the tax code.
ben_w · 5h ago
Some are, some aren't.
You can tell the ones which aren't by watching them getting removed in a hurry when the government finally notices too many people using them. 10-15 years back, some colleagues had made businesses for themselves just so they could receive their real jobs' income at the lower rate of dividend income rather than the income tax rate. I am told this is no longer possible.
Conversely there is (or was) what I think was a deliberate loophole for UK inheritance tax — if I remember right (not a lawyer) it works like this: physical objects in your home are all bundled together and valued at £1 for inheritance tax purposes, so fancy art, stamp collections, etc. don't get taxed.
Muromec · 5h ago
We have a name -- it's called "backdoors"
mcv · 4h ago
That's what the issue is: there are loopholes, and far too many of them. The fact that some people get to deduct costs or have access to tax avoidance loopholes that most people don't have access to, is wrong. And governments don't do enough to fix this.
hinterlands · 4h ago
Because most of the "loopholes" aren't actually loopholes: they are created for a specific reason under some specific economic theory. Most often, to encourage people to make certain types of investments, avoid double- or triple-taxing certain activities, etc.
We just almost never talk about it in neutral terms: why was this policy implemented, what are the pros and cons, etc. Instead, it's just political talking points to get people to the voting booth.
SpicyLemonZest · 4h ago
There are some loopholes that aren't actually loopholes, and I can't claim to have counted to know whether it's a majority or not. But programs like the QSBS thing the source article describes are definitely loopholes in the intuitive sense. Politicians wanted millionaire business owners to be somewhat richer, didn't want the political headache of directly giving those business owners our tax money, so they lowered the tax rate on a specific category of income that only millionaire business owners can arrange to receive.
It's true of course that there was an economic theory behind the policy. It's a subsidy; the government thinks it's important for the US to have more small businesses, and hopes that more people will set one up if the financial rewards for doing so are greater. Perhaps you could even find some business owner to explain why they would have stayed in their corporate job if not for the QSBS. But this subsidy could never have gotten majority support if it wasn't obfuscated behind the tax code.
Aurornis · 1h ago
> What on earth is wrong with not paying taxes legally?
The primary anger is at the tax code.
> If the government wants a tax to be paid they need to make it simple and unconditional.
That’s the point. Making people aware of how the tax code is structured and how people take advantage of it is key to building support to change the tax code to what the people want.
webdevver · 6h ago
i think the latest term is 'tax optimisation'...
you could make an argument that in order to optimise your taxes, you have to be quite wealthy to begin with (hiring a tax guy, etc.) - otherwise you don't have any time left in the day to run your business.
so in practice, the little guy winds up just paying the 'sticker price' so to speak, while the big guy has pros who can make their big profits even bigger.
jt2190 · 5h ago
> in order to optimise your taxes, you have to be quite wealthy to begin with (hiring a tax guy, etc.)
Another way of thinking about this is that the wealthy person is incentivized to invest their wealth directly into higher-risk, economy-boosting activities like starting businesses that (if successful) create jobs that then pay income taxes. Ideally tax revenue is generated from this incentive. The wealthy person could just buy gold bars and create no jobs that generate income tax, but they don't get as good a tax deal on that.
phtrivier · 5h ago
I always wonder if there was an opportunity for a startup to "uberize" tax avoidance.
The article is mostly about avoiding taxes on "having your startup acquired" - not everyone will be able to do that.
But setting up funds and deduce everything you buy ? Creating shill companies ? Becoming a trustee for some random that badly wants to avoid their taxes ? Sounds like that can be automated ?
Sure, it would be insanely immoral, and I hope the person who master tax avoidance get to loose access to everything payed by the tax payers, just doe thrill.
Or maybe we should have voluntary taxation ; but, beyond a certain level, you really loose access. Don't want to pay ? Sure. You put off the fires yourself, you heal and tech your kids yourself, you build and drive on your own roads, fund your own research, don't access supermarkets that are full of FDA-vetted food, etc...
In all seriousness, if budgets were voted by "real" people and not representatives, how many of things would survive ? Can you convince people about the usefulness of tax free 10M$ startup sale, where every cent your earn is taxed as some portion ?
Anyway, let the tax avoidance experts be the richest of their graveyards.
coredog64 · 4h ago
The IRS takes an extremely dim view of setting up a shell and deducting everything. You don’t have to take my word for it, you can ask Wesley Snipes if 28 months in the federal pokey was worth the illusory tax savings he managed.
f4c39012 · 6h ago
If everyone had access to the same kind of tax advice that minimised taxes for the rich, I bet a bunch of loopholes would get closed pretty quickly. Some publicly available templates and simple to follow guides would encourage governments to act when they see a general shortfall in revenue. When new loopholes emerge, rinse & repeat. Maybe everyone would pay their fair share then
smallmancontrov · 6h ago
No, because most loopholes cost $$ to set up so they only break even above a certain income that few people have. You must be this rich to play.
anthonypz · 5h ago
I’m curious to know: what are some of the things that need to be set up? Specific bank accounts to route money around?
