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Sir John Templeton, 1912-2008, RIP and thank you for the investing lessons.
July 9, 2008 3:48 AM   Subscribe

The simple phrase "it's different this time" are the four most expensive words in the English language. Sir John Templeton, 1912-2008, we thank you for this lesson and countless others.

One of modern finance's greatest pioneers, in 1954 Sir John Templeton launched what was one of the first globally oriented mutual funds, Templeton Growth Fund. At that time, almost nobody invested outside The United States. However Templeton argued that by restricting choices to domestic securities, investors were denying themselves of the chance to markedly increase portfolio diversification, lower volatility while increasing overall returns.

Today Templeton's approach to portfolio diversification is textbook at business schools. Ideas and theories he devised and put into practice decades ago led to such stunning performance that in 1999 Money Magazine called Sir John “arguably the greatest global stock picker of the century”. Over a period of forty years, Templeton Growth Fund returned an average of 14.5% per annum.

In 1992, a month before his 80th birthday, Templeton sold his mutual fund empire for a reported $440 million to Franklin Resources Inc. of San Mateo, California.

While still was active in the fund's strategic management, Templeton next turned his attention to religion and charitable endeavours, founding the John Templeton Foundation which he intended to "serve as a philanthropic catalyst for research on concepts and realities such as love, gratitude, forgiveness and creativity."

Sir John did, however, leave those of us still learning how to invest with one final gift: Sir John Templeton's 16 Rules for Investment Success. [.pdf]

Sir John Templeton, 1918-2008, RIP and Godspeed.
posted by Mutant (67 comments total) 6 users marked this as a favorite

 
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posted by ruelle at 4:03 AM on July 9, 2008



On a less unambiguously positive note - He was a devout Christian who was one of the main source of funds for the Intelligent Design movement.

An innovator in personal tax avoidance for Americans.

He renounced his citizenship in the 60's and made himself a tax exile in the Bahamas.
posted by JPD at 4:26 AM on July 9, 2008 [7 favorites]


So um, he pretty much invented the techniques used by the class that lives off stock dividends instead of working, he pumps money into promoting Intelligent Design nonsense, and he was a pioneer in tax evasion.

Gee, let me call FTC, this event simply demands a wreath.
posted by Pope Guilty at 4:31 AM on July 9, 2008 [3 favorites]


What would Templeton think of the bear market we seem to be entering? While we can't find an interview with him discussing this topic, we do know that in 1987, at the height of the stock market crash, Templeton was buying shares, a view summarised in this quote - "People should sell when others were greedily buying, and buy when others were despondently selling."

Also during the dot com run up Templeton, then almost ninety years old, shorted the shares of 84 NASDAQ listed companies, capturing a return in excess of 50% in a matter of months.


Other insights into Templeton's thought process:

"Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria."

"An investor who has all the answers doesn't even understand all the questions "

"Do not be fearful or negative too often"


And a final lesson for those of us who might follow the markets just a little bit too much (I'm guilty of it):

"Money is as fleeting as human life. What lasts is the spiritual."
posted by Mutant at 4:38 AM on July 9, 2008


Yeah, I'm not really a Templeton fan. Rich people dodging taxes means *I* pay more, so thanks for screwing me over Templeton. And, of course, he's also screwed everyone over by doing his best to destroy science education in the USA, good show there.

Mutant Yeah, but his whole "hey, I'm gonna flee to the Bahamas because fuck the American taxpayer" bit kinda undermines his "wooo, spirituality is teh roxxors!!!" BS.
posted by sotonohito at 4:40 AM on July 9, 2008 [1 favorite]


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posted by Slithy_Tove at 4:41 AM on July 9, 2008


your first point is incorrect and unfair. Lots and lots of regular people benefit from investing in equities.
posted by JPD at 4:42 AM on July 9, 2008


Compare Templeton to Buffett . The latter has created a personal fortune that dwarfs the former, but yet he has argued that current US taxation policies are untenable and inherently unfair.

Buffett has also been a big opponent as well of California's crazy property tax laws that force new home buyers to pay the vast majority of tax.
posted by JPD at 4:47 AM on July 9, 2008


"hey, I'm gonna flee to the Bahamas because fuck the American taxpayer"

Imagine how many other greedy fuckwads have followed his example! Imagine what America would be like if all those people were paying taxes!

