Steve Ballmer Gets Billion-Dollar Tax Write-Off For Being Basketball Baron

McGruber (1417641) writes "According to a report published by The Financial Times (paywalled), ex-Microsoft CEO Billionaire Steve Ballmer will be able to write off about a billion dollars of his basketball team's purchase price from the taxable income he makes over the next 15 years. "Under an exception in US law, buyers of sports franchises can use an accounting treatment known as goodwill against their other taxable income. This feature is commonly used by tax specialists to structure deals for sports teams. Goodwill is the difference between the purchase price of an asset and the actual cash and other fixed assets belonging to the team."

Comments

If you tax the rich, they'll leave

[CRCulver]

This is a wise policy. If you tax the rich too much, then they won't buy local basketball teams and instead will look elsewhere. Eventually there wouldn't be any professional sports at all in our great and beautiful nation. Instead of sitting down to watch the NBA on their televisions, Americans would instead see only short-statured, low-wage Chinese tossing a ball around instead. Kudos to the government for allowing an entrepreneur like Ballmer to keep his local business going.

Re:If you tax the rich, they'll leave

[nucrash]

I thought he would most likely send the Basket Ball team, the Clippy's to India.

Re:If you tax the rich, they'll leave

[gl4ss]

I'm just thinking is there a loophole here for the old guys just selling the teams to each other every now and then and skipping paying taxes..

or you pay tax when you sell the team? I guess not.

Re:If you tax the rich, they'll leave

[Crashmarik]

I enjoy this
They have good team work and fundamentals but no jumpshot.

Re:If you tax the rich, they'll leave

[NotDrWho]

I'm just glad that we poor people can do our part in giving more money to rich guys so they can create more jobs and such. It's like Jesus said "Given unto the rich so they may beget to the poor."

Re: If you tax the rich, they'll leave

[Anonymous Coward]

YES, send them ALL the New Jersey. But first, can we ship them to the moon with the Chinese? The A ship leaves soon.

I don't want the New Jersey anyway.

Re:If you tax the rich, they'll leave

[nucrash]

Did you mention the good fundamentals?

Death by Snoo Snoo!

Re:If you tax the rich, they'll leave

[CrimsonAvenger]

*sighs*

A billion over FIFTEEN YEARS. Amounts to about $70 million a year.

Considering that Ballmer is worth north of twenty Billion, we're not actually talking about a huge tax break here.

What we are talking about is an article that combines fifteen years of tax deductions in order to put that magic "B" in the title to get people excited....

Re:If you tax the rich, they'll leave

[king neckbeard]

If it's not that much to Ballmer, I'll gladly take just a month of that. 5 million is plenty to me.

Re:If you tax the rich, they'll leave

[Culture20]

You don't get taxed based on your net worth; it's "income tax" for a reason. How much taxable income does he receive a year (not counting this tax break)?

Re:If you tax the rich, they'll leave

[MachineShedFred]

Most of society, including wildly successful people across all faiths, disciplines, and cultures.

Re:If you tax the rich, they'll leave

[Anonymous Coward]

The successful ones aren't really watching. They're just playing a different game. It's amazing what you can get sports fans to do with a ticket to a suite.

Re: If you tax the rich, they'll leave

[K. S. Kyosuke]

Perhaps he meant to write "send them all the new jersey". After all, we're talking about sports here.

Re:If you tax the rich, they'll leave

[luis_a_espinal]

*sighs*

A billion over FIFTEEN YEARS. Amounts to about $70 million a year.

Considering that Ballmer is worth north of twenty Billion, we're not actually talking about a huge tax break here.

What we are talking about is an article that combines fifteen years of tax deductions in order to put that magic "B" in the title to get people excited....

We shouldn't need a 'B' to get excited. A billion is a billion whether it gets paid in a year or 15. And $70 million in taxes is $70 million no matter how you cut it. Under what type of cynic logic can this be justified?

This is not $70 millions in non-taxable charities, but an investment on a money machine in the sports/entertainment industry.

Re:If you tax the rich, they'll leave

[Applehu Akbar]

Ballmer also wouldn't be able to work on the problem the Clippers have been having lately: in the middle of a game, all the players suddenly stop right where they happen to be in action and freeze in place. Whenever this happens, you have to restart the game from the beginning. The team doctor says that a large load of viruses seems to be responsible.

Re:If you tax the rich, they'll leave

[myth24601]

Well, if his assets are $20 Billion and his return on all his assets were only 5%, he would be generating $1billion in income. A write off of $70 million lowers his taxable income to $930 million. ( my guess is his return is higher than 5% but that is a SWAG)

Re:If you tax the rich, they'll leave

[Anonymous Coward]

Americans would instead see only short-statured, low-wage Chinese tossing a ball around instead.

I'm not sure why it is okay to demean an entire ethnic group/nationality, even if the tone of the original post is meant to be sarcastic?

Racist/xenophobic comments like this should be called out, even if it is supposed to be funny.

Re: If you tax the rich, they'll leave

[Anonymous Coward]

The suite just replicates the comforts of home. If you have that much money, why not?

On the other hand, it's the idiot fans who sit in the nosebleeds when they have a 50 inch plasma at home that puzzle me.

Re:If you tax the rich, they'll leave

[nucrash]

Think of it like this:

If we took that money and spent it on education alone, considering the average cost of what it takes to put a student through school in a year ($11,153), that would allow for 6276 students. That's per year for 15 years.

In less than two years, India would have been able to pay for another Satellite to orbit Mars.

Think of the amount of road work that could have been done in that time?

I know this is from a Tax and Spend Democrat, but right now, I know there are a lot of students that could use that money, as improving their living conditions would improve their school performance.

Re:If you tax the rich, they'll leave

[halivar]

Basketball tickets are a luxury. If you buy them, it's because you chose to give Ballmer money. I can't help you with that.

Re: If you tax the rich, they'll leave

[jd2112]

Yes it is a struggle. You know with the economy like it is when I traded my year old Mercedes S-Class a new one was just too expensive so I had to settle for an M-Class. Now everybody at the country club us going to laugh at me when the Rolls and the Bentley are both in the shop...

Re:If you tax the rich, they'll leave

[Anonymous Coward]

This story and comment thread is about tax breaks for the rich, not whether or not you buy a ticket.

Re:If you tax the rich, they'll leave

[backwardsposter]

"Why don't the poor get it? How could we pay their salaries without THEIR money!" - Jack Donaghy

Re:If you tax the rich, they'll leave

[Rob Y.]

And as passive income that billion a year is taxed at a 15% rate after all of his other deductions and loopholes. Whether or not you think a $70 mil writeoff is insignificant to a hundred billionaire, it's just this kind of insult to injury loophole (available only to the hyper rich) that makes a travesty of the notion that we're all in this together. But, of course, we're not - and apparently CrimsonAvenger is fine with that...

Re:If you tax the rich, they'll leave

[Anonymous Coward]

Basketball tickets are a luxury. If you buy them, it's because you chose to give Ballmer money. I can't help you with that.

I'm perfectly fine with Balmer making money from his basketball team. I'm just not fine with the fact that he gets away with not paying taxes on HIS income and purchases, when poor people still have to. If I go down to the grocery store and buy a gallon of milk, I have to pay a 5% sales tax (even though it's far from a luxury item). So why should Balmer be able to buy a $2 billion basketball team without paying HIS tax? He can certainly afford it more than most of the rest of us can.

Re:If you tax the rich, they'll leave

[Moof123]

A billion here and a billion there, and pretty soon you are talking about real money...

Re:If you tax the rich, they'll leave

[Anonymous Coward]

Basketball tickets are a luxury. If you buy them, it's because you chose to give Ballmer money. I can't help you with that.

This article is about a tax-break. Whether or not you have ever even heard of basketball, if you live in the US and pay taxes, a disproportionate amount of it is going to Ballmer. You and I and everybody else here is giving money to this man through the government merely because he already has large sums of money.

Is that simple enough for your meager reading comprehension skills? If it isn't, I can't help you with that.

Re:If you tax the rich, they'll leave

[RingDev]

$20 billion in the bank.
Figure 5% annual return (highly conservative) for $1 billion gross income
15% unearned income tax rate.
$150 million annual tax payment
-$70 million annual tax credit

So yeah, cutting his tax burden in 1/2 for buying a basketball team seems a little out of whack.

For instance, imagine if you or I got to cut our income tax rate in half because we sponsored a little-league team. Wouldn't that be nice! But of course we can't. This law isn't set up to benefit the whole of society, it's set up to benefit those members of society who have enough money and power to effect the rules.

-Rick

Re:If you tax the rich, they'll leave

[geoskd]

Basketball tickets are a luxury. If you buy them, it's because you chose to give Ballmer money. I can't help you with that.

Thats right, we can choose not to buy basketball tickets (and I'm already in that camp), but we can't choose not to subsidize Balmers purchase of the team because a set of, long since gone, politicians wrote that nice little loophole into our tax code for us. The way I do the math, those assholes transferred about $10 from my pocket into Blamers pocket with just this one transaction. I had no say in the matter. I had no interest in the stupid basketball team (or the sport for that matter), and yet here I am subsidizing it...