AlotOfReading · 5h ago
An easy example: buy a house in Monaco, put €500k in a bank, and declare it your legal residence for tax purposes to avoid most taxes.
v5v3 · 4h ago
Or get some one else to move...
The UK billionaire Phil Green
lived in UK, his wife moved to Monaco and everything was in her
name. So he could run the companies in person and she would recieve the hundreds of millions in dividends.
thatguy0900 · 6h ago
I'm not sure governments would act on a shortfall in revenue. Some governments seem to just consider money not real, just add a couple trillion to the debt and call it a day
carlosjobim · 6h ago
You could make that argument, but it is incorrect. Creating a limited liability company is one of the few (the only?) things which is still allowed and accessible for any person to do, no matter if you're rich or poor, no matter your family name, no matter your political connections, no matter any visible or invisible handicaps you might have. In most places it costs very little to create an LLC or other similar kind of entity.
If you're "a little guy" - as I would consider myself - there are usually zero open doors and zero opportunities in this world, except for starting your own company. And it is possible to optimize your taxes from the start when your business is small. Most governments and states in the world actively encourage this by giving tax relief to small businesses, and then other types of incentives. The price for "hiring a tax guy" depends very much on the scale of your business, in the beginning it's not a lot of money, if you even need him.
For all this talk about "equality", this is the only thing that actually functions in our modern world.
ryandrake · 4h ago
> Most governments and states in the world actively encourage this by giving tax relief to small businesses, and then other types of incentives.
At least in the USA, I don't think there is any need to "incentivize" going into business via the tax code. Most people who can afford to own a business already do, and many people who really can't afford it still try! "I'd love to start a business and try to make a bunch of money, but those darn taxes are stopping me!" - said no US entrepreneur ever. They're not doing it for these small tax incentives, but they are certainly taking advantage of them whenever they can.
So it seems like we are simply incentivizing activity that's already going to happen and allowing people who were already going to do it anyway to have that activity be not subject to taxes.
pengaru · 5h ago
> i think the latest term is 'tax optimisation'...
How does this differ from the long-standing term "tax avoidance"?
It's the "tax evasion" flavor that gets you into legal trouble afaik.
Muromec · 5h ago
There is a spectrum where tax optimization is one side and tax fraud on the other. Depending on who you ask, some behaviors can be put on different points in it.
lokar · 5h ago
There is nothing wrong with using them. The problem is the mega-wealthy using their wealth to buy these loopholes.
smallmancontrov · 6h ago
If person A lobbies a self-serving loophole into the tax code, it's reasonable for person B to object.
> If there are loopholes or ways to legally avoid it, they will be discovered and people will take advantage of them.
Most loopholes take a certain amount of time and effort to exploit, so they only break even if you are above a certain income level. You don't "write ↑ ↑ ↓ ↓ ← → ← → B A on your 1040, collect $200." That's never how it works. It always takes effort to set up the necessary "excuses," this effort can be expressed as a dollar amount, and your dollar savings typically apply in proportion to your overall income, so a given loophole works AMAZINGLY WELL if you are ultra rich, ok if you are super rich, meh if you are rich, and it has negative expected value if you are not rich.
This is true for many things in life. Look for things expressed as a rate rather than a dollar amount. Then ask "what if the dollar amount that multiplied the rate was really big?"
barbazoo · 4h ago
It’s wrong if it’s not equally accessible
> It is incredibly simple to spin up an LLC or C corp and expense all kinds of things. Employees don’t get this benefit.
majormajor · 5h ago
If you're seriously asking why discussions like this exist...
One thing - and this may not be your intent - that often happens is that people will disingenuously use "nobody should do more than they have to" as sleight of hand to point in the direction of "oh it's the law that's bad" with no intent of actually encouraging fixing the tax code.
Another thing is that there's often a big difference between the letter and spirit of a law, since the laws are made by imperfect humans and other humans have FAR more cumulative people-hours available after the law is passed to find holes. There is likely no such thing as a "simple and unconditional" tax law that can't be worked around in ways its authors did not intend. And here this may seem circular - "then the government should patch the hole" - but of course that would be great and yet it is something the government is rarely incentivized to do when people with money give them that money to influence them to not want to.
mystified5016 · 5h ago
By and large these loopholes are only accessible to people with enough money to buy islands.
The ultra-rich get tax loopholes and the rest of us have to make up for it with increased taxes and decreased government services.
jrflowers · 3h ago
> What on earth is wrong with not paying taxes legally?
