How do McCourt and other rich guys avoid paying taxes?

In the case of the Dodger owner, he just borrows against the team's ticket revenue and other assets. In one year, according to divorce filings, the McCourts spent $45 million, but since that money is not coming from actual income - just borrowing - it's not subject to any federal tax. They're really shameless, those two. Tax maven David Cay Johnston uses Frank and Jamie as an example of how the well-off are often able to bypass the IRS ( McCourt's stiffing of the government got some attention during the divorce trial). From the Association of Alternative Newsweeklies

John Paulson, the most successful hedge fund manager of all, bet against the mortgage market one year and then bet with Glenn Beck in the gold market the next. Paulson made himself $9 billion in fees in just two years. His current tax bill on that $9 billion? Zero. Congress lets hedge fund managers earn all they can now and pay their taxes years from now.

[CUT]

Lots of other people live tax-free, too. I have Donald Trump's tax records for four years early in his career. He paid no taxes for two of those years. Big real-estate investors enjoy tax-free living under a 1993 law President Clinton signed. It lets "professional" real-estate investors use paper losses like depreciation on their buildings against any cash income, even if they end up with negative incomes like Trump.

This is why serious reform of the tax laws is so daunting (some would say impossible). Each loophole has a formidable constituency that will hire lawyers and lobbyists and spend millions of dollars to either hold onto their giveaway or come up with another way of skirting taxes.


More by Mark Lacter:
American-US Air settlement with DOJ includes small tweak at LAX
Socal housing market going nowhere fast
Amazon keeps pushing for faster L.A. delivery
Another rugged quarter for Tribune Co. papers
How does Stanford compete with the big boys?
Those awful infographics that promise to explain and only distort
Best to low-ball today's employment report
Further fallout from airport shootings
Crazy opening for Twitter*
Should Twitter be valued at $18 billion?
Recent Sports stories:
Lakers 'faith' may lead to folly
Doug Krikorian back on the beat in Long Beach
Jonathan Martin's Harvard-Westlake (and LA)
The beard stands on principle
The case for Ed Orgeron

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Mark Lacter
Mark Lacter created the LA Biz Observed blog in 2006. He posted until the day before his death on Nov. 13, 2013.
 
Mark Lacter, business writer and editor was 59
The multi-talented Mark Lacter
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