I want to know: What humanitarian need did my $10 fill? In what way is the world a better place than it would have been if Balmer had to cough up the price without my subsidy? I could fully support the idea if my money had gone towards curing cancer, or helping dying children, or something equally righteous, but how is supporting Basketball, a sport that is fully capable of paying its own way, helping better humanity? How is this anything other than yet another way in which those with the power and the money are stealing from the rest of us?

Re:If you tax the rich, they'll leave

[halivar]

It's not a subsidy; it's a tax credit that only applies to money he gives to the government that he would not have owed if he'd never purchased the team in the first place.

Re:If you tax the rich, they'll leave

[CWCheese]

ARGH!!! If I see Clippy popping up on the screens at Staples Center, I'm gonna walk out immediately.

Re:If you tax the rich, they'll leave

[davester666]

No, he would hire expert Indian basketball players for 1% of the cost of expert American basketball players to play here.

Re:If you tax the rich, they'll leave

[secret_squirrel_99]

What we are talking about is an article that combines fifteen years of tax deductions in order to put that magic "B" in the title to get people excited....

What w'ere really talking about is a standard accounting practice in the purchase of ANY business. The asset and liabilities columns have to total to the same in any balance sheet. When the purchase price exceeds assets, an imaginary asset called goodwill is added. There is nothing unusual in any way at all about this.

Re:If you tax the rich, they'll leave

[cHALiTO]

It's also plenty for the state, 70M can buy tons of infrastructure, and other tax-paid services. Just sayin..

Re:If you tax the rich, they'll leave

[crbowman]

That's just not true. While he may own $20Billion worth of assets, they surely don't pay that much in income (dividends) something in the neighbor hood of 1% to 5% would be close which puts him earning somewhere between $200M and $1B. A $70 million a year tax write off is very valuable. I don't understand why he should get any write off. He bought something that he believes will make him money knowing full well that the physical assets and cash of that entity are far less than the purchase price. He is not a naive investor. If he sells it and loses money let him take a loss and write it off otherwise why should the rest of us subsidize him.

Re:If you tax the rich, they'll leave

[Applehu Akbar]

That's been tried, but it just causes the other players to start holding up signs telling the world how many viruses are in play in this game. This goes on until you restart the game from the beginning.

Re:If you tax the rich, they'll leave

[lsatenstein]

And as passive income that billion a year is taxed at a 15% rate after all of his other deductions and loopholes. Whether or not you think a $70 mil writeoff is insignificant to a hundred billionaire, it's just this kind of insult to injury loophole (available only to the hyper rich) that makes a travesty of the notion that we're all in this together. But, of course, we're not - and apparently CrimsonAvenger is fine with that...

I guess Balmer wants to line his coffin with all those shareholder certificates. Somebody tell him to insist to have the certificates waterproofed

Re:If you tax the rich, they'll leave

[kuzb]

The same kind of loser that needs to put others down for doing in order to make himself sound superior.

We get that you're an underwear skidmark, but fear not. One day your mother will realize it's never too late for an abortion.

So the taxpayer pays for overage, got it

[RichMan]

So when someone buys a team at overvalue, the regular tax payer is on the hook for that overvalue.

Nice deal the rich have going, getting someone else to pay their bills.

Re:So the taxpayer pays for overage, got it

[Imrik]

On the other hand, the person who receives payment has to pay taxes on the overvalue.

Re:So the taxpayer pays for overage, got it

[Overzeetop]

Yeah, we wish...

http://www.forbes.com/sites/ro...

Re:So the taxpayer pays for overage, got it

[Anonymous Coward]

he would pay more in tax in a single year than 99% of the population pay in there entire lives.

Except he won't, he'll exploit exceptions and loopholes until he's paying less tax than a top-level middle manager. You don't seem to understand how taxation works.

Re:So the taxpayer pays for overage, got it

[ganjadude]

if the team was not sold, would there be any tax revenue??? no. its still a net gain for the government (the same government who uses that money to abuse americans and people abroad)

Can we PLEASE stop acting like letting people keep their own money is somehow the same as the tax payers giving money to "the ev0l rich"???

Re:So the taxpayer pays for overage, got it

[Shoten]

he would pay more in tax in a single year than 99% of the population pay in there entire lives.

Except he won't, he'll exploit exceptions and loopholes until he's paying less tax than a top-level middle manager. You don't seem to understand how taxation works.

Actually, this is only sort of true. On a percentage-of-annual-income basis, it's correct. But in terms of dollars and cents paid in taxes annually, it is incorrect.

The fact that Ballmer is involved in this is the only reason it's on Slashdot...let's face it. This situation relates to capital investment, and it happens several times a day with regard to transactions of varying sizes. We could argue about whether or not it's about the taxpayer that gets stuck with this or that, or whether capital will flee if we tax the rich more, but one thing is true: Ballmer is no more to fault for leveraging available, documented, and legal tax write-offs than we are when we all claim a write-off for our mortgages, business expenses, or even just the standard deduction (if we don't even itemize).

None of us seek to maximize the amount of taxes we pay. But we demonize the ultra-wealthy, by name, when they do the same thing as us but on a larger scale. Don't fault them, fault the system...and then change it.

Re:So the taxpayer pays for overage, got it

[Anonymous Coward]

Last I checked we dont get to lobby for special tax exemptions for ourselves.
The Waltons famously reduced their state tax burden by 3 million dollars by spending about 100k on lobbying.

They deserve all the deominzation they get.

Re:So the taxpayer pays for overage, got it

[weilawei]

We fault them because they design the system expressly to create loopholes that only they can afford to exploit, via legalized bribery and the good 'ol boys network.

Stop being an apologist shill. Fuck off. You're never going to be that rich unless you're a sociopath who doesn't mind screwing over everyone in your path.

Re:So the taxpayer pays for overage, got it

[Nemyst]

Sure, but only if I can get a tax credit for 50% the price of my next house. I mean, if the house was not sold, there wouldn't be any tax revenue.

Re:So the taxpayer pays for overage, got it

[ganjadude]

depending on the value of your next house, you very well may be able to. you seem to think this kind of thing is only for the ultra rich, if you are not writing off your expenses you got no one to blame but you

granted, im in favor of eliminating the IRS, and only having a tax on transactions, therefore none of this would even matter but by todays rules, if you buy a house for 200K and its only worth 100K, you can do the same thing ballmer is doing

Re:So the taxpayer pays for overage, got it

[ganjadude]

and your an idiot like ballmer for paying double what something is worth

Re:So the taxpayer pays for overage, got it

[gl4ss]

you should be modded funny.
in this case, no.

though, if there is a calculable "REAL VALUE(TM)(R)" for a team, then it should be on sale all the time for that money - if it were, then I would approve of this system.

but they're not, so the real value is actually the value you need to pay the current owner... the whole concept is so foreign to foreigner such as me that yeah this is just a tax break for the rich for nothing in exchange to the taxpayer.

Re:So the taxpayer pays for overage, got it

[CastrTroy]

Exactly. The point of taxes is that we all pay, and we are all supposed to get the same service from the government. If that is the case, why does one person pay more than another? Sure, it wouldn't be possible for everybody to pay the exact same amount. Children obviously don't have jobs and can't pay taxes. People who make less money can't afford to pay as much as those who make lots of money, so we try to come up with a balance that works.

Someone who makes $10 million (or more) a year could afford to pay 90% tax and still live comfortably. But in what way is that fair? Presumably this person is providing a service to a business that they have both agreed is worth $10 million a year, and that they are both happy with the arrangement. Why should the government be allowed to take such a large amount of money as taxes? The rich person doesn't really get much extra out of the deal. At the end of the year, they may have only paid $100,000 in taxes, which is 1% of their earnings, but the have paid the same in taxes than 10 people making $30,000 who may have paid $10,000 each.

Also, it's easy to point out individuals who don't do a whole lot and earn a lot of money, but most people who make a lot of money actually put a lot of effort into their jobs, and they are not easily replaceable. Otherwise, they would find somebody else to do the job for cheaper. Even sports stars who get paid to play a game actually have to put a lot into their jobs. They spend a lot of time away from home. They spend countless hours training, and they are among the best at what they do. People are paying a lot to see them play, and the money has to go somewhere. If it doesn't go to the players, it goes to the team owners, or the league or someone else.

Also, some may argue that the wealthy do get more out of their taxes, but that is something that should be changed. We should fix the system so that they get exactly as much as everyone else. Not make them pay more because we know they get more out of the system.

Re:So the taxpayer pays for overage, got it

[pscottdv]

There would be the revenue from Balmer's income taxes over the next 15 years.

Re:So the taxpayer pays for overage, got it

[postbigbang]

There is something negative in exchange for the average tax payer, called: we prop up the difference because the bills still need to get paid. Teachers, public safety, roads, etc etc.

This is yet another example of how that thick, bought-and-paid-for tax code benefits those who bought and paid for it. That means most of us that thought that government fairness wasn't an oxymoron get another kick in the slats.

Remember to vote. And if in Chicagoland, often and frequently.

Re:So the taxpayer pays for overage, got it

[aaarrrgggh]

When anyone buys something with "goodwill"min the price they can take advantage of this, against future profits.

This is no different than depreciation; it is actually disadvantageous to the taxpayer in the short term as you cannot write off the goodwill all at once against other income.

Of all the things to get up in arms about, this really isn't one of them. Just wait until Ballmer starts pushing for H1b's for players...