The issue is who is able to avoid paying taxes. The ability to reduce tax burden is largely possessed by people that make significantly more than the median income, so if you rephrase your question as “What is wrong with low- and median-earners subsidizing the wealthy?” then you’ll see people’s problem with it.
ashoeafoot · 6h ago
Taxes are one of those funny defector games, that win you a free shave at the neck when you win to much. You not paying legaly gals the honest suckers who do into funny witchhunts, that when they come around make you wish you did.
chillingeffect · 6h ago
The actual functioning of everyday society and quality of everyday life are based on moral grounds. Legal grounds are a backstop, not a hand rail.
Those who exchange moral indulgences, clinging to legal grounds, are naturally and inevitably bound to accept the moral consequences. It's not just your Sunday school teacher making frowny faces at you: It's being afraid of armed robbery at every step because you have squeezed every bit of wiggle room out of every one elses' lives.
michaelmrose · 6h ago
Because all the poor people have zero room for creativity because it is designed to be so. The loop holes aren't accidental they are put their on behalf of all the rich people. Users taking advantage of them are part of a systemic swindle on behalf of the rich. Participating in such is therefore both fairly expected and still wrong.
delusional · 6h ago
You cannot make them "unconditional" without totally constraining all political freedom. The laws are rules that society imposes on itself. We all expect each other to operate within those bounds fairly, anyone who does not operate like that should be subject to digressional democratic liquidation. That is, forced bankruptcy with a simple majority.
HenryBemis · 5h ago
The issue with democracy (which imho is by far the best political system) is that the parties can collect "donations" which (again just imho) is legalized bribing and ultimately ends up creating servants of the sponsors and not the voters.
People are not heroes. They want to be elected, hire the ones they want for their "court" (think Kings and their courts). And politicians want to change only the things that won't stop them from getting reelected.
Secondary consequences are irrelevant to many politicians' mindset.
lucianbr · 6h ago
If I understood correctly, it's "how not to pay taxes when selling your company".
At least some of the advice requires preparation years ahead. What happens if the company does not become as valuable as you expect it to, or at all? Or way more valuable, for that matter?
coredog64 · 4h ago
Or if you set up a $10m trust for someone and they abscond with the proceeds.
bilbo0s · 41m ago
To be fair..
you can't con an honest man so to speak.
That's the chance you take when you go down that road.
burnt-resistor · 4h ago
Step 0. In America, be rich to receive all of the legalized tax dodges to pay less than ordinary workers.
Also note that US citizens who leave the country and pay foreign income taxes elsewhere still have to pay federal income taxes just like the only other country that does this, Eritrea. The only way out is to renounce citizenship and be doxed in the Federal Register, pay lots of legal costs, and risk arbitrary demands for $10k fines for "not paying back taxes" and also being denied entry should it be determined for it was "economic reasons" any point in the future.
trollbridge · 7h ago
The headline is a bit clickbait-y. If your business turns a profit, it’s quite challenging to not legally pay taxes on the profits. Not to mention taxes owed on a salary you pay yourself.
If your business just has losses, I suppose it’s true you can eventually find someone else to sell to who apparently wants to spend a lot of money to buy your money-losing business?
coliveira · 6h ago
If you cannot do what the article says, the only reason is that you're not rich enough.
> pay taxes on the profits
There are techniques to show zero profits, or to get tax breaks on these profits. Some of the most successful companies do this.
> taxes owed on a salary you pay yourself.
You don't need to pay anything to yourself. Some of the richest founders proudly say they receive a $1 salary.
jimhi · 6h ago
This article is literally only about legal means to not pay tax when your company makes a profit
swat535 · 4h ago
And yet, a trillion dollar corporation like Apple pays little tax.
daft_pink · 6h ago
The problem with your article is that it’s extremely difficult to turn a company into a >$10 million asset value company for the founder and outside of the silicon valley VC world a company that doesn’t generate any net income isn’t worth $10 million. It’s not that simple to conjure up a $10 milliion company out of thin air.
So in the real world choosing QSBS stock results in electing into double taxation, so if you are starting a company to that will make net income that company is going to
Also, just to clarify, the article says save $10 million in tax in at least one place, but what you really mean is $10 million in capital gains taxable income, so really it is saving about 2.38 million in Federal tax (20% plus NIIT) plus the state if the state recognizes QSBS.
In my experience, most people benefit from QSBS after building a company for 10-15 years and selling for $3-7 million.
sailfast · 5h ago
The problem is not that folks aren’t paying their taxes. It is that wealthy individuals have lobbied to make the tax laws what they are.
The quieter and larger the exemption the better.
HWR_14 · 3h ago
I don't understand how Thiel was able to buy his PayPal shares using a Roth. I thought you aren't allowed use your Roth to invest in a company you work for.
