Creative Tax Avoidance

Well, I should say, evasion. Tax avoidance is legal; tax evasion is not. It occurs to me that unpatriotic, unscrupulous, greedy, selfish, individualist types, since they are so creative in trying to find ways to avoid paying the taxes that they legally and morally owe, could try a strategy such as the following, which of course I as a good lawyer and libertarian would never recommend; quite the contrary, keep on the lookout for this horrible way to cheat the state out of your money:

Say you are physically injured by someone, and sue them, and receive monetary damages. In this case, the money damages might not be taxable (2, 3), since it compensates for an injury and is designed to “make you whole” or put you back where you were before–rather than a substitute for income, which is taxable (no offense, nutballs, 2). Anyway, this is my understanding, even though I’m not a tax attorney (but I do play one on TV).So suppose you have a small business (and are a horrible, evil person who would actually cheat the government out of your money) and have a salesman who makes a base salary of $100K a year. You want to give him a big commission this year, say $300K. Well tha $300K will be taxed at a high level. So, what you do is–evil you–have the salesman sue you for some tort (say, he claims you beat him up), and then you settle for $300K. Tax free!

O! it saddnes my heart that there are probably actually people out there who actually want to cheat the state out of their money. That they would be so creative shows how desperately greedy they are.

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10:37 pm on September 3, 2004