This guy just made my Top Ten Fuckwads list. He'll get no full stop from me.
posted by chuckdarwin at 5:03 AM on July 9, 2008 [1 favorite]


What exactly was Templeton's position on ID? As this from the Templeton foundation doesn't seem terribly pro-ID. Admittedly I'd like to have seen a stronger anti-ID statement from them, but there's an awful lot of Templeton Foundation stuff that I am not exactly a fan of.

Was Templeton the person known for having a notably different stance from the foundation on this, and funded ID outside that route?
posted by edd at 5:27 AM on July 9, 2008


Sir John Templeton's 16 Rules for Investment Success
Rule No. 12: BEGIN WITH A PRAYER
If you begin with a prayer you can think more clearly and make fewer mistakes

Dear Lord,

Just a quickie. I was skimming through your biography the other night and was a bit surprised by the whole 'eye of a needle' and 'serving two masters' thing in the chapter you titled 'Matthew'. You didn't mean any of that stuff literally, did you? I mean, it's a huge text and a few typos are bound to slip in here and there, right? Like that thing about shellfish being an abomination, eh? You really dropped the ball on that one hahahaha! I assume you'll get a chance to do some more editing once you've got the rapture out of the way.

Anyhoo, I'm going short on rice and grains tomorrow, so how about you help old Johnny out a little. I'll slip you the usual 10%.

Thanks again for the smashing eyes and opposable thumbs.

Your etc.
posted by boosh at 5:29 AM on July 9, 2008 [14 favorites]


"Money is as fleeting as human life. What lasts is the spiritual."

Ha ha ha ha ha. How very droll!
posted by octobersurprise at 5:36 AM on July 9, 2008


Mutant, we thank you for this lesson and countless others.
posted by beagle at 5:39 AM on July 9, 2008 [1 favorite]


Like that thing about shellfish being an abomination, eh? You really dropped the ball on that one hahahaha!

Actually, if all 10 of the Commandments had been "THOU SHALT NOT EAT OF THE 'FOOD' FROM THE SEA" I'd be a fundamentalist in a heartbeat.
posted by DU at 5:46 AM on July 9, 2008


Ha ha, you fool! "it's different this time?" You fell victim to one of the classic blunders! Only slightly less well-known is "land war in Asia!" I can clearly choose the words in front of me! Ahahahahahahaha! Ahahahahahaha! Ahahaha ---- (slumps, falls over)
posted by bugmuncher at 5:46 AM on July 9, 2008 [1 favorite]


Yeah, but his whole "hey, I'm gonna flee to the Bahamas because fuck the American taxpayer" bit kinda undermines his "wooo, spirituality is teh roxxors!!!" BS.

I would argue that runaway spending on wars, garrisons, and ponzi schemes and the inability of the U.S. Congress to balance a budget are what's shafting the American taxpayer. But then I am a little bit on the loony side.
posted by bugmuncher at 5:51 AM on July 9, 2008 [1 favorite]


I would argue that runaway spending on wars, garrisons, and ponzi schemes and the inability of the U.S. Congress to balance a budget are what's shafting the American taxpayer.

Silly bugmuncher, you can have both!
posted by octobersurprise at 5:54 AM on July 9, 2008


I would argue that runaway spending on...ponzi schemes.... I am a little bit on the loony side.

Given that "ponzi schemes" is classic rightwing/libertarian code for Social Security and other social programs, I agree.
posted by DU at 5:57 AM on July 9, 2008


If I could opt out of Social Security, I would. But I wouldn't move to Bahamas to get out of it.
posted by bugmuncher at 6:20 AM on July 9, 2008


Silly bugmuncher, you can have both!

You are correct, octobersurprise. I probably should have quantified that the things I mentioned are shafting the American taxpayer more than tax avoidance loopholes.

Of course I have no data to back up my hunch. I just think the rich people's taxes are like drops in a bucket, and most other people's taxes are like the droplets in a fine mist.

(But the Internet is not a series of tubes.) :-)
posted by bugmuncher at 6:46 AM on July 9, 2008


I know we enjoy hating on the rich, tax-evading bastards 'n all, but the top 5% pay nearly 44% of all federal taxes, with the richest 1% ponying up for 27.6%. (See here for Congressional Budget Office data, Summary Table 2.) Just saying.
posted by jagalt at 7:09 AM on July 9, 2008 [1 favorite]


Pfff if I get 14.3% returns over forty years I'd do everything I can to piss off everyone here. I don't care if it means spending all that $400m to lobby congress in making CFCs legal again. If I had any left over I'd spend it on Jeb Bush's presidential campaign. Oh and giving everyone on Yahoo Answers $5 so they can buy an account here. Hmmmm....
posted by geoff. at 7:18 AM on July 9, 2008


the top 5% pay nearly 44% of all federal taxes, with the richest 1% ponying up for 27.6%.