Re:So the taxpayer pays for overage, got it

[nucrash]

He only manages to make 25 times the what the median household income is. So yes, he's going to pay more in taxes in one year than most of us do in a life time.

Re:So the taxpayer pays for overage, got it

[king neckbeard]

And who do you think tells the politicians what to do? Hint: it's not the general public.

Re:So the taxpayer pays for overage, got it

[GameboyRMH]

Someone who makes $10 million (or more) a year could afford to pay 90% tax and still live comfortably. But in what way is that fair? Presumably this person is providing a service to a business that they have both agreed is worth $10 million a year, and that they are both happy with the arrangement. Why should the government be allowed to take such a large amount of money as taxes? The rich person doesn't really get much extra out of the deal. At the end of the year, they may have only paid $100,000 in taxes, which is 1% of their earnings, but the have paid the same in taxes than 10 people making $30,000 who may have paid $10,000 each.

The rich person gets to harvest most of the productivity of a vast number of people who receive many services from the government but don't personally cover the entire cost through their taxes.

Also, some may argue that the wealthy do get more out of their taxes, but that is something that should be changed. We should fix the system so that they get exactly as much as everyone else. Not make them pay more because we know they get more out of the system.

Sounds fair. We'd have to stop them from absorbing so much of the value that others produce.

Re:So the taxpayer pays for overage, got it

[nealric]

This is a common misconception. The teams themselves are for-profit enterprises that get taxed just as any business would. Some of the leagues, however, do have non-profit status (NOT charitable status, which is different). This is because they are business leagues, just like the "Dairy Farmers of America" or other business groups. They are "non profits" because they are really just spending vehicles for the teams. For example, each dairy farmer that is a member of the Dairy Farmers of America might pay $100 a year to be a member of the organization, which runs "got milk" commercials in order to spur demand. No individual farmer could pay for those commercials, so they pool their money. Same thing with the sports leagues. The league exists to run joint advertising, license merchandise, run publicity, etc. on behalf of the teams.

Re:So the taxpayer pays for overage, got it

[aaarrrgggh]

No, not really. There are a few bad exceptions (Hollywood accounting comes to mind), but on the whole the system is designed reasonably fair. Specific tax credits (not deductions) are a problem, but it is all designed around the complexities of the tax code. Simplifying the tax code isn't easy.

Simple example: my wife has her own business, and makes less than $50k from it. Almost all that money goes into her 401k. She takes a minimal salary ($20k per year, of which $17.5k goes to her 401k, $2.5k goes to payroll taxes, and $2k goes to employment taxes). Everything else goes into her 401k, and we live off of my salary. This arrangement cost $400 to set up, and $250 per year in accounting, and saves us about $20k in taxes. (More importantly though it helps her build her retirement account which was non-existent 4 years ago.)

I also know several teachers that use real-estate tax benefits to fund their retirement or kid's college, taking advantage of the tax write-offs there.

The one thing I really wish would be different is that the IRS didn't tax retained earnings in small businesses. This is economically crippling and makes for poor business decisions busy not building sufficient reserves. However, if they did this it would make abuse significantly worse as it would allow a small business to choose when and how much taxes they pay.

If you want to learn about how to minimize your tax liability, read a book or hire an expert. The book can get you 90% of the way there. The one I read was something like "tax write offs of the rich" for $20. It wasn't anything revolutionary, but it makes you think about how you leverage your money. It had some terrible advice (in the post housing bust mindset), but you need to understand the implications of your actions and not just expect a magic formula to make you wealthy/happy/healthy/whatever.

Re:So the taxpayer pays for overage, got it

[ganjadude]

also true, but irrelevant. if you are borrowing money from someone else, you are at their mercy anyway.

Re:So the taxpayer pays for overage, got it

[Anonymous Coward]

And who do you think tells the politicians what to do? Hint: it's not the general public.

Two words: Citizens United.

Re:So the taxpayer pays for overage, got it

[JAlexoi]

Can we PLEASE stop acting like letting people keep their own money is somehow the same as the tax payers giving money to "the ev0l rich"???

Fine. If that's the case, would these "evil rich" do us all a favour and pay for the overwhelming publicly funded protection they get?

Re:So the taxpayer pays for overage, got it

[ganjadude]

they do. look at the total tax revenue brought in by "the rich" compared to the tax revanue brought in by everyone else

the top 1% of tax payers pay 38% of all income taxes yet only have a 20% share of total AGI. Furthermore, the top 50% of tax payers pay practically all of the nation’s federal taxes (97.3%) while commanding 87.25% of total AGI. This table from the IRS is the source for the often politically bantered argument that 47% of American income earners pay zero federal income taxes.

- See more at: http://www.financialsamurai.co...

Re:So the taxpayer pays for overage, got it

[slashmydots]

No, the taxpayer is on the hook for the taxed percentage of the difference. In other words, far from 100%.
By the way, I'm pretty sure the entire summary is wrong. Goodwill is considered an asset and you can only write it off if you lose it. At least that's how companies work. Microsoft did it recently with their surface line.

Re:So the taxpayer pays for overage, got it

[Hognoxious]

Hollywood accounting comes to mind

Well it shouldn't - it's nothing to do with tax avoidance/evasion.

Re:So the taxpayer pays for overage, got it

[CanHasDIY]

Just wait until Ballmer starts pushing for H1b's for players...

Players perhaps not, but there are janitors, technicians, AV guys, and a host of other positions that he very well could replace with low wage immigrant workers.

Re:So the taxpayer pays for overage, got it

[swillden]

So when someone buys a team at overvalue, the regular tax payer is on the hook for that overvalue.

I don't think you understand what "deduction" means. It doesn't mean that Ballmer gets to recover his billion dollars from taxpayers, it just means that he doesn't have to pay taxes on that much of his capital gains income. Essentially, they're treating this as a bad investment on which Ballmer has taken a billion-dollar loss. In any investments you pay taxes on gains, but you get to deduct any losses against those gains.

In this case, it's actually an asset depreciation, not an actual loss... but those details don't really matter.

Note that the other side of this is that if Ballmer turns around in a few years and sells the team for exactly what he bought it for, any portion of the original value which he has claimed as a loss (depreciated away), but which he then recovers in the sale becomes a new capital gain. Basically, if the buys for $2B, argues that $1B of that was a loss and offsets it against other gains (using all of the $1B) then sells for $2B, the IRS will say "You bought for $1B and sold for $2B, so you have to pay capital gains on $1B".

There are lots of actual loopholes out there, but this isn't really one of them.

Re:So the taxpayer pays for overage, got it

[s.petry]

I think some of your points have merit in theory, but not in reality as written. For example, claiming that Tax payers don't fund the asset (team) is correct, but what do Tax payers fund? An easy target is that tax payers fund the building of Stadiums. Contrary to what you may believe, AT&T Park was not paid to be built by AT&T. Oracle Arena was not paid to be built by Oracle. Tax payers don't get direct return on their investments either, they get indirect benefit if they have a business in the traffic zone that can benefit. Which of course does increase tax revenue for the Government because the small business owners are not the ones receiving tax breaks.

In other words, yes the tax payers do pay for it. It may not be money paid from the Government directly to Balmer (or what ever rich guy you want to replace him with), but it does cost the tax payer money.

Lastly, the implication that the amount and not a percentage of money paid for tax is the only factor to consider is wrong. We have had over 30 years of watching "Trickle Down" fail. Lets stop trying to prop up the failure and work to make the system fair.

Re:So the taxpayer pays for overage, got it

[s.petry]

First, a percentage is correct and not a flat amount. How we determine the percentage is a good question, and a great discussion.

Next, your insinuation that a rich person takes their personal income and pays people's annual wages with it is provably wrong. This is the same exact claim made by Reagan with "Trickle Down" and it did not work (yet all of the tax law is still in place). A wealthy person _could_ surely start a business venture with personal income but this is not the only thing that happens. At least as often as a new business gets started, a business gets bought out and stripped of assets which reduces jobs in society and increases someone's personal wealth by that amount.

Your last paragraph is exactly double speak (intentional or otherwise). If I go with your middle statement, I concur that the system should be fair and that no one person should get more benefit than another.

Re:So the taxpayer pays for overage, got it

[halivar]

Then your real issue is idiot voters who do whatever the TV tells them. And that's if Citizen's United actually has the effect you think it does.

Re:So the taxpayer pays for overage, got it

[ranton]

Sure, but only if I can get a tax credit for 50% the price of my next house. I mean, if the house was not sold, there wouldn't be any tax revenue.

Well, considering the long term average 30 year mortage rate is 8.5%, and assuming your property taxes are 2% of your home's worth yearly, you will certainly save quite a bit money on taxes for your house. A $300k house at those rates will provide an owner in the 25% federal tax bracket $132,606 over the life of the loan, and $45,000 in property tax savings. So you will actually get a "tax credit" of almost 60% of the price of your home.

Thinking of taxes this way is a bit silly, but if you really need to feel like you are somehow avoiding taxation by taking advantage of tax deductions then I guess this will help.

Re:So the taxpayer pays for overage, got it

[Anonymous Coward]

You know that AGI stands for "Adjusted Gross Income", right? It's a little disingenuous to use their income minus deductions when the whole conversation is about how they have more ability to take advantage of deductions.

