Last week marked the end of an era as David Rockefeller, the last grandchild of Standard Oil baron John D. Rockefeller, died at age 101. Rockefeller, whose name was once synonymous with "wealth," symbolized the eastern establishment in all its glory. His death marks a last living link to an age of robber barons-turned-philanthropists whose fortunes still shape our nation.
Patriarch John D. Rockefeller launched the family fortune before Uncle Sam launched the income tax, which gave "Senior" a big head start. He started out in 1855 as a 16-year-old assistant bookkeeper in Cleveland, Ohio, with a 10-week accounting course under his belt. By 1911, he controlled 90% of America's oil refining. The Supreme Court eventually broke his company into 34 separate pieces. But much to Rockefeller's delight, those pieces became worth more than the original whole. By the time he died in 1937, he was worth the equivalent of $340 billion in today's dollars.
Rockefeller had always been generous. He gave away six percent of his earnings even at age 16. But his fortune helped him really ratchet up his giving. He endowed the University of Chicago with a nondeductible gift equal to $2 billion in today's dollars. (That's because there wasn't any tax to worry about then.) He founded Rockefeller University and made major gifts to Central Philippine University and Spelman College.
Rockefeller's son, John D. Jr, wasn't quite so lucky. In 1923, when the IRS published everyone's tax bills, he ranked #1 in the country, paying $7,435,169. In 1924, he ranked #1 again. And when the Wealth Tax Act of 1935 applied a special rate on income above $5 million, there was only American who paid it — Rockefeller. Junior diversified the family's holdings, financing the 16-building Rockefeller Center complex in midtown Manhattan and helping make Chase Manhattan Bank the world's largest.
By then, Junior was taking advantage of charitable deductions for his own philanthropy. He gave $537 million to charity over his life, more than the $240 million he gave to his own family. He donated the land for New York's Museum of Modern Art and the United Nations headquarters, and gave generously to renovate Colonial Williamsburg in Virginia.
David Rockefeller might have become like those spoiled rich brats you see on Instagram and reality television. He grew up in an eight-story house, the biggest ever built in New York. (Seven stories are for peasants, right?) He and his brothers roller-skated down Fifth Avenue, trailed by a limousine in case they got tired, and vacationed at the family's 107-room cottage in Maine. But as an adult he expanded the family portfolio internationally, cutting banking deals with the Soviets, Chinese, and various oil-rich dictators. He was active in the Council on Foreign Relations and the Trilateral Commission. (If the Illuminati are real, you probably could have found David Rockefeller lurking somewhere near the center of it all.)
Time, taxes, and 150+ descendants have whittled down the Rockefeller fortune. Forbes magazine estimates the family is worth "just" $11 billion today. Ironically, two of the family's charitable funds have announced that they will be selling all their fossil fuel investments as part of their commitment to fight climate change.
We realize you don't have Rockefeller riches to protect. But we know you value what you have, and we know that smart tax planning is one of the best ways to preserve it. So call us when you're ready to pay less!
Tuesday, March 28, 2017
Tuesday, March 21, 2017
I, Robot
For decades now, governments across the world have struggled with where to impose taxes to raise the revenue they need to offer modern services. Should they simply raise rates? Should they broaden the base by eliminating loopholes and deductions? Should they sock it to smokers, drinkers, or other disfavored groups? How about entirely new levies designed to influence behaviors, like a carbon tax or soda tax? The smartest minds in politics and economics have grappled with these questions. Not only have they failed to make everyone happy, they've failed to make anyone happy.
At the same time, writers and filmmakers have worked to populate our imagination with a variety of more-or-less human robots. These have included the Laurel and Hardy-esque R2D2 and C3PO of Star Wars fame, the seductively human replicants of Blade Runner, and the self-aware killers of Westworld.
Sooooo . . . how long did you think it would take for some mad genius to make a mashup of taxes and robots? Well, today is that day, and Microsoft founder Bill Gates is that genius. His proposal is exactly the sort of thing you'd expect from a guy who dropped out of college to lead the personal computer revolution. Forget trying to squeeze more taxes out of people — let's just tax the robots!
"Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you'd think that we'd tax the robot at a similar level."
At first blush, taxing robots might sound like science fiction. But robots don't mind paying taxes. They don't feel pain at the thought that their hard-earned money is going to pay for government spending they might not support. They don't sweat late nights wrestling with W2s, quarterly estimates, or tax forms. And, at least as far as we know, no robot has ever opened a secret bank account or shell corporation in some sunny Caribbean tax haven.