Can someone who knows more than me explain where I am wrong?
jimhi · 3h ago
He was originally a big investor not a founder (or at least set it up to look that way)
gamblor956 · 1h ago
You can't anymore because of Thiel. He's the reason they closed the loophole.
eli · 5h ago
The hard part is identifying a stock you acquire for cheap or free now but will be worth much more than $10 million in five years.
analyte123 · 2h ago
QSBS has to be issued directly from the qualifying
company. Stock sold on a secondary basis does not qualify.
jimhi · 4h ago
If you read what I wrote, it doesn't even need to actually be 5 years if the person does some creative stuff with options which I have personally seen.
eli · 3h ago
Sure, to delay the "sale". A surefire way to go from minimal value to multiples of $10 million in fewer than 5 years is even rarer.
FreakLegion · 2h ago
There's no legal 'creative stuff with options' to get around the five-year holding requirement. QSBS can be rolled over into other QSBS without restarting the clock, or you can agree to delay the actual sale (including payment) until you've met the holding requirement. At the end of the day, though, you have to hold the stock for five years, and any early payment you take (e.g. for writing options) is taxed normally.
giarc · 5h ago
@jimhi - might need to update your article. See this other article on the front page now.
(The donors to the politicians use these loopholes, so why would a politician end it...)
bgnn · 6h ago
For start-up founders: There are countries, like the Netherlands, where there is no capital gains tax. Move to such a country.
sigmoid10 · 5h ago
They don't have an additional capital gains tax, but they still tax you on capital gains. In fact they even tax you specifically on capital gains from savings and investments, but using a fixed assumed percentage gain irrespective of whether your actual gains were lower or higher than that percentage. And they are also going to change that law by 2028 so that it works like any normal capital gains tax. So if you can 10x an investment in the next 2.5 years you might save a bit, but after that it hits you like everywhere else.
mcv · 4h ago
It's effectively a 1.2% wealth tax that's based on a 30% tax on assumed capital gains of 4%. The thing is, the assumed gains are generally far lower than reality, and the tax is also much lower than regular income tax.
lancewiggs · 5h ago
If you are a US citizen then US tax will apply to you wherever you are. People form other countries switch off their home tax if they do not meet residency requirements.
There is no capital gains or wealth tax at all in New Zealand, but only for domestic investments. For offshore investments there is a deemed return that you treat as income, so if your wealth is tied up in illiquid stock then it can be dire.
bgnn · 4h ago
Yeah so your offshore investment ruling is applicable for domestic investment in the Netherlands too.
tecleandor · 6h ago
No thanks, I'm OK paying taxes at home.
diggan · 5h ago
Technically, if you move to Netherlands, that becomes your new home, so you'd be OK with paying taxes there too then :)
StrandedKitty · 5h ago
From what I understand, you are taxed on the unrealized gains from your assets, so you are effectively paying ~2% of the value of all your assets every year. Even if you simply own a stake at a startup, you still have to pay the wealth tax regardless of whether your stake ends up having any real value at all (most likely it won't).
bgnn · 5h ago
It depends. I have been in this situation several times. The benefit of the current regulation is that you can pay 0 income tax over stock options if you exercise them at the value of FMV. This is extremely beneficial for early employees. The disadvantage is that the tax service treat them as any other asset and if the company valuation skyrockets your shares might worth more than the 100k or so threshold they have for Box 3 tax. Ecen in that case you do pay a fractional tax over potential income they calculate over this. This might be tough but a very privileged position to be in as a good lawyer can come to an agreement with the tax service if the prospects are looking good (a potential IPO or acquisition). You will not pay ANY income tax over the profit you made in this scenario.
The same applies to house ownership too for example. I did pay 0 income tax over 150k profit I made over my previous house when I sold it. When the money was on my account the wealth tax started to kick in, but it is after you make the capital gains not at the moment you make it.
piperswe · 5h ago
Doesn't the Netherlands have a wealth tax in lieu of capital gains?
bgnn · 4h ago
It works differently as it is after you make the gain, not at the moment. You can have a start up, buy the inital shares for 1k, sell it for 1M, pay no weakth tax (or close to 0) if your valuation during filing a tax return wasn't above a certain amount, get the cash and move somewhere else. If you stay here you will be taxed slowly every year but the rich doesn't do that as they put their money in LLCs etc.
gist · 6h ago
> This is the Qualified Small Business Stock Tax Exclusion. Basically as long as you wait 5 years before selling the business, you won’t be taxed on the first $10 million dollars. This isn’t some loophole, this is exactly what it was intended for so that people are encouraged to take risks.
First this doesn't work for a Sub S only a 'C' corp.
Second, this wouldn't work in many cases when someone only wants to acquire the assets of the business and not the actual corporation in order to avoid liability going forward.