Also, even with them paying for most of the taxes by dollar amount, they are getting a fantastic deal. They command the vast majority of the accumulated wealth, get almost all of the benefits of increased productivity and economic growth, own the majority of real property, get preferential law enforcement, and have almost exclusive access to legislators.

Re:So the taxpayer pays for overage, got it

[nealric]

Hollywood accounting still has to be reconciled with tax accounting. You are required to use the tax rules for tax accounting, so using some exotic method for your private contracts doesn't help. Hollywood accounting exists only to screw the actors, not the IRS.

Re:So the taxpayer pays for overage, got it

[Overzeetop]

Actually, that's my "ideal" tax system. No deductions*, no exclusions. Many cities have gross receipts taxes on businesses because it's easy to administer and hard to (legally) duck. No marriages, no dependents - one tax id = one tax bill.

Seriously: it makes everything a "cost of doing business" rather than a "tax on success". Every layer of middle man increases the cost of a good, benefiting local producers and direct sellers. Every layer of corporate shell costs money, discouraging said use. Day trading...well, that would be a thing of the past.

Re:So the taxpayer pays for overage, got it

[ganjadude]

we are talking about total dollars, not percentages. you said you want them to pay their fair share, well they are as this article shows. being that that top 1% give the governement 38% of ALL money the government gets and the top 50% pay 97% of the total. meaning the bottom 50% share paying 3% of all taxes

long story short the "rich dont pay their fair share" is a myth created by bleeding hearts to get votes, thats it

Re:So the taxpayer pays for overage, got it

[Charcharodon]

yeah but then what would all the lawyers, politicians, and accountants have to do? Even worse their children would be able to attend all those exclusive schools. THINK OF THE CHILDREN YOU HEARTLESS BASTARD!!

Re:So the taxpayer pays for overage, got it

[Charcharodon]

Teacher's unions
student organizations
emergency responders unions
military organizations
labor unions
political parties
professional organizations
rights & activities related organizations
consumer groups
environmental groups
local and state organizations
private certification agencies
etc, etc, etc
Yeah we are just a bunch of powerless peasants we is.

Re:So the taxpayer pays for overage, got it

[Rockoon]

And who do you think tells the politicians what to do?

For the most part, the middle class.

The middle class benefits from both the taxation of the rich and the taxation on the poor. This isn't because the middle class isnt calling most of the shots. They call most of the shots.

If you make the middle class angry then you will not survive reelection. The politicians vilify both the rich and the poor because thats the tune that satisfies their middle class electorate.

Re:So the taxpayer pays for overage, got it

[judoguy]

Really? How? You damn sure can't do that with your residence.

In most, if not all of the U.S., if you make too much money selling a house, you can get hit with capital gains. But if you lose money, too bad. In some states, merely moving out of state after a sale triggers a tax on ANY amount over the buying price.

Re:So the taxpayer pays for overage, got it

[king neckbeard]

What is this 'middle class' you are talking about? I think I might have heard legends of a middle class existing, but at this point, they are pretty much a fantasy.

Re:So the taxpayer pays for overage, got it

[Pope]

The 1% can afford to pay more.

Re:So the taxpayer pays for overage, got it

[Lost2Home]

we are talking about total dollars, not percentages. you said you want them to pay their fair share, well they are as this article shows. being that that top 1% give the governement 38% of ALL money the government gets and the top 50% pay 97% of the total. meaning the bottom 50% share paying 3% of all taxes

Need to stop with the idea that 100% of the government's revenue is from income tax. You should realize that the amount of money from income tax is roughly on par with the amount of money from payroll taxes - revenue breakdown.

Now realizing that since payroll taxes are capped, meaning they are essentially round off error for the top 1%. So realizing that the top 1% with their 28% of the total income in the US are really only paying about 20% of the actual tax revenue doesn't sound quite so unfair anymore.

Re:So the taxpayer pays for overage, got it

[ganjadude]

just because they can doesnt mean they should. the top 50% of americans already pay just shy of 100% of the taxes in this country, top 1% pays almost 40%!

Let me phrase it this way "how much of ones own money do YOU think they deserve to keep, and how much do you feel the government "deserves" to take away from those who earned it??

Re:So the taxpayer pays for overage, got it

[ganjadude]

Technically, a payroll tax is a tax paid by the employer based on its payroll. An example would be the employer portion of U.S. Social Security (Old Age and Survivor’s Insurance or OASI) or unemployment insurance (FUTA, for Federal Unemployment Tax Act). There may be all sorts of variations, such as limits on the level of wages on which the Social Security tax is applied. Colloquially, I’ve heard the term used for the entire Social Security program, including the employee portion, as you suggest. The income tax comes from the employee based on their income and, from a theoretical or policy (but perhaps not from a psychological) standpoint, is considered distinct. The money isn’t earmarked the same way as OASI or FUTA money. You can read about these topics in standard textbooks or dictionaries of economic or public policy terminology.

http://blogs.library.duke.edu/...

if im reading this correctly, it looks like the payroll tax is paid by the business, not the employee while the income tax is paid by the employee.

Re:So the taxpayer pays for overage, got it

[UnknownSoldier]

Cognitive dissonance much?

The video points out the absurdity and unfairness of taxing with different rages is no different then a petition to redistribute GPA scores.

Re:So the taxpayer pays for overage, got it

[UnknownSoldier]

Typo t->g. Obviously different rates, not rages. ;-)

Re:So the taxpayer pays for overage, got it

[sound vision]

Those who amass more money than a person could conceivably use during multiple extravagantly luxurious lifetimes are afflicted with a type of megalomania/hoarding, more often than not. After a certain point it becomes simply a fixation with adding more digits to the bank balance. The difference between them and the person living knee deep in dollar-store baubles and cat shit is that those who hoard wealth cause significant harm to other people. If we imposed higher taxes on this money these people can't possibly use, we could end so much human suffering in 1 year. Our country could have a health care system, and sane working conditions with a few weeks of guaranteed vacation a year, like the rest of the civilized world. It is the duty of government to improve living conditions for as many people as possible, across the board -- to "promote the general welfare" as stated in the Constitution's preamble.
The growing wealth disparity in past decades has shown that the hoarders have dug in deep. Many of the 1%ers are in positions of power, and they have proven they will not willfully provide the other classes with the fruits of their increased productivity. At this point it can only be done by force, through taxes.

There is no comparison between the working man ticking off his standardized deduction, and the 1%er slave-traders squeezing every last dime from their government and their fellow countrymen.

Re:So the taxpayer pays for overage, got it

[Lost2Home]

Actually it's both. There is a portion of the payroll tax that is taken out of your paycheck for both Social Security and Medicare. There is also a portion of these taxes that is paid by the employer.

However these taxes are capped to approximately the first $117,000 of earned income, not income from capital gains or dividends. So for someone like Mr. Ballmer, they are just round off error.

Re:So the taxpayer pays for overage, got it

[ganjadude]

what is the point of that though? he STILL pays more in a year in taxes than me or you will in our lifetimes, why do you feel he needs to be punished for simply having money? its wrong

Re:So the taxpayer pays for overage, got it

[Lost2Home]

You should realize that he is also benefiting from the US government more than either of us as well. Without the infrastructure and legal system of the US government he wouldn't have been able to accumulate all that wealth. No one would like to go back to the era where you needed your own private army to protect your wealth.

I'm not seeking to "punish" anyone, I am just pointing out that people who think that the wealthy are actually providing the vast majority of the funding for the US government are wrong.

Re:So the taxpayer pays for overage, got it

[Rockoon]

Your view of reality is based on the notion that if you arent very comfortable then you arent a member of the middle class. Thats not how middle class is defined.

Neither extreme of the socio-economic strata. The middle class. The ones that continue to vote for themselves more government benefits and services than they pay for at the expense the rich, the poor, and when its neither of those then its at the expense of future adults... children and all the people that havent even been born yet.

You can't dream your way out of this. Follow the money. They are even adding foodstamps to the list of things required to appease them. At the expense of the rich and the poor. Thats the middle class.

Re:So the taxpayer pays for overage, got it

[Fjandr]

And why do they have the power to change the system? Because all those pesky little taxpayers keep voting Democrat or Republican. Both parties present bills written by lobbyists wholesale, and that's the laws we get.

Re:So the taxpayer pays for overage, got it

[Fjandr]

Sure you should fault the politicians, but that in no way lets uninformed voters off the hook. As for lack of educational dollars, it's been conclusively shown that increased investment does not correlate to better results. School systems are given too much leeway in some areas, and not enough in others, regarding how they are able to spend money. Some of that is the fault of unions, while other fault lies with corrupt administrators or the Department of Education, while still other fault lies with local voters who don't actually hold school board officials to account.

Re:So the taxpayer pays for overage, got it

[swillden]

This is definitely a loophole. Companies are allowed to depreciate or amortize an asset because it loses value over time, like a piece of machinery. Where is the evidence the club is losing value?

It doesn't matter all that much, because any value incorrectly depreciated off becomes a capital gain upon resale. So even if it's completely bogus, it at most delays the taxes. I suppose if there's a massive reduction in gains taxes, or some other real loophole is discovered, Ballmer could sell the team to himself, realize the gain and then exploit that future tax reduction/avoidance. Delays can sometimes be parlayed into avoidance. But I think it's more likely that gains taxes will increase.