Of course, robots can't really pay taxes. In practice, taxing Team Robot would mean taxing the businesses that own the robots and use them to replace human labor. It's really just a shift from taxing labor to taxing capital. Taxes could likely be calculated on a per-head basis, or an amount based on the revenue the robot helps produce, and be paid to wherever the robot lives.
Taxing robots can also help make up for the money government loses by not being able to tax the workers the robots replace. Right now, there are 3.5 million truck drivers hurtling down America's highways, along with 220,000 taxi drivers and 160,000 Uber drivers. The driverless car revolution is sure to replace some of those jobs. That will torpedo taxes and be a real windfall for businesses that no longer have to hire human workers. Taxing the robots can help restore the current balance.
If taxing robots works, there's no limit to where we can turn next. Taxing smartphones? Taxing video games? Taxing the Muppets? It's all fun and games until somebody tries to tax you. Good thing you've got us! We're here to give you the plan you need to pay less . . . so you can focus on important things like the robot takeover!
At the same time, writers and filmmakers have worked to populate our imagination with a variety of more-or-less human robots. These have included the Laurel and Hardy-esque R2D2 and C3PO of Star Wars fame, the seductively human replicants of Blade Runner, and the self-aware killers of Westworld.
Sooooo . . . how long did you think it would take for some mad genius to make a mashup of taxes and robots? Well, today is that day, and Microsoft founder Bill Gates is that genius. His proposal is exactly the sort of thing you'd expect from a guy who dropped out of college to lead the personal computer revolution. Forget trying to squeeze more taxes out of people — let's just tax the robots!
"Right now, the human worker who does, say, $50,000 worth of work in a factory, that income is taxed and you get income tax, social security tax, all those things. If a robot comes in to do the same thing, you'd think that we'd tax the robot at a similar level."
At first blush, taxing robots might sound like science fiction. But robots don't mind paying taxes. They don't feel pain at the thought that their hard-earned money is going to pay for government spending they might not support. They don't sweat late nights wrestling with W2s, quarterly estimates, or tax forms. And, at least as far as we know, no robot has ever opened a secret bank account or shell corporation in some sunny Caribbean tax haven.
Of course, robots can't really pay taxes. In practice, taxing Team Robot would mean taxing the businesses that own the robots and use them to replace human labor. It's really just a shift from taxing labor to taxing capital. Taxes could likely be calculated on a per-head basis, or an amount based on the revenue the robot helps produce, and be paid to wherever the robot lives.
Taxing robots can also help make up for the money government loses by not being able to tax the workers the robots replace. Right now, there are 3.5 million truck drivers hurtling down America's highways, along with 220,000 taxi drivers and 160,000 Uber drivers. The driverless car revolution is sure to replace some of those jobs. That will torpedo taxes and be a real windfall for businesses that no longer have to hire human workers. Taxing the robots can help restore the current balance.
If taxing robots works, there's no limit to where we can turn next. Taxing smartphones? Taxing video games? Taxing the Muppets? It's all fun and games until somebody tries to tax you. Good thing you've got us! We're here to give you the plan you need to pay less . . . so you can focus on important things like the robot takeover!
Tuesday, March 14, 2017
Monkey Business
In Roman mythology, the hero Hercules used his divine strength to smash through the mountain that used to be Atlas. This created the Straits of Gibraltar, linked the Atlantic and the Mediterranean, and forged the famed Rock of Gibraltar. The so-called "rock" is an enormous limestone monolith, rising 1,398 feet nearly straight up from the sea, and making Gibraltar a key strategic crossroad. It's also a natural paradise. It's home to over 500 species of plants, as well as the famed Barbary macaques, which are the only wild monkeys living in all of Europe.
Admiral George Rooke seized Gibraltar from Spain in 1704, and the Treaty of Utrecht ceded it to the British in 1713. But the treaty didn't specify a border, and the Spaniards are still bitter bumblebees about the whole thing. Local legend holds that when the monkeys leave, so will the British. Winston Churchill took that legend seriously enough that during World War II, when the population had dwindled to just seven, he issued an order to keep the population at no less than 24. (More about the monkeys in a bit.)
The territory today covers 2.6 square miles, including the Rock. That's barely a tenth the size of Manhattan. It's a bustling port and popular tourist destination. But there's little industry to speak of, and no agriculture at all. So how does a dinky little flyspeck of a state like that make a living? Well, there's new money coming in from online bookies and casinos. And like many territories clinging to the remnants of the British empire, it's become a tax shelter.
Gibraltar has no VAT tax. No sales tax. No wealth tax. No tax on interest, dividends, or capital gains. No gift or estate tax. Personal rates are capped at 26.25%. There's now a flat 10% tax on most corporations. Does that make for a true "tax haven"? Not necessarily — the government is proud to comply with OECD tax standards and our own Foreign Account Tax Compliance Act, which strong-arms foreign banks into identifying Americans with accounts topping $50,000. Gibraltar proudly calls itself a low-tax zone, and even sued a Spanish newspaper for calling it a "tax haven."
