DeSaulnier announces legislative effort to end poverty
Original post made
on Jan 10, 2014
Fifty years ago, President Lyndon Johnson declared a war on poverty. Now, State Senator Mark DeSaulnier (D-Concord) is firing some new shots in that old war, recently creating the Ending Poverty and Inequality in California (EPIC) Caucus.
Read the full story here Web Link
posted Thursday, January 9, 2014, 12:21 PM
Posted by spcwt
a resident of Danville
on Jan 10, 2014 at 1:51 pm
I've disliked DeSaulnier ever since his cronies put up tons of campaign signs all over Danville during an election many years ago, which was an eyesore, and then they just left them there long after the election!
I also dislike most Democrats, especially our current president. I hate to even write his name, as the thought of him makes me sick.
The poor, of course, pay no taxes, and receive tax refunds due to tax credits. They cry about paying payroll taxes, but the poor receive hundreds of thousands more in social security and Medicare benefits than they put into the system. The sales & property taxes they pay are a pittance compared to the benefits from schools, roads, law enforcement, and other benefits they receive. In short, around half the country receive more hand-outs than they put into the system.
Moderately wealthy people, like many in Danville, who make a decent living (~$500,000 yr.), pay high taxes (~50%) on their wages and business income. People who earn between $150,000 to $1 million / year in wages and business income are the ones getting squeezed in order to pay the country's bills.
The super rich have it best, of course. It is possible for rich Americans to legally pay very low taxes (~5% or less) on investments. It's possible to set up a trust that can supply you and your heirs an almost limitless amount of low-taxed investment income, in perpetuity. And neither you nor your heirs pay any estate or gift tax, ever. In other words, the party never has to end. Imagine amassing $100's of millions and paying a tax rate of 5% or less on all that wealth. Here's how:
Suppose you're a moderately wealthy person with around $50+ million in assets. You might be one of the folks who recently made some money in a tech IPO here in the Bay Area. You and your spouse can each contribute $5 million to a family trust without incurring gift tax. Through various valuation techniques that every estate planner is familiar with, it is possible to contribute much more than that to the trust and still fit within this $5 million window. For example, you and your spouse could reasonably each contribute $25 million, or $50 million total, and still have it qualify for the gift tax exemption.
You put the money in a trust in South Dakota. Why South Dakota? Because first of all, South Dakota doesn't have an income tax. Second of all, South Dakota is one of only three states in the country that has done away with "the rule against perpetuities." That rule limits the duration of a trust to the lifetime of a living heir, plus 21 years. With that rule gone, it is possible for a trust to be never-ending, providing low taxed wealth for you and your family for generations to come. You pay capital gains taxes only on what you spend, while the rest of the money grows. You and your heirs pay no estate tax and very limited federal income tax or California income tax. Best of all, you can still live in California. They call these "Dynasty Trusts," and hundreds of family have put over $120 billion in these trusts, especially since Obama and congress made the $5 million estate and gift tax exemption permanent during last year's budget compromise. (Thanks Obama!!!).
You may be asking yourself how these trust funds can be subject to only ~6% income tax when the federal capital gains rate is 23.8% and the California income tax rate is 12.3%. That's because you only pay tax on what you spend, not on what your investments earn.
For example, suppose you live on $2 million per year, which is quite modest if you're worth $100 million. $2 million / year should allow you to enjoy a decent SF apartment or a nice 10,000 sq. ft. home in Danville and still travel regularly to Europe, scuba dive in the Galapagos and other essentials. During the course of 25 years, you will have withdrawn $50 million from the trust and paid around $15 million of Federal and California income tax. But during that 25 years, the trust's assets will have grown by over $250 million, assuming a modest return of 8%. So, you've had a $250 million net ascension of wealth but paid only $15 million of taxes on it, or around 6% tax rate, because you pay taxes only on the taxable distributions, not the appreciation.
And the good times can be passed on to your kids, grand kids, and great grand kids, tax free, because the Dynasty Trusts go on forever.
This is just one example of how the rich can shelter their income from tax, of course. If you want to read about how Romney got $100 million into his tax-deferred IRA, click here: Web Link
It's nice to be rich.