Re:So the taxpayer pays for overage, got it

[david_thornley]

Thing is, that person making $10M/year is paying less tax, proportionately, than I am. Almost all of my income is from my job, which means I pay FICA taxes (and, since I'm only making five figures, on all of it), I'm in a fairly high tax bracket, and there really aren't a lot of ways to shelter salary (as opposed to investments and such). I consider that very unfair.

Further, they get more services than I do. Right now, the law enforcement system provides some level of protection for me and my assets, which are less than $1M in value. True equality would therefore suggest that, if a person with $20M is robbed of $19M, the police shouldn't bother investigating.

Re:So the taxpayer pays for overage, got it

[david_thornley]

Your figures are off. If the 1% pay 38% of income taxes, that does not mean they supply 38% of government income. The Feds take in a lot of money through FICA taxes, and states often have sizable sales taxes, and both of those are regressive. I suggest that you look at total tax burden, not just the taxes that support your point.

Re:So the taxpayer pays for overage, got it

[ganjadude]

ahh, so "you didnt build that!"

got it.... sigh

Re:So the taxpayer pays for overage, got it

[ganjadude]

why would you bring state sales taxes into the topic of federal taxes? as for FICA, I would argue its not a tax per se but more like insurance

Re:So the taxpayer pays for overage, got it

[david_thornley]

FICA tax receipts go into the general fund by way of bonds, and there has been talk of defaulting on the bonds for it. I don't consider it secure. In any case, it isn't insurance.

In any case, I figure that anything allocated by Payroll that has to, by law, go to the Federal government is a Federal tax, no matter what it's called. Discussing tax burden by referring to the Federal income tax alone is at best disingenuous.

Re:So the taxpayer pays for overage, got it

[ganjadude]

you get your FICA back though (in some form or another) you dont get your "taxes" back though

Ill ceed that point to a degree. but any state taxes should not be included.

Re:So the taxpayer pays for overage, got it

[Your.Master]

The GPA is intentionally distributed, by professors/teachers/etc., in order to fit a preconceived model. Sometimes it's a forced curve applied after the fact, and sometimes it's just in setting the tests in the first place such that the curve is expected to fall out naturally. By contrast, under pure capitalism, compensation is an emergent behaviour.

A school environment is a communist environment in this sense, or at least a socialist one ("To each according to their contribution"). To make an equivalent for capitalism, you would have to be able to exchange your GPA for goods and services that directly impacted your ability to increase your GPA. Eg. spend a 0.3 GPA points on a tutor.

If the school model for GPAs is a good model to follow for compensation, then you should have a central authority or central authorities distributing your income according to their perception of your contribution. I don't think that's the point you were trying to make.

Re:So the taxpayer pays for overage, got it

[Your.Master]

He's not being punished. He's being rewarded with more money. You just want to reward him with even more money than everybody else wants to reward him with. Everybody else is saying "that's kind of unnecessary".

The Steve Ballmar Foundation

[Anonymous Coward]

We need to setup a foundation to get more money for Steve.
He just can't survive.
Please help to feed Steve more billions of dollars so he can buy... ...everything!

Re:Wrong headline

[king neckbeard]

And the loopholes are there because of the influence the rich have over the government. You can be mad at the people who made a loophole and the people who abuse it simultaneously.

We have the best tax system

[madbrain]

that money can buy.

Re:Wrong headline

[bloodhawk]

It doesn't even say he is taking advantage of it, just that the rules say he can (in which case he would be mad not to do it as I can't think of any group less capable of handling money than the government, he could flush half down the dunny and then give half to a charity and it would still be better spent than going in the tax coffers).

Misleading- Good will is common accounting

[cbelt3]

The implied assumption in the article and in the commentary indicates a deliberate misdirection or a simple understanding of the accounting principles involved in how a business accounts for a BAD DECISION. Every business has the ability to use this 'loophole'. But it's not a 'loophole'. It's a simple recognition that a capital purchase that turns out to not be a good deal should have the loss (cost of the purchase price minus the fair market value of the asset) amortized over the book life of the asset against the income produced by the asset.

Kids, this is basic accounting 301 (Intermediate management accounting). Most accountants will tell you that having good will on your books means you made a dumb decision at some point, and paid more than something was worth. The title SHOULD read:

"Ballmer pays twice what Basketball team is worse, can't write it off immediately, has to wait 15 years."

Re:Misleading- Good will is common accounting

[Freedom Bug]

Waiting 15 years is a better deal than everybody else gets. Everybody else gets to wait indefinitely; most have to realize a loss before it can be claimed. In other words, if you overpay for an asset you don't get to claim a loss until you sell that asset to somebody else.

Re:Misleading- Good will is common accounting

[eric31415927]

There is no loophole here.
Imagine buying a truck to use in a business. The cost of the truck can be written off against earnings over a number of years instead of all at once. The accounting principle here is to spread the cost of the asset over its useful life.

Goodwill is also an asset that can be written off over a number of years. It's an intangible asset with a more ambiguous useful life. The mechanism for writing it off over 15 years instead of, say, 40 years may be questionable. Government policy to attract investment may have led to the 15-year period.

So long as Ballmer is forced to follow the government's rules and he spreads the cost over many years, I see no problem..

Re:Misleading- Good will is common accounting

[DRJlaw]

The implied assumption in the article and in the commentary indicates a deliberate misdirection or a simple understanding of the accounting principles involved in how a business accounts for a BAD DECISION. Every business has the ability to use this 'loophole'. But it's not a 'loophole'. It's a simple recognition that a capital purchase that turns out to not be a good deal should have the loss (cost of the purchase price minus the fair market value of the asset) amortized over the book life of the asset against the income produced by the asset.

Kids, this is basic accounting 301 (Intermediate management accounting).

If it were basic accounting 301, then you would have learned that "goodwill" does not equate to the purchase price minus the "fair market value" of the asset. Goodwill represents the "fair market value" of the asset minus the value of the tangible assets -- the inventory, machinery, real estate, etc. that can be quantitatively and qualitatively priced by sales or marking to a known market.

If you were to purchase the Coca-Cola corportion, then you would be spending an enormous amount on "goodwill." That is because the value of the trade secret for the formulation of Coca-Cola, the value of the brand recognition for Coca-Cola, and the value of the bottler network relationships are all intangible assets that do not have a concrete or easily ascertainable value. A significant part of the value of Coca-Cola lies not in the value of the HQ building (real estate), the office computers, lab, and pilot plant equipment (you don't think the actual corporation owns very many bottling lines and delivery trucks, do you?), but in the value of being Coca-Cola and not Royal Crown Cola.

That's goodwill. You didn't necessarily make a bad decision buying Coca Cola because you didn't buy it for the price of RC Cola, you paid for intangibles that contributed to the medium term P/E ratio (or similar metric) that you actually used to detemine the price tha you were willing to pay. If you try to pack that value into the tangible assets of the corporation, which depreciate over time and must be replaced (note, also over much shorter depreciation scales), then you end up with silly values that are way above market. If you offer a price only based on "real" values of the physical assets, the seller is going to tell you to take a long walk off a short pier.

The difference between (1) the price of the tangible assets and (2) the price the buyer is willing to pay and the seller is willing to accept, i.e., the very definition of a "fair market value," is the value of the intangible assets. Some of those you can estimate a value for, if need be, but frequently they are all lumped together as "goodwill." Sure you can overpay and make a bad decision, but that's because you eff'ed up the value of the revenue stream you could generate versus the cost of the debt you took on(or the opportunity cost of the money you took out of whatever other investment you shifted out of to) to buy it, not simply because you spent money on goodwill.

Signed,
A guy who does M&A work

Re:Misleading- Good will is common accounting

[nealric]

Thank you. I am a tax attorney. People who rant about "tax loopholes" rarely understand what they are talking about. When people talk about loopholes, they can describe any of the following:

1) A logical flaw in the wording of the code allowing very low tax for a transaction or allowing a transaction to "shelter" other income. This would be something like the way Subchapter K was worded (portion of the tax code governing partnerships) allowing the Son of BOSS tax shelter. I would consider these this a "true" loophole. However, when this happens, the IRS will (usually successfully) challenge the transaction under various anti abuse rules in the tax law.

2) Tax preferences. These are things that can be as common as the home mortgage interest deduction or as esoteric as the special dispensation for non-profits that host bingo games. The government is trying to encourage home ownership or VFW halls and writes something into the tax code. Tax preferences can also be the result of lazy budgeting by Congress, describing what is really a spending measure as a tax cut.

3) Provisions of the tax code that apply to certain complex business transactions. Things like the tax deferral for controlled foreign corporations, or as we have here, the amortization of goodwill. Business transactions can be really complex, which means the tax code tends to have to follow suit with complexity. Sometimes these provisions can produce really good results for the business. Often, they can produce very bad results if you aren't careful as a tax planner. When they produce favorable results (or what seems like favorable results) we call them "loopholes". But really, it's just an attempt to accurately measure and tax "income", which can be a very difficult thing to do.

4) Tax evasion. People talk about things like undeclared offshore accounts as a "loophole". It's not really a loophole. It's just tax evasion that is rather hard to catch.

Re:Misleading- Good will is common accounting

[Anonymous Coward]

They don't have to understand to the same level as you, they know that the extremely wealthy can protect their wealth via vehicles the rest of the world cannot. That's the fucking difference.