Note that typically the buyer would decide the issue (sure you with your 'small' business could say 'has to be corp' but that would potentially limit companies that would want to buy)
My point is the OP makes a broad statement "Business owners have the most flexibility of everyone to not pay their taxes. I personally think these things are questionable but its what I have seen others do over the last few years and what has been recommended to me by every top accounting firm in New York." and the benefit (like anything else is specific as far as the exact situation).
Edit: Want to make clear the liability is more than the money liabilities it's also potential lawsuits that hold over to the company acquiring.
gamblor956 · 1h ago
This advice is generally good. Used to give variations of this when I was still at a firm.
The most important one if you really want to avoid paying taxes on the sale of your business is to move to Puerto Rico and establish domicile there before discussions for a sale have commenced.
niklasbabel · 6h ago
is the author writing this article from the future? Peter Thiel is 57 years old (2025).
‘Peter Thiel famously bought his Paypal shares (which were valued at a few cents when he founded the company) into his Roth IRA account. When he turned 65, he was able to access the billions that the Paypal equity was worth with 0 tax on it.’
jimhi · 6h ago
Wow for some reason I thought he was 65 already, thanks for the correction
missedthecue · 5h ago
One can access their Roth IRA penalty free starting at 59.5, no need to wait to 65
jekwoooooe · 6h ago
I would bet it’s LLM generated like most content these days
jimhi · 6h ago
The entirety of my blog was written pre-chatgpt and pre-scheduled. You can even check the images I use for all blog posts which were the first generation of ai images from 2021 which are quite bad looking now. LLMs were too awful to use nor would I use them.
edoceo · 6h ago
Clickbait? This is how to avoid a tax event. It's different than not paying what's due. It's known, clever method to change the tax class of some of your money. We teach this method in my angel group.
sheiyei · 6h ago
This article comments on how tax deductions/exemptions should not exist in the form demonstrated, but way too subtly to be understood by someone so deep in the bullshit.
madaxe_again · 7h ago
Similar mechanisms exist in the U.K. - entrepreneur’s relief/BADR allows you to pay a flat 10% on the full or partial sale of a business you founded, up to £1M - was £10M until 2020. You can of course do similar shenanigans with family to use their allowances too.
You can also of course emigrate to Portugal under the NHR scheme and between the fifth and seventh year sell whatever you fancy and not be liable for CGT anywhere.
The IRS sucks. They're staffed with dishonest grifters. I dealt with them when my dad was still alive, and hadn't paid his taxes for 11 years. They would send him a bill and he would just pay it without filing. They would continue to bill, assuming that he was hiding something because he never filed. Unfortunately, I was never able to get most of that money back.
One time, the IRS "lost" the cost basis for my investments during a year of heavy trading. They sent me a bill for $400k. After fighting with them for over two years, I eventually had to pay them ($180 for something else I had overlooked and never got the records for). I went back and forth with them three times, and they kept claiming that I owed them smaller amounts, but still much larger than anything I actually owed.
Most recently, I accidentally over-withheld on my 2024 income. They owe me about $30k and they're in no hurry to pay me. Fortunately, I learned that they must pay interest (7%!) on my over-payment. Hopefully I'll get this settled before next April 15th, but if I don't, I'll be sure to under-withhold on some of my deferred income this year to balance it out.
What I've learned from all of this is that the IRS is less concerned with what is legal than with how much of your money they can grab. If you're wealthy enough to afford a good tax attorney, you can usually fight them and win.
rob_c · 4h ago
Funded twice with nothing to show and offering better than realistic financial advice. I'll just leave it at that.
idontwantthis · 5h ago
Another way for Americans is to qualify for the FEIE by working a remote job in a foreign country that isn't good at collecting taxes.
jimhi · 4h ago
That is "only" ~100k or a so a year and if they aren't in the USA more than ~30 days a year. Small potatoes and arguably makes some sense.
eli · 5h ago
Wouldn't claiming an exemption for foreign taxes that you didn't actually pay be fraud?
coredog64 · 4h ago
Yes, but I’ll give a concrete example: I was an expat in New Caledonia. They have (or at least had) no income tax. The salary was below the amount that the US taxes for folks who are legitimately living outside the country, with a fair portion coming from a difficult to quantify housing subsidy.
eli · 3h ago
Sure but the premise is "legally" not "can get away with it"
(Though, to be fair, I guess those two things aren't that different in practice)
HenryBemis · 6h ago
How not to pay your taxes:
1) be rich (or even better filthy rich)
2) go to PWC/EY/etc, pay them handsomely, let them work their magic
3) they got offices all over the planet and are updated on every single legislation/regulation around the planet
4) they (PWC/EY/..) make sure you use the very best ways, tailor-made to not pay taxes. This could mean thwt you need to move and live to some random village in Switzerland (IKEA dude, the writer of the Alchemist (Paulo Coelho)).