Still, the friendly tax regime has made Gibraltar home to 30,000 people and 30,000 corporations. That's quite a ratio! Data nerds will appreciate that Gibraltar has the second-highest number of "Big Four" accounting offices per capita (behind only the British Virgin Islands) and twelfth-highest number of banks. Conspiracy theorists will note that Mossack Fonseca, the law firm at the heart of last year's Panama Papers revelations, kept an office overlooking the harbor before closing it down in the wake of the story.
Gibraltar even has some natural tax collectors. We're talking about those macaques, who live in troops on the upper Rock. They share 99% of our DNA, which makes them curious and intelligent. And they have opposable thumbs, which makes them nimble and dextrous. They're more than happy to pickpocket "tax" visitors of food and even items like hats, sunglasses, earrings, and wigs. Watch out!
You might think after reading all this that your next move should be to someplace like Gibraltar. In fact, the nonprofit Tax Justice Network ranks our own United States as the number three tax haven in the world. The reality is that you don't need to move offshore to save money on taxes — you just need a proactive plan to make the most of legal opportunities here at home. So call us for that plan — we promise no monkeying around!
Admiral George Rooke seized Gibraltar from Spain in 1704, and the Treaty of Utrecht ceded it to the British in 1713. But the treaty didn't specify a border, and the Spaniards are still bitter bumblebees about the whole thing. Local legend holds that when the monkeys leave, so will the British. Winston Churchill took that legend seriously enough that during World War II, when the population had dwindled to just seven, he issued an order to keep the population at no less than 24. (More about the monkeys in a bit.)
The territory today covers 2.6 square miles, including the Rock. That's barely a tenth the size of Manhattan. It's a bustling port and popular tourist destination. But there's little industry to speak of, and no agriculture at all. So how does a dinky little flyspeck of a state like that make a living? Well, there's new money coming in from online bookies and casinos. And like many territories clinging to the remnants of the British empire, it's become a tax shelter.
Gibraltar has no VAT tax. No sales tax. No wealth tax. No tax on interest, dividends, or capital gains. No gift or estate tax. Personal rates are capped at 26.25%. There's now a flat 10% tax on most corporations. Does that make for a true "tax haven"? Not necessarily — the government is proud to comply with OECD tax standards and our own Foreign Account Tax Compliance Act, which strong-arms foreign banks into identifying Americans with accounts topping $50,000. Gibraltar proudly calls itself a low-tax zone, and even sued a Spanish newspaper for calling it a "tax haven."
Still, the friendly tax regime has made Gibraltar home to 30,000 people and 30,000 corporations. That's quite a ratio! Data nerds will appreciate that Gibraltar has the second-highest number of "Big Four" accounting offices per capita (behind only the British Virgin Islands) and twelfth-highest number of banks. Conspiracy theorists will note that Mossack Fonseca, the law firm at the heart of last year's Panama Papers revelations, kept an office overlooking the harbor before closing it down in the wake of the story.
Gibraltar even has some natural tax collectors. We're talking about those macaques, who live in troops on the upper Rock. They share 99% of our DNA, which makes them curious and intelligent. And they have opposable thumbs, which makes them nimble and dextrous. They're more than happy to pickpocket "tax" visitors of food and even items like hats, sunglasses, earrings, and wigs. Watch out!
You might think after reading all this that your next move should be to someplace like Gibraltar. In fact, the nonprofit Tax Justice Network ranks our own United States as the number three tax haven in the world. The reality is that you don't need to move offshore to save money on taxes — you just need a proactive plan to make the most of legal opportunities here at home. So call us for that plan — we promise no monkeying around!
Tuesday, March 7, 2017
Fixed This for You
For generations, Americans fostered a culture of thrifty self-reliance, especially where it comes to taking care of our stuff. It started all the way back in pioneer days, and living on the frontier's edge. Back when Pa Ingalls lived in that little house in the big woods, if his saw broke, he couldn't just order up a replacement on Amazon. He had to fix it, or he would have a tough time heating his house for the winter! Ma had one nice dress, for Sunday church, and when she got home she spent the rest of the day taking care of it. Folks mended and darned and repaired until household items had more lives than the family cat.
More recently, though, we've become a throwaway society. Maybe it's the flood of cheap, shoddy stuff from Walmart and China. Even formerly big-ticket purchases like TVs are cheap enough now that it rarely makes sense to repair them. (Think about it — your family room TV may have cost less than your phone.) Even real estate has become disposable, as thousands of Americans buy perfectly serviceable houses for the land they sit, then and tear them down to replace with something bigger (and usually gaudier and not as well built).