Re:Misleading- Good will is common accounting

[jittles]

Waiting 15 years is a better deal than everybody else gets. Everybody else gets to wait indefinitely; most have to realize a loss before it can be claimed. In other words, if you overpay for an asset you don't get to claim a loss until you sell that asset to somebody else.

No. He already paid for the team. So he has already realized the loss. The question is whether its a short term loss, or not. Either way, if you or I were to purchase a home and then sell it for a loss, we could choose to do the exact same thing: amortize the lost money over the course of many years. As a homeowner you're given the option of realizing the loss in a single tax year, an option he did not have with this loss. The only difference between this and a homeowner who loses money is the scale. The fact that most homeowners cannot afford to lose that kind of money is a separate issue having to do with wealth distribution.

Re:Misleading- Good will is common accounting

[aaarrrgggh]

For personal assets, yes. You as an individual cannot take tax advantage of buying something overpriced. Buyer's remorse is not tax deductible.

For a company, making that bad decision has other implications; your business has an inflated book value which will never hit equilibrium. Example: Computers are depreciated over 7 years. In years 1, you write off 1/7 the cost of the computer, and treat the other 6/7 as profit. Year 2, you can write off 1/7 against profits that year... same thing in year 3, provided you have profit. In year 4, you buy a replacement computer and retire the first one. Then, you can write off the remaining book value of the original computer, plus 1/7 the value of the new computer.

If you are paying 40% marginal tax rate combined state and federal, what is the net present value of your deductions assuming a discount rate of 5% and the replacement cost is equal to the original cost in dollar terms?

Re:Misleading- Good will is common accounting

[nealric]

It's actually a lot more simple than that. As currently written, the tax code preferences capital over labor because capital gains are taxed at a lower rate than ordinary income. All of the complexity is mostly a red herring. Increase the capital gains rate to match ordinary income, and the effective rate on the wealthy will increase substantially.

Re:Misleading- Good will is common accounting

[Shatrat]

He's not claiming a loss. He's listing Goodwill on his balance sheet. Since this is an 'intangible' asset it's taxed differently than a huge stadium.

Re:Misleading- Good will is common accounting

[laughingskeptic]

Accountants from the 1970s will tell you that having good will on your books means you made a dumb decision at some point. Modern accounting practice is to assign as much value of a major purchase as possible to 'Good Will' because of the associated write off. If you review the fortune 100's annual filings you will find them full of purchases of lesser companies where the majority of the value of the purchase was assigned to 'Good Will'. Since the IRS takes 'Good Will' assignment at face value, why wouldn't you take as big of a write off as possible if you are a business spending money?

Re:Misleading- Good will is common accounting

[Anonymous Coward]

Kind of, but that's a bit over-simplistic. Good Will isn't just "overpayment." It represents the intangible value of something beyond its capital value.

For example, is the Cocacola Corporation only worth it's manufacturing facilities, sugar warehouses, copy machines, and other physical assets? If somebody were to buy Coke for the mere cost of all of its physical assets, it would be a steal. When selling a company/sportsteam/etc, that difference between the purchase price and the physical assets usually turns into Good Will.

My understanding is that it's a quirk of negotiation as much as anything, and it's something of a compromise between the buyer and seller. The buyer wants to consider that value difference it an overpayment ("oh, we are just bad at negotiation and paid way too much") and thus expense it all as an operating loss against income in the first year. The seller wants to consider it a tangible asset, and thus not pay any taxes as there is no profit from the sale. Good Will is something of a compromise which lets the buyer still expense the Good Will for a tax break over a period of time, and is something of a catch-all for everything the IRS hasn't declared as "no, obviously, this is a manufacturing plant with a known value and depreciation schedule."

Re:Misleading- Good will is common accounting

[jfengel]

If I'm following the discussion (and thanks so much for this; I was hoping somebody would explain the concept), the value of goodwill depreciates over 15 years, yes? And you can deduct that as you would the depreciation of a physical asset.

Is that reasonable? On the one hand I could see it. If Coca Cola were to stop doing whatever it's doing to build up goodwill, the value of the brand would decrease over time. The number is arbitrary but that's just the consequence of trying to codify a tax system; buildings and machines don't break down on a fixed schedule either. It does "depreciate".

But on the other hand, it feels like it's an incentive to invest in intangibles rather than tangibles, which doesn't seem like it's as productive for the economy. I know that intangibles produce jobs; that basketball team is selling entertainment, and keeping people employed from the players to the peanut vendors. But entertainment dollars are fungible; how much of Coca-Cola's goodwill produces additional jobs via additional soda sales and how much of it is just devoted to putting dollars in their pockets rather than Pepsi's owners?

Re:Misleading- Good will is common accounting

[nealric]

I'm not ranting about average people at all. Just clarifying. Actually, the tax code for most individuals doesn't need to be all that complex. The U.S. could do what the UK does and have a pro forma tax return for W-2 wage earners and eliminate the need for 90% of the population to bother filing a return. However, that would require tax reform which has proven to be a near impossibility. You could simplify business taxation to a large degree with some key reforms, but as long as you make "Income" the tax base, you are going to have a complex tax code for large business enterprise. However, the large business enterprises aren't getting away with murder to the degree that most people suspect. Remember, corporations are just vectors. Ultimately a real human being has to pay tax, so corporate tax complexity can be a bit of a red herring.

As for the necessity of my profession... any time you have laws, you need someone who specializes in their interpretation or application. Name me a type of law, and I will name you a specialized practitioner. Doesn't matter whether the law itself is simple or complex.

Re:Misleading- Good will is common accounting

[DRJlaw]

Goodwill is the 'gap' between the valuation numbers and the purchase price by definition (http://www.investopedia.com/terms/g/goodwill.asp).

No. Valuation only combines identifiable tangible and intangible assets. If you do not break out and assign distinct values to intangible assets like copyrights, trademarks, patents, or especially other intangible assets such as distribution contracts, those items do not fall within "book value," but rather the goodwill account. Read your own link. There are times that this needs to be done -- for certain tax benefits -- but otherwise you try to avoid this exercise.

To assign a book value to an intangible asset you have to be able to demonstrate that you've given it a so-called "fair value" . For intangible assets that can extremely difficult to do. The value of the "Coke" trademark is not traded on a market, or readily comparable to equivalents, or entirely described by a separate revenue stream (it is in part - licensing revenue for merchandise - but it is also inextricably part of the value of the base product). The entire point of "goodwill" is to provide an account mechanism for that portion of the fair market price -- the non-book value -- that cannot be marked to an asset market like most physical goods.

So what? Why is this news?

[Anonymous Coward]

I don't get why this is on /.

Everyone is equal before the law.

[140Mandak262Jamuna]

Americans, do not give into class warfare arguments. You too have the right to buy sports franchises and write off billion dollars from your taxable income. You too have the right to create a SuperPAC and spend a million dollars to launch attack ads against the politicians who you don't like. Every one is equal before the law. And America has the best political system money can buy, let no one try to convince you otherwise.

Re:Everyone is equal before the law.

[Livius]

"In its majestic equality, the law forbids rich and poor alike to sleep under bridges, beg in the streets, and steal loaves of bread."

Re:Wrong headline

[Crashmarik]

LOL Gates is on record as being for a tax on consumption not wealth.
Can't imagine why a man with 80 billion dollars would hold this position.

The Clippers is not a 'real' business, Steve

[gelfling]

According to your own words. Funny though how when I pointed out that most MS products don't earn a profit I was downvoted as flamebait.

He can only save 1 billion?

[peterpolle78]

This is simply unfair. Steve balmer is a entrepreneur and a jobcreator. We should all band together and give him another billion worth of taxbreak, so he dont have to get money up from his pockets to buy the team.

Re:Wrong headline

[ganjadude]

you are aware he has *given away* some 26 BILLION dollars of his own money. just given away.

Gates, who has already donated in excess of $26 billion, is once again the richest person on the planet, according to Forbes Magazine's annual report on the richest people in the world

Re:Wrong headline

[NotDrWho]

Our government demonizes the rich when in fact its government who approves these loopholes in the first place.

And who do you think OWNS the government?

Don't hate the player

[enjar]

Hate the game.

I'll wager that Ballmer doesn't actually know much about his taxes. He pays someone (or, more likely, a group of someones) to figure out his tax return. Their job is to make sure he pays what he owes and not a penny more. I make considerably less than Ballmer but I also employ an accountant to do my tax return versus doing it myself. I expect her to advise me on how to pay the correct amount. I'm not looking to get audited or get sent to jail for tax fraud, but on the same token I have many other uses for my own money that don't involve paying taxes. My wife runs her own business and also uses the same accountant, who advises her on what deductions she can take and which ones she cannot.

I would personally like to see the US tax code vastly simplified. Much like trying to debug horribly written spaghetti code, the sheer complexity and length of it (IIRC it is will over 30K printed pages at this point) makes effective auditing difficult, if not impossible. As others have mentioned, the "fairness" comes into question when people (including corporations, because they are people, too!) of enormous wealth are lowering their rates considerably using these strategies. I think everyone on some level knows that some level of taxation is required to pay for roads, court systems and other services we like here in the first world -- but people get pissed off when they see anyone (rich or poor) who seems to be abusing the system -- from welfare fraud all the way up to billion dollar tax dodges.