5) never pay taxes
jekwoooooe · 6h ago
A good way to get audited is to follow this advice
An llc is not a tax entity also
withinboredom · 5h ago
When you create your tax id for an LLC, you get two choices on how you want to be taxed. You can choose to tax it as an individual or as an S-corp. There are tax implications and it affects how you do taxes.
jimhi · 5h ago
I wish. I know several people in person who do this. Read some of the other commenters saying how this is their standard mode of operation and they don't see any problem with any of this.
If the government wants a tax to be paid they need to make it simple and unconditional. If there are loopholes or ways to legally avoid it, they will be discovered and people will take advantage of them.
In a good and just society there is a large overlap between them, and in others there is less overlap.
But it's impossible to build a legal system where there is a 100% overlap, and it would most likely be a broken society in other ways.
I totally agree with your second paragraph, that the government needs to remove loopholes and other ways for people to weasel out of contributing to society. But there will always be some corruption and a lot of money to be earned by only taking from our shared resources and never contributing back.
I strongly disagree with this one. It's not that hard to not define loopholes and exceptions. Really, a simplified tax system without such should be the goal, and then the circles so match.
Yes, it should be, because in addition to complex tax systems introducing loopholes and exceptions, they also become more complex to collect.
If taxes were simple and straightforward, you would sink an entire industry in the US. There's a whole money pit around just getting money from people to their government. That's money you could, instead, be getting as taxes.
the people with money prefer being able to employ someone to essentially skip paying altogether.
But if they couldn't - because there are no exceptions and loopholes - society would be better off.
I’m actually in favor of removing all charity exemptions too. They are just used by rich people to spend our money (the taxes they owe) on pet projects depriving everybody of that income.
I'm all for removing loopholes where it's possible. However
- It's not "our money". It's money that, we a society, feel validated in taking from members of our society to pay for things that make our society better. But it is, in no way, "our money". We're taking it from people, at force, because we believe it's worth it.
- The only taxes that are "owed" are the ones defined by the rules (laws); pretty much by definition. If the rule doesn't say they owe it, then they don't owe it.
If you're only going to pick one thing that a government does, yeah, it's easy to cherrypick something awful. But the alternative is literal anarchy, which is a) much, much worse for the vast majority of people, and b) 100% guaranteed not to last, as the people either organically organize a government from the bottom up, or some violent strongman (gender-neutral) (but let's face it, probably a man in practice) emerges and enforces an authoritarian government from the top down. And in either of those cases, they'll levy taxes very soon, whether it's to make sure that the things that a representative government needs can happen, or just to take as much as they can from everyone else.
If you’re going to argue the majority, then I’ll remind you that the majority had no problem with slavary either not too long ago in Western nations.
If you’re goning to argue democratic values, then I’ll remind you that many brutal dictators also rose to power by the same values.
So put another way , by which definition of morality are we drawing this diagram?
One who exploits a bug is a hacker. An example of a life-hack is to arrange things to have lower taxation than those who wrote the laws were expecting.
But just as bugs in software are not meant to be exploited even though they can be, there are many loopholes in laws that are not meant to be exploited even though they can be.
Unless the law has a generic catch-all for tax minimisation schemes*, such minimisation may be legal, and yet frowned upon because it wasn't meant to be legal. Or even if it was meant to be legal, but you're rich and the general public thinks you're being unreasonable.
* I think the UK does? Or at least that's what it looked like HMRC was saying last time I was able to file my own taxes there…
You can tell the ones which aren't by watching them getting removed in a hurry when the government finally notices too many people using them. 10-15 years back, some colleagues had made businesses for themselves just so they could receive their real jobs' income at the lower rate of dividend income rather than the income tax rate. I am told this is no longer possible.
Conversely there is (or was) what I think was a deliberate loophole for UK inheritance tax — if I remember right (not a lawyer) it works like this: physical objects in your home are all bundled together and valued at £1 for inheritance tax purposes, so fancy art, stamp collections, etc. don't get taxed.
We just almost never talk about it in neutral terms: why was this policy implemented, what are the pros and cons, etc. Instead, it's just political talking points to get people to the voting booth.
It's true of course that there was an economic theory behind the policy. It's a subsidy; the government thinks it's important for the US to have more small businesses, and hopes that more people will set one up if the financial rewards for doing so are greater. Perhaps you could even find some business owner to explain why they would have stayed in their corporate job if not for the QSBS. But this subsidy could never have gotten majority support if it wasn't obfuscated behind the tax code.
The primary anger is at the tax code.
> If the government wants a tax to be paid they need to make it simple and unconditional.
