U.S. Tax Hackers: Cheating or Beating? (Infographic)

Tax time is stressful for everyone. It can be overwhelming collecting all the necessary forms and making sure everything is in order before that dreaded day in April hits. I thought that getting ready to make sure yearly dues are paid and accounted for was a universal experience—however, I was surprised to learn just how many legal tax havens are out there. Unfortunately, I learned that most of these are of no benefit to the average citizen. Only 1% of taxes on wages and salaries goes uncollected; however, it’s estimated that every year the U.S. Government loses $100 billion to legal tax havens employed by corporations and multi-millionaires. Read on to learn about some of the surprising crafty tax players. I think it’s a subject worth learning something about, regardless of income level or tax bracket.


  1. I usually come on here for ideas and opinions on money and debt matters. Usually I am informed and even enlightened by this website. However, today there is a little political slam thrown in for fun. The obvious implication (never said explicitly, you liberals are too sophisticated for that) is that Mitt Romney is some kind of criminal for not wanting to “share” his money, his property, with the rest of us. He followed the rules and so what. Using your talents, skill, hard work, and yes even luck to become as rich as he is is admirable, not a negative. Protecting that wealth from power hungry politicians that have spent this country almost into the grave is a noble pursuit. By the way that 15% is on investment income, and is a double taxation on wealth he already earned, so in fact his tax is over 50%.

    • Agree. What does paying LTCG and dividend tax, just like the rest of us, have anything to do with “hacking” taxes? For those uneducated on the implications of charging LTCG & dividends as ordinary income, let me illustrate. You read a bunch of PF blogs and found out that rental income is the golden goose to prosperity. You buy a multi-residence home for say $100,000 and rent it our over the next 30 or so years. You finally decide you want to sell it, and find out you can fetch $1.1 mil! So you sell it, and instead of paying the 15% LTCG, you get hit with $1 mil in ordinary income tax rates. It’s a difference between paying $150k vs $320k. You aren’t rich, just a working stiff who rented out a multi-family residence all these years and you take a huge hit b/c everyone wanted to tax the “hackers.”

      The more you delve into these things, the more complicated it becomes.

      • Bichon – nothing you’ve brought up there involves tax havens. Romney has accounts in tax havens. Tax havens are what the post is about, not whether you pay income tax or capital gains tax on the sale of property.

        • Interesting. I read it as a slam on multiple things, one being LTCG & dividends being taxed at 15%. Did you miss the bar chart comparing Mitt’s tax rate to his father’s? Or the pie chart showing his income and the amount of taxes he pays? Or was all this being under the “Taxes & Tricks” title meant to be ignored?

          Please forgive, all this threw me a curve ball and I didn’t realize we were suppose to ignore everything that didn’t have to deal with “Tax Havens.”

    • Jeff – i find it hilarious that you describe Mitt Romney as protecting his money from “power hungry politicians” while Romney is using that money to try to become President. There are lots of big companies, banks , multi-multi-millionaires and billionaires avoiding paying anything like the same percentage of tax as the vast majority of people who are on a fraction of their wages.

      If you google Warren Buffet, who has a few more scruples than Romney, Buffet was shocked to disover he paid a lower tax rate than his cleaning ladies, because the very wealthy can afford accountants who can take advantage of tax havens. He called for legislation to get the super rich to agree to pay at least 20% taxes.

      I greatly doubt that Romney’s tax rate on his income is 50%.

      Governments certainly waste a lot of money – for instance the US wastes the best part of a trillion dollars a year on it’s military and military aid to dictatorships and military regimes like Egypt’s (which is basically a government subsidy to US arms companies who have enough money to buy political influence and good accountants).

      However governments also provide welfare and education and transport and communications infrastructure and healthcare along with investment in areas which any potential profit (or costs from not investing) are long term enough that no bank or company will invest in them. They can provide regulation of the kind that could have prevented the financial crisis and the subequent recession if it had been kept in place – but they can’t do any of this when they don’t have the funds because big banks, firms and billionaires are using their political influence to make it legal for them to avoid paying the same taxes everyone else has to – and they can’t do it while the same people and firms are able to keep their finances secret in tax havens either.

      Without regulation the markets will destroy themselves again and everyone is guaranteed to suffer – except maybe the billionaires and big banks who can always buy a political bailout with all the taxes they avoided – or maybe the next time it’ll lead to extreme politics as the Great Depression did and then even the bankers and billionaires may suffer with the rest of us.

      Every time the big firms and billionaires get off with paying less tax due to tax havens you are paying more as a result.

  2. In Matthew 22:21 Jesus said, “render to Caesar the things that are Caesar’s, and to God the things that are God’s.” I find it hard to follow what Jesus said. Mitt Romney and Google et al don’t seem to lose much sleep over taxes.

  3. Your presentation of Mitt Romney’s wealth as a bad thing (no, it wasn’t neutral) is laughable. Are you so biased that you can’t even see how this one-sided example destroys your credibility? Why don’t you take a rich Democrate’s taxes as an example, too? I suspect you would see the same techniques used, and neither would be criminals, or cheats, or hackers. When you do your taxes, do you pass up legitimate deductions? Why should they?

  4. I am calling businessweek, PCmag and fastcompany and cancelling my subsrciptions I will explain that frugal dad went political.(the swipe at Mitt Romney)
    FD/Jason I suggest you leave politics to the politicians, nothing infuriates me more then someone injecting a political view where it does not belong. (I thought this site was about saving money and spending wisely)?.

  5. Great post. I know the US takes a really dim view of tax dodgers (especially nationals who have left the country for tax purposes). Looks like the rest of the world is doing the same now. What’s worst is being a dual citizen, now that’s when things go crazy!!