Re:Don't hate the player

[king neckbeard]

It's fine to hate the player that rigs the game as well as the game.

Re:Don't hate the player

[nealric]

It's true that the tax code is extremely lengthy, but the portions that apply to individuals who are not running a business with other people would actually fit into a volume of around 100 pages. The other 29,900 pages cover things like employee pension plans, the rules governing non-profits, International business taxation, etc. The only people who need to know and understand these things can easily employ professionals to manage them. And it's simply false that the tax code is too complex to effectively audit transactions. There may be certain aspects of the code where complexity hinders compliance, but that does not mean a professional is unable to evaluate whether a given tax payer is in compliance.

Loophooles for poor people too...

[Etherwalk]

And the loopholes are there because of the influence the rich have over the government. You can be mad at the people who made a loophole and the people who abuse it simultaneously.

It's not like tax policy doesn't also help poor people in some ways.

The earned income tax credit is basically the way we've raised minimum wage for the past thirty years. (We haven't formally raised minimum wage because that would be hard politically--turns out it's much easier to make policy when you do it in taxes.)

Re:Loophooles for poor people too...

[king neckbeard]

Giving a pittance to the poor doesn't really compare.

Re:Loophooles for poor people too...

[jriding]

"Let them eat cake!"

Re:Loophooles for poor people too...

[CanHasDIY]

When the Constitution was written, "income" was defined as "profits from business transactions," not money exchanged for labor. In other words, the entire modern concept of "income taxes" is a complete FUCK YOU to the nation's less well off population.

I don't blame you for failing to understand the distinction; after all, it has been a century since the wealthy pulled off that particular scam.

Re:Wrong headline

[king neckbeard]

The difference is that in a certain strict sense, Congress made the loopholes on the rich, thus Congress deserves blame. The people who influenced Congress to make those changes and the people that take advantage of those loopholes are pretty much the same set, though.

Major league sports are a welfare scam

[Required Snark]

NBA, NFL, MLB, it makes no difference. They are all state supported monopolies that make obscene profits by stealing from the general public.

They have lots of ways to steal, and they are really good at it. First, of course is their monopoly status. It's what every giant corporations dreams of. All the benefits of pretend capitalism, none of that pesky competition.

Then there's the stadium scam. Get a city to build you a stadium, along with getting a bunch of tax breaks. Pretend that you are bringing in "jobs". In fact most of the jobs are low level minimum wage jobs for running the physical plant and selling food. Not much in the way of real economic benefit.

The media contracts are where they real big time theft happens. If you have cable or any high speed media link, you are automatically paying for sports. Then if you want to watch something not in your area, you have to pay extra for the privilege. It's like the MicroSoft Tax, only worse. The only way to opt out is to stick to terrestrial HD broadcast.

No wonder Ballmer joined the owners club. He finally achieved 100% monopolist status, which he was never quite able to get at Microsoft.

Personally, I hope he chokes to death on some greasy stadium food.

Re:Major league sports are a welfare scam

[Required Snark]

We're subsidizing billionaires who are making huge profits. For the most part we're not talking job that are middle class, but part time low wage jobs.

Given a finite amount of subsidies, is that a cost effective way to invest public resources? I highly doubt it.

Tax credit = reduced government resources. Let's play pretend. Assume that there were no billionaire giveaways for sports, and that the money went to the educational system. Fewer high school drop outs, more college graduates. Finishing school leads to lifetime income. Graduates will be paying taxes for their entire lives and generally being productive. People who finish school are less likely to end up in jail. Also more teachers, and jobs are middle class jobs, not part time minimum wage jobs. This increases the tax base.

So which would be a better investment?

Stop thinking like a toady, start thinking like a citizen. Citizens take responsibility for the well-being of society, and they want everyone to be equally responsible. That includes billionaires, who don't deserve a free ride.

Re:Major league sports are a welfare scam

[tepples]

Instead of taking free paychecks from the city, they pay some to the state.

Underemployed people still get what amount to paychecks from multiple levels of government, such as city services (subsidized by those wealthier than them) and state health insurance subsidies under expanded Medicaid (or foreign counterparts).

Re:Wrong headline

[king neckbeard]

And if someone is on record as supporting something, then clearly they actually support it. Also, it's funny how the ploy of thinking that they are great people by giving money to charity worked on you.

Summary bad...

[Etherwalk]

The summary (and the non-paywalled article) are not clearly written. I am guessing that they mean sports team owners can depreciate goodwill over fifteen years...

Re:Wrong headline

[rcharbon]

If Bill gave away all but his last billion, he would still have A BILLION DOLLARS. So, nice of him to help, but there's no real cost to him for spending billions on charity work.

Re:Wrong headline

[DoofusOfDeath]

you are aware he has *given away* some 26 BILLION dollars of his own money.

We he have had that money if he hadn't engaged in a lot of illegal activity while at Microsoft? Doubtful.

I have four words for you today.

[Junior J. Junior III]

I.
LOVE.
THIS.
COUNTRY!
WOOOOOOO!

Does He Pay That Much in Taxes?

[wisnoskij]

So that he will be able to use this credit, even in the next 15 years?

Re:Wrong headline

[ganjadude]

it shouldnt be about "what hurts you" that is horrible way of looking at it, its a jelous mind. It should be about how much help he has done for others. I wouldnt care of he had a trillion dollars, he still does more to help people than anyone else does financially.

Growing up in america, it was everyone dream to become rich, now it seems everyones dream is to shit on the rich... explain to me how that helps ANYTHING for ANYONE???

Who Cares About The Taxes , , ,

[tgeek]

, , , I'm more interested if he'll hire Bobby "The Chair Chucker" Knight to be head coach . . . They certainly share the same style . . .

Re:Wrong headline

[ganjadude]

i never said that he was "great people" I simply said he is giving away more money of his own than anyone else is. its well known that bill gates was a d bag, but the point remains that he is doing more to help than most.

Re:Wrong headline

[king neckbeard]

You are ignoring the harm that he has done through anti-competitive business practices. What he's giving to charity is chump change in comparison, and his charity is of questionable efficacy (other than being a tax shelter and being good PR). There's nothing inherently wrong with being rich, but at a certain level of wealth, you will find little other than robber barons.

More government welfare for sports teams

[QuietLagoon]

Government-sanctioned monopolies that suck billions of dollars out of tax-paying citizens.

Re:Wrong headline

[king neckbeard]

And that's a moot point if he's done more harm than most. If I steal a thousand dollars from you and buy you a case a beer, it doesn't put them in a better position than a friend who buys you a single beer but didn't rob you.

Re:Wrong headline

[Hognoxious]

Never mind that, just add up all the productivity lost due to BSODs, crashes, freezes, virus infections, spambots...

Re:Wrong headline

[ganjadude]

anti competitive business practices? are you talking about "bundling a web browser?" granted IE was shit but giving away something for free should not be against the law

not that I disagree with you in principle, but i just dont get all the jealousy against rich people. one day I hope to be one. perhaps if more people thought that way (like americans did until the past 20 years) we would be better off

Re:Wrong headline

[ganjadude]

Any time you hear any rich person asking for more taxes ask them have they donated to the gov and not used any deductions they are entitled to.

and i dont blame them for not giving the government money it doesnt deserve. The same government that is giving guns to gangs accross borders, spying on all americans and people abroad, illegally detaining people. why would I want to help fund that more than i am obligated to?

the government is not there to help YOU. it should be but in its current form its only goal is to rape the people for their own good.

Re:Wrong headline

[ganjadude]

except for thats apples and oranges. we can question some things MS has done in the past, most of it IMO is blown out of proportion (bundling IE for example should never have been an issue for example) bill gates and M$ has never stolen anything from me, so im not out anything based on his practices. he was a ruthless businessman no question

Alliteration

[wonkey_monkey]

Steve Ballmer Gets Billion-Dollar Tax Write-Off For Being Basketball Baron

C'mon, we can do better than that:

Ballmer Bags Billion Bucks By Becaming Basketball Baron

Re:Wrong headline

[ganjadude]

yeah, thats true. if theres one thing I hate gates for the most its the damn BSOD... and clippy

Re:that's fine for something important and necessa

[alexander_686]

Because they set the rules, schedule the games, helps set the pay – which makes more teams competitive and the game more enjoyable. Mostly housekeeping stuff. So I have low objectives here.

Here is a link.
http://www.npr.org/blogs/money...

That being said, I am looking at a construction site for a new sports stadium which I am helping to pay for via my taxes. Subsidies for billionaires. That I grumble over.

Re:Wrong headline

[Anonymous Psychopath]

No, the loophole is there because paying taxes on a loss makes zero sense. Did you even read what you responded to?

Re:that's fine for something important and necessa

[anagama]

Don't be an idiot. Food is important, even foods that only 99.999% of the population can eat. Secondly: Lactaid.

Re:Wrong headline

[king neckbeard]

Actually, they got off very light for the harm their business practices caused. That you can't easily point to a simple direct effect it has on you is irrelevant. They are good at tricking you in these things because our brains don't really work on the kind of scale in place here, but it's a real stretch to claim that Gates' ledger is in the black, especially since a lot of the practices of B&MGF are themselves harmful or of limited utility.