Our democratic socialist friends in the Kingdom of Sweden have noticed the same trend, and they're not very happy about it. (Yes, Sweden is still a monarchy — King Carl XVI Gustaf hands out the Nobel Prizes every year, and collects Porsche 911s.) It might seem ironic for the country that unleashed IKEA's particleboard aesthetic on the world to champion durability. But they've expressed it through their tax code, of all things, by passing a new law cutting taxes on fixing things.
Here's the scoop. Like most European countries, Sweden imposes a value-added tax, which is a form of sales tax levied at each level of production (such as from producer to distributor to retailer). In Sweden, the tax is 25% for most goods and services, 12% for restaurant meals and hotel stays, and 6% for printed materials, cultural events, and travel within the country. For 2014, the VAT raised 353 billion krona ($39 billion dollars, give or take a couple of meatballs), which amounts to 21% of the country's revenue.
Last November, the legislature chopped the VAT tax on repairs to items like bicycles, shoes, and clothing, from 25% to 12%. The goal is to encourage Swedes to buy higher-quality products. They also "Sweden the pot" by letting taxpayers deduct half the cost of repairs they make to appliances like refrigerators, ovens, and dishwashers. This makes repairs cheaper and helps keep repairmen employed in Sweden. (We suppose it could be possible to outsource refrigerator repairs to China or Mexico, but your food would probably melt before it gets back.)
Per Bolund, Sweden's Minister for Financial Markets, told BBC News, "I think it will be a good incentive and I think there's also a possibility that people will buy high-quality products and repair them, rather than buying cheap products they know will break down and then buy something new instead." He estimates the new law will cost Sweden about $250 million krona, not to mention slowing the growth of landfill fjords.
As long as we're on the topic of taxes and maintenance . . . how's your tax plan looking these days? Still shiny and new? Or showing some wear and tear at the seams? Tax planning isn't something you do just once and forget about. It's an ongoing process that needs periodic maintenance and tuning. So count on us to help keep your plan running in tip-top shape! (And if you don't already have a plan, what are you waiting for?)
More recently, though, we've become a throwaway society. Maybe it's the flood of cheap, shoddy stuff from Walmart and China. Even formerly big-ticket purchases like TVs are cheap enough now that it rarely makes sense to repair them. (Think about it — your family room TV may have cost less than your phone.) Even real estate has become disposable, as thousands of Americans buy perfectly serviceable houses for the land they sit, then and tear them down to replace with something bigger (and usually gaudier and not as well built).
Our democratic socialist friends in the Kingdom of Sweden have noticed the same trend, and they're not very happy about it. (Yes, Sweden is still a monarchy — King Carl XVI Gustaf hands out the Nobel Prizes every year, and collects Porsche 911s.) It might seem ironic for the country that unleashed IKEA's particleboard aesthetic on the world to champion durability. But they've expressed it through their tax code, of all things, by passing a new law cutting taxes on fixing things.
Here's the scoop. Like most European countries, Sweden imposes a value-added tax, which is a form of sales tax levied at each level of production (such as from producer to distributor to retailer). In Sweden, the tax is 25% for most goods and services, 12% for restaurant meals and hotel stays, and 6% for printed materials, cultural events, and travel within the country. For 2014, the VAT raised 353 billion krona ($39 billion dollars, give or take a couple of meatballs), which amounts to 21% of the country's revenue.
Last November, the legislature chopped the VAT tax on repairs to items like bicycles, shoes, and clothing, from 25% to 12%. The goal is to encourage Swedes to buy higher-quality products. They also "Sweden the pot" by letting taxpayers deduct half the cost of repairs they make to appliances like refrigerators, ovens, and dishwashers. This makes repairs cheaper and helps keep repairmen employed in Sweden. (We suppose it could be possible to outsource refrigerator repairs to China or Mexico, but your food would probably melt before it gets back.)
Per Bolund, Sweden's Minister for Financial Markets, told BBC News, "I think it will be a good incentive and I think there's also a possibility that people will buy high-quality products and repair them, rather than buying cheap products they know will break down and then buy something new instead." He estimates the new law will cost Sweden about $250 million krona, not to mention slowing the growth of landfill fjords.
As long as we're on the topic of taxes and maintenance . . . how's your tax plan looking these days? Still shiny and new? Or showing some wear and tear at the seams? Tax planning isn't something you do just once and forget about. It's an ongoing process that needs periodic maintenance and tuning. So count on us to help keep your plan running in tip-top shape! (And if you don't already have a plan, what are you waiting for?)
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