Is the purpose of the tax code to get people to jump through hoops?
January 22, 2013, 7:31 am
Filed under: Uncategorized

Barry Ritholtz says that Phil Mickelson must be stupid for (we guess) not employing ‘ordinary tax planning moves’ to reduce his tax exposure, moves such as “Establishing a Family Foundation”.

Let’s assume the extreme case and say that Mickelson is doing none of these things. Question: Why should nominal tax rates on a Phil Mickelson be so high that unless he “establishes a Family Foundation”, and related stuff, he is stupid?

One could plausibly say they want tax rates to be high on a Phil Mickelson because they want that extra revenue. Only, such a person wouldn’t turn around and say ‘form a Family Foundation, dummy’. If the goal were revenue, there wouldn’t be (and one wouldn’t want, or advise) all these ways to “minimize their taxes”.

Oh, but maybe these ways of minimizing taxes are so socially-beneficial that we want rich people doing them. You know, like “forming a Family Foundation”. Really? Is that really a thing that society wants and needs all rich people doing? So if you’re a rich person you have two options (1) form a Family Foundation (2) you’re a stupid dumb-ass?

What is the sense of arguing for a tax code with a certain set of rates, and then when people complain about those rates, instead of saying maybe they have a point you say ‘you moron, you could jump through some hoops’? In other words, why do we want the high rates + the hoops instead of just lower rates full-stop?

Is it because we want to punish, most of all, people who don’t or won’t or can’t jump through hoops? Seems like it.

12 Comments so far
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No, I did not call Phil Mickelson stupid.

Angry, ungrateful and poorly advised, yes, but not stupid.

This is the 2nd time you put words in my mouth I never said to make your case The post is ~686 words long — more than enough for you to make an honest counter argument and disagree with what I wrote.

Try making an argument against with resorting to fabricating straw men to argue against. If you cannot make your case without resorting to rhetorical sleight of hand, then I will have to put you into the category that you erroneously have me putting Mickelson into.

Comment by Barry Ritholtz (@ritholtz)

Strawman! I merely said he was “oblivious” and should be mocked. Oh and that he was an ungrateful class enemy (Ungrateful to whom? To God? To the fans that have made him rich? To the system of expropriation and political poverty patronage that perpetuates an underclass?). I’ll sue you in England!

Fuck family foundations. “Hey, why not put your family’s wealth into the hands of the fake philanthropy complex where ‘experts’ will use it to destroy everything you value about civilization? What a great alternative to having your family’s wealth confiscated and spent by experts destroying everything you value about civilization.”

Comment by josh

Whatever dude, this is the Internet, not some debate club.

Your failure to address the substance of his point weakens your position

Comment by Dave

Barry, you said (without any real basis, and indeed probably incorrectly, for ‘clever’ rhetoric/point-scoring) that he either doesn’t know – or has chosen financial advisors who don’t know – about things like estate planning or munis. Yes for blog-post brevity/shorthand I summarized this as you calling him ‘stupid'; I assert no material loss of fidelity resulted. But if you think in this instance there’s a hugely important distinction between that shorthand and what you said with 686 words feel free to make that case.

That’s a strange hill to defend though. As Dave above implies, whether PM is/isn’t stupid, or whether you literally called him same, wasn’t the main point of my post (as could be seen by looking at e.g. its subject line, if not by reading it). Which, to rephrase, is that it’s folly and creates perverse outcomes (like forcing people to do pointless hoop-jumping) to push for/defend a tax code with high tax rates and then when people complain about/react to high tax rates – instead of addressing whether they have a point – scoff ‘you can just shield your income from it’.

It is your inalienable right not to be interested in or address that sort of, I think more fundamental, question about our taxation system and to be far more interested in the important political-economic questions of whether Phil Mickelson is ‘ungrateful’, ‘angry’, has bad financial advisors, etc. That’s your blog. This is my blog. Thanks for visiting.

Comment by The Crimson Reach

Just don’t you dare paraphrase him a third time!

Comment by josh

Condensed Barry Ritholtz:

“Dear Phil: What the fuck is going on with your personal finances? Ordinary tax planning moves are either unknown to you, or maybe are being ignored by your advisers. Who the hell are they? They are crappy and seem to be costing you millions. No, I didn’t call you stupid, why would you think that?”

Comment by Scrutineer

Good to see someone starting to counter Ritholtz. I used to read him often, but recently started to realize he is in bad faith, for example his posts on healthcare.

Comment by a*dam

I find reading him valuable due to the condensed Conventional Wisdom he so reliably offers.

Comment by The Crimson Reach

The obvious answer is yes, right? The tax code has been used for purposely jiggering behavior ever since the country was formed and they immediately slapped taxes on whiskey. It didn’t always take place on the scale that it does today, where the Obamacare ruling basically enshrines the (already entrenched) idea of behavior modification via tax benefits.

The exact situation here, with the “family foundations” is more like an unintended consequence of a well-meaning rule than a direct interference, but you know what they say about unintended consequences: once they are highlighted, they become intended consequences. Hmm, maybe I’m the only one that says that.

It’s certainly incoherent to simultaneously argue that someone should cynically take advantage of loopholes to lower taxable income while arguing that taxes should be higher overall, or at any rate should not be lower. But the reconciliation maybe comes by reasoning that the family-foundation thing is “good for society” whereas by simply having tax rates be lower we enable Phil Mickelson to spend his money on beer and hookers.

Comment by Matt

But the reconciliation maybe comes by reasoning that the family-foundation thing is “good for society” whereas by simply having tax rates be lower we enable Phil Mickelson to spend his money on beer and hookers.

Which is of course ridiculous, but your average voter (and Ritholtz reader) has gotten off the thinking bus by this point, so it doesn’t matter.

Comment by Dave

Matt wins the thread.

Re: family foundations, I think I had dismissed that line of argument, blithely assuming that someone like Ritholtz would know as well as you or I do that their being ‘good for society’ is a crock of shit. In retrospect, that may have been an error on my part.

Comment by The Crimson Reach

[…] he has before, Barry Ritholtz is still defending the estate tax on the grounds that no one pays it except […]

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