Re:Wrong headline

[king neckbeard]

anti competitive business practices? are you talking about "bundling a web browser?" granted IE was shit but giving away something for free should not be against the law

Intentionally breaking compatibility with DR-DOS, anti-Linux FUD, the difficulty in getting back the MS tax, countless instances of embrace, extend, extinguish, threatening OEMs with what is effectively a kiss of death if they didn't only ship MS software. That you think it was about bundling a browser suggests you have a very limited background here.

not that I disagree with you in principle, but i just dont get all the jealousy against rich people. one day I hope to be one. perhaps if more people thought that way (like americans did until the past 20 years) we would be better off

Actually, that's exactly how we got here in the first place. We put up with a lot of bullshit because we were told that one day we might be rich, and we thought that it would be us.

Re:Wrong headline

[ilparatzo]

Goodwill is not a "loophole", it a tax law it it relates to money spent on a purchase of a business over and above it's market value. It's only a loophole in the sense that you don't like it and it needs to have a bad name to try and demonize it. A loophole is: "an ambiguity or inadequacy in the law or a set of rules". Not a specific rule for how certain value can be deducted from profits.

Goodwill as a tax advantage works whenever anyone buys a business. So if your parents go and buy a mom and pop store down the street, and pay more than what it's value appears to be, they get a tax advantage in the future profits of that business. If you buy a business of any kind, whether it's value is in the thousands, millions or billions, you get to use goodwill. It's not a "loophole for the rich" apart from the argument that only the rich can afford to buy businesses.

If you don't like the rules around goodwill, I would urge you to understand what it is and what it's there for rather than lashing out at it without any knowledge beyond "Ballmer is saving a bunch of money on taxes, damn that cheater!". It will help your argument against it immensely.

Re:that's fine for something important and necessa

[nealric]

It's not a subsidy. The federal tax code taxes income, but not spending. It's not really a subsidy when spending is not being taxed. Even if you made the leagues taxable entities, the actual tax paid would be near zero.

Re:lol

[PPH]

This way they at least get some money and avoid a decade of legal battles to get it.

Or, they could just take it and then have the taxpayer go to court to get it back. Why should sports team owners be treated differently from the rest of the taxpayers?

Re:Wrong headline

[king neckbeard]

I wasn't even discussing the specifics of this case here, just dispelling the 'hate the player, not the game' meme because it's utterly idiotic, and you can put blame on both the government and individuals.

Re:Wrong headline

[FilmedInNoir]

It's not jealousy, it's a fear of plutocracy.
People with money understand that if someone else has money, their money becomes less valuable, so they change the laws and lobby government to keep other people from getting rich.
Example: copyright laws being stretched over and over again to keep corporate cash cows from falling into public domain. Disney and their mouse. Submarine patents. Net Anti-neutrality.
I remember a story of how Apple successfully sued an ex-employee for starting a new business because he had obviously thought of the idea for the business while working at Apple.
*Thought of*, they sued him over his thoughts, not that he left with a pile of paper or a floppy disk.
Hey, if you can hire an army of lawyers for millions of dollars, you to can win every court battle.

Come on, guys, you can do better than that...

[Anonymous Coward]

How about...

Ballmer Benefits! Bastard's Billion-Bucks Better By Becoming Basketball Baron.

BALLS!

Re:Wrong headline

[ganjadude]

ok, ill bite. explain to me how something M$ or bill gates has done that directly affected me??? (in a negative way)

no subsidy. No profit means no tax

[raymorris]

"We" are subsidizing that only if you and I own sports teams. It's the teams that pay for it.

Taxes are paid when you make money. If you buy a widget for $5 and sell the $10, you've made $5, which you'll pay taxes on. The teams make money and pay taxes. The NFL is setup where the NFL itself is not allowed to make money. Because it doesn't make money, it doesn't owe any income tax. The teams make money and therefore must pay income tax.

Discount because team actually sucks?

[billstewart]

If I buy a car that turns out to suck, I don't get a tax writeoff for it.

The whole professional sports business is a racket - things like the NFL being a non-profit, etc.

Re:Wrong headline

[king neckbeard]

If Ballmer is morally opposed to that stuff, he has more effective tools than avoiding paying taxes through the legal avenues available to him.

Re:Wrong headline

[king neckbeard]

I didn't say it affected you directly, which is why it's easy to hide the costs. Here's an example. Because MS controlled the browser market, HTML standard adoption languished, and web developers had to support IE6 much longer than we would in an actual competitive market. The amount of extra time spent for that is enormous (and in many cases, supporting IE would take about as much time as supporting all other browsers combined). They've also added on costs with bullshit patent lawsuits that have added more than the cost of the Windows Phone OS to most Android manufacturers. In addition to being low quality patents, a lot of them are only needed because MS doesn't support filesystems they didn't create. So, if you want a phone to conveniently work as a flash drive on any machine you plug it into, you have to use Fat32 or NTFS. There are plenty of perfectly good filesystems that would be fine if MS would support anything that they didn't create. NIH syndrome is one of the biggest issues of MS asserting their dominance.

Is it fair to single out Ballmer?

[walterbyrd]

This is just another tax-break for the super-wealthy. Nothing unusual about that.

These lavish tax breaks are not just for Ballmer, there are many such tax breaks for one percenters.

Re:Wrong headline

[ganjadude]

fair enough points. but it all boils down to choice. you always could have bought a mac. you always could have bought netscape (back in the day) if business didnt base its builds on active x (and now silverlight) it wouldnt be browser specific. the people who made the tools always could have stayed strictly HTML compliant, they chose not to. I cant fault microsoft for bad business practices of others.

If anything one could argue the exact opposite, due to M$ policy, it caused others to get outraged and make competing products better.

i get your points, I know I hated that time when IE dominated the landscape as much as anyone else and was so happy when mozilla came to the rescue. but I would hardly call any of that "harm". I mean they could just not exist at all, and we wouldnt have a lot of what we do have today. you can make the same complains against any big company, ma bell, the railroads, electricity. while it may not be perfect, its STILL orders of magnitude better than the previous generation

Re:clickbait 4 ignorant. Investment in money machi

[luis_a_espinal]

> This is not $70 millions in non-taxable charities, but an investment on a money machine in the sports/entertainment industry.

Yes, he bought a business, so he'll pay income tax on any income that is generated. If he buys T-shirts for $10 each and sells them for $25 each, that's a $15 profit he'll be taxed on.

If he buys hot dogs for $2 and sells them for $8, that's a $6 profit on which he'll pay taxes.

If he buys a team for a billion dollars and over 15 years he gets his billion back plus $500 million more, that's a $500 million profit he'll pay taxes on.

The billion he apent buying the team is money he ALREADY earned from Microsoft, so he ALREADY paid taxes on it. Of course he doesn't have to pay income taxes on the same money again when spends it on a team. It's INCOME tax, not SPENDING tax. The article is just clickbait for the uninformed and gullible, silently assuming he should have to pay income tax over and over on the same money. How many times he should be taxed on that money the author doesn't say.

Wait, what? $70 million per year for the next 15 years (future tense) is money he already made (past tense)?

Re:This is why ...

[Lilith's Heart-shape]

Eat the fucking rich.

I'd rather eat their trophy wives.

Re:Wrong headline

[king neckbeard]

fair enough points. but it all boils down to choice.

Except for the fact that MS effectively killed all reasonable choice. I would argue that Apple was a bit of a co-conspirator in this matter, as they priced themselves out of being a legitimate mainstream competitor while taking the public's eye as the most visible choice that wasn't MS and actually contributed to the IE lock-in. You are not realizing the impracticality of other choices because of MS's actions.

If anything one could argue the exact opposite, due to M$ policy, it caused others to get outraged and make competing products better.

Except that healthy competition does a way better job of that than fighting a powerful. The iron grip of IE was a small dark age in regards to browser advancements. The rapid growth we've seen as of late is the result of having a number of competing browsers trying to outdo one another.

I mean they could just not exist at all, and we wouldnt have a lot of what we do have today. you can make the same complains against any big company, ma bell, the railroads, electricity. while it may not be perfect, its STILL orders of magnitude better than the previous generation

You are assuming that if they hadn't exist, nobody else would have fulfilled the same niche. That is only true on accidental inventions. Had Alexander Graham Bell been struck by lightning on the way to patent office, we would've had Elisha Gray to take his spot the same day, and probably at least a half dozen others within a year or two.

Encouragement of entrepreneurship

[tepples]

the portions that apply to individuals who are not running a business with other people would actually fit into a volume of around 100 pages

In an era of unemployment, I keep hearing pundits encourage other un- or under-employed people to start their own business, with proverbial blackjack and hookers. This would bring more ordinary people under the scope of the other tens of thousands of pages that do apply to those "running a business with other people".

The only people who need to know and understand these things can easily employ professionals to manage them.

Does this include a startup without a big pile of venture capital?

Re:Encouragement of entrepreneurship

[nealric]

Well, yes and no. A truly small business started by a single individual (or spouses) will be treated as a disregarded entity unless it elects otherwise or forms a corporation, which does not subject the business person to the full brunt of business tax complexity. It's more complex to run a small business, but mostly from an administrative standpoint (i.e. keeping all your receipts, etc.). The actual tax law that applies to such small businesses wouldn't expand all that much. But, in my experience, the people who really get into trouble with the IRS tend to be small business people. Big businesses have the technical and administrative resources to follow the law.

A VC funded startup will have tax planners on the VC side.