That’s the point. Making people aware of how the tax code is structured and how people take advantage of it is key to building support to change the tax code to what the people want.
you could make an argument that in order to optimise your taxes, you have to be quite wealthy to begin with (hiring a tax guy, etc.) - otherwise you don't have any time left in the day to run your business.
so in practice, the little guy winds up just paying the 'sticker price' so to speak, while the big guy has pros who can make their big profits even bigger.
Another way of thinking about this is that the wealthy person is incentivized to invest their wealth directly into higher-risk, economy-boosting activities like starting businesses that (if successful) create jobs that then pay income taxes. Ideally tax revenue is generated from this incentive. The wealthy person could just buy gold bars and create no jobs that generate income tax, but they don't get as good a tax deal on that.
The article is mostly about avoiding taxes on "having your startup acquired" - not everyone will be able to do that.
But setting up funds and deduce everything you buy ? Creating shill companies ? Becoming a trustee for some random that badly wants to avoid their taxes ? Sounds like that can be automated ?
Sure, it would be insanely immoral, and I hope the person who master tax avoidance get to loose access to everything payed by the tax payers, just doe thrill.
Or maybe we should have voluntary taxation ; but, beyond a certain level, you really loose access. Don't want to pay ? Sure. You put off the fires yourself, you heal and tech your kids yourself, you build and drive on your own roads, fund your own research, don't access supermarkets that are full of FDA-vetted food, etc...
In all seriousness, if budgets were voted by "real" people and not representatives, how many of things would survive ? Can you convince people about the usefulness of tax free 10M$ startup sale, where every cent your earn is taxed as some portion ?
Anyway, let the tax avoidance experts be the richest of their graveyards.
The UK billionaire Phil Green lived in UK, his wife moved to Monaco and everything was in her name. So he could run the companies in person and she would recieve the hundreds of millions in dividends.
If you're "a little guy" - as I would consider myself - there are usually zero open doors and zero opportunities in this world, except for starting your own company. And it is possible to optimize your taxes from the start when your business is small. Most governments and states in the world actively encourage this by giving tax relief to small businesses, and then other types of incentives. The price for "hiring a tax guy" depends very much on the scale of your business, in the beginning it's not a lot of money, if you even need him.
For all this talk about "equality", this is the only thing that actually functions in our modern world.
At least in the USA, I don't think there is any need to "incentivize" going into business via the tax code. Most people who can afford to own a business already do, and many people who really can't afford it still try! "I'd love to start a business and try to make a bunch of money, but those darn taxes are stopping me!" - said no US entrepreneur ever. They're not doing it for these small tax incentives, but they are certainly taking advantage of them whenever they can.
So it seems like we are simply incentivizing activity that's already going to happen and allowing people who were already going to do it anyway to have that activity be not subject to taxes.
How does this differ from the long-standing term "tax avoidance"?
It's the "tax evasion" flavor that gets you into legal trouble afaik.
> If there are loopholes or ways to legally avoid it, they will be discovered and people will take advantage of them.
Most loopholes take a certain amount of time and effort to exploit, so they only break even if you are above a certain income level. You don't "write ↑ ↑ ↓ ↓ ← → ← → B A on your 1040, collect $200." That's never how it works. It always takes effort to set up the necessary "excuses," this effort can be expressed as a dollar amount, and your dollar savings typically apply in proportion to your overall income, so a given loophole works AMAZINGLY WELL if you are ultra rich, ok if you are super rich, meh if you are rich, and it has negative expected value if you are not rich.
This is true for many things in life. Look for things expressed as a rate rather than a dollar amount. Then ask "what if the dollar amount that multiplied the rate was really big?"
> It is incredibly simple to spin up an LLC or C corp and expense all kinds of things. Employees don’t get this benefit.
One thing - and this may not be your intent - that often happens is that people will disingenuously use "nobody should do more than they have to" as sleight of hand to point in the direction of "oh it's the law that's bad" with no intent of actually encouraging fixing the tax code.
Another thing is that there's often a big difference between the letter and spirit of a law, since the laws are made by imperfect humans and other humans have FAR more cumulative people-hours available after the law is passed to find holes. There is likely no such thing as a "simple and unconditional" tax law that can't be worked around in ways its authors did not intend. And here this may seem circular - "then the government should patch the hole" - but of course that would be great and yet it is something the government is rarely incentivized to do when people with money give them that money to influence them to not want to.
The ultra-rich get tax loopholes and the rest of us have to make up for it with increased taxes and decreased government services.
The issue is who is able to avoid paying taxes. The ability to reduce tax burden is largely possessed by people that make significantly more than the median income, so if you rephrase your question as “What is wrong with low- and median-earners subsidizing the wealthy?” then you’ll see people’s problem with it.
Those who exchange moral indulgences, clinging to legal grounds, are naturally and inevitably bound to accept the moral consequences. It's not just your Sunday school teacher making frowny faces at you: It's being afraid of armed robbery at every step because you have squeezed every bit of wiggle room out of every one elses' lives.
People are not heroes. They want to be elected, hire the ones they want for their "court" (think Kings and their courts). And politicians want to change only the things that won't stop them from getting reelected.
Secondary consequences are irrelevant to many politicians' mindset.
At least some of the advice requires preparation years ahead. What happens if the company does not become as valuable as you expect it to, or at all? Or way more valuable, for that matter?
you can't con an honest man so to speak.
That's the chance you take when you go down that road.
Also note that US citizens who leave the country and pay foreign income taxes elsewhere still have to pay federal income taxes just like the only other country that does this, Eritrea. The only way out is to renounce citizenship and be doxed in the Federal Register, pay lots of legal costs, and risk arbitrary demands for $10k fines for "not paying back taxes" and also being denied entry should it be determined for it was "economic reasons" any point in the future.
If your business just has losses, I suppose it’s true you can eventually find someone else to sell to who apparently wants to spend a lot of money to buy your money-losing business?
> pay taxes on the profits
There are techniques to show zero profits, or to get tax breaks on these profits. Some of the most successful companies do this.
> taxes owed on a salary you pay yourself.
You don't need to pay anything to yourself. Some of the richest founders proudly say they receive a $1 salary.
So in the real world choosing QSBS stock results in electing into double taxation, so if you are starting a company to that will make net income that company is going to
Also, just to clarify, the article says save $10 million in tax in at least one place, but what you really mean is $10 million in capital gains taxable income, so really it is saving about 2.38 million in Federal tax (20% plus NIIT) plus the state if the state recognizes QSBS.
In my experience, most people benefit from QSBS after building a company for 10-15 years and selling for $3-7 million.
The quieter and larger the exemption the better.
Can someone who knows more than me explain where I am wrong?
https://www.mintz.com/insights-center/viewpoints/2906/2025-0...
https://youtu.be/YAJCvt9tOYE
(The donors to the politicians use these loopholes, so why would a politician end it...)
There is no capital gains or wealth tax at all in New Zealand, but only for domestic investments. For offshore investments there is a deemed return that you treat as income, so if your wealth is tied up in illiquid stock then it can be dire.
The same applies to house ownership too for example. I did pay 0 income tax over 150k profit I made over my previous house when I sold it. When the money was on my account the wealth tax started to kick in, but it is after you make the capital gains not at the moment you make it.
First this doesn't work for a Sub S only a 'C' corp.
https://carta.com/learn/startups/tax-planning/qsbs/
Second, this wouldn't work in many cases when someone only wants to acquire the assets of the business and not the actual corporation in order to avoid liability going forward.
https://www.brickbusinesslaw.com/blog/should-i-buy-the-compa...
Note that typically the buyer would decide the issue (sure you with your 'small' business could say 'has to be corp' but that would potentially limit companies that would want to buy)
My point is the OP makes a broad statement "Business owners have the most flexibility of everyone to not pay their taxes. I personally think these things are questionable but its what I have seen others do over the last few years and what has been recommended to me by every top accounting firm in New York." and the benefit (like anything else is specific as far as the exact situation).
Edit: Want to make clear the liability is more than the money liabilities it's also potential lawsuits that hold over to the company acquiring.
The most important one if you really want to avoid paying taxes on the sale of your business is to move to Puerto Rico and establish domicile there before discussions for a sale have commenced.
‘Peter Thiel famously bought his Paypal shares (which were valued at a few cents when he founded the company) into his Roth IRA account. When he turned 65, he was able to access the billions that the Paypal equity was worth with 0 tax on it.’
You can also of course emigrate to Portugal under the NHR scheme and between the fifth and seventh year sell whatever you fancy and not be liable for CGT anywhere.
One time, the IRS "lost" the cost basis for my investments during a year of heavy trading. They sent me a bill for $400k. After fighting with them for over two years, I eventually had to pay them ($180 for something else I had overlooked and never got the records for). I went back and forth with them three times, and they kept claiming that I owed them smaller amounts, but still much larger than anything I actually owed.
Most recently, I accidentally over-withheld on my 2024 income. They owe me about $30k and they're in no hurry to pay me. Fortunately, I learned that they must pay interest (7%!) on my over-payment. Hopefully I'll get this settled before next April 15th, but if I don't, I'll be sure to under-withhold on some of my deferred income this year to balance it out.
What I've learned from all of this is that the IRS is less concerned with what is legal than with how much of your money they can grab. If you're wealthy enough to afford a good tax attorney, you can usually fight them and win.
(Though, to be fair, I guess those two things aren't that different in practice)
An llc is not a tax entity also