At my house, there are two adults and some number of children. One of the adults is in the top .01% of income earners (in the house) but pays 100% of the taxes. My wife and kids aren't pulling their weight! *moves to Bahamas*
posted by DU at 7:20 AM on July 9, 2008 [1 favorite]


I can clearly choose the words in front of me!....Ahahahahahahaha! Ahahahahahaha! Ahahaha ---- (slumps, falls over)

"Gill. Gill. Gill, can you hear me? You've got to tell those people what happened! You're the only one who can prevent the slaughter! Gill! "
posted by storybored at 7:21 AM on July 9, 2008


jagalt Yup, and its not enough. The richest 1% own around 38% of the money, which (all things being equal) means they should be paying around 38% of the taxes.

Moreover, there's a relative aspect to things. 20% of my income going as taxes is a painful thing, it restricts my spending and is definitely a financial liability. Take 20% of Bill Gates' income and he won't even notice. Simply put a 20% tax rate hurts me more than a 60% tax rate would hurt Gates.

bugmuncher Irresponsible government spending [1] is bad, no doubt, but here in America we've got a two tier tax system: those of us who aren't gazillionares are required to pay taxes, and the gazillionares can opt out via clever loopholes. I figure being a gazillionare is reward enough, and they don't need the government granting them exceptions from taxation just to make them feel all special.

[1] Note, the only time in the past 50 years the national debt has gone down were when Democrats held the presidency, support a balanced budget? Vote Democrat.
posted by sotonohito at 7:21 AM on July 9, 2008 [6 favorites]


As a Mac user, I don't admire Bill Gates all that much. But I have to say, I like what he is doing with the money he put into that tax shelter - the Bill and Melinda Gates Foundation.

Here is their value statement:

There are two simple values that lie at the core of the foundation’s work:

All lives—no matter where they are being lived—have equal value.

To whom much is given, much is expected.


Rich people can be kind. And by putting the money into the foundation, it's not funding the war in Iraq. Yay for that.
posted by bugmuncher at 7:47 AM on July 9, 2008


jagalt Yup, and its not enough. The richest 1% own around 38% of the money, which (all things being equal) means they should be paying around 38% of the taxes.

Moreover, there's a relative aspect to things. 20% of my income going as taxes is a painful thing, it restricts my spending and is definitely a financial liability. Take 20% of Bill Gates' income and he won't even notice. Simply put a 20% tax rate hurts me more than a 60% tax rate would hurt Gates.



Look at the table again. I think if you factor in the other taxes – corporate income, etc., the effective tax rate for the top 1%-5% probably comes close to that 38%. (The CBO does not provide actual numbers for that stuff, so I am speculating.) Also, although I understand the sort of intuitive appeal of one’s tax rate being equal to the percentage of money that they “own,” why does that make sense?

About your Bill Gates comparison: first off, I am fairly sure that no matter one’s financial status, a 20% drop in income would be noticed. Further, the idea that somebody has to shoulder an additional financial burden just because, in your opinion, it will not affect them greatly is sort of odd. That aside, it seems like the implicit assumption in your argument – and correct me if I’m wrong – is that because Gates already has a substantial net worth, a 60% tax rate would not hurt him because, hey, it’s not like he needs the new income that much. (Otherwise, if he did not have his capital to fall back on, I am sure you agree that Gates would probably have some issues with a 60% tax.) The idea of tying the tax rate to one’s net worth is troublesome because it would effectively create obvious disincentives to investing, saving, etc.
posted by jagalt at 7:53 AM on July 9, 2008


I read an article about the Templeton Foundation a couple of weeks ago: The Templeton Foundation: A Skeptic's Take
posted by kothar at 7:57 AM on July 9, 2008 [1 favorite]


Well, I'd rather learn from Templeton as an investor, not as a tax rebel or proponent of ID.

I've emailed folks that claimed Templeton was behind ID asking for a cite. While researching this article I debated adding references to ID but couldn't find a source. Maybe (quite possibly) someone will have better research skills than I.

In terms of the tax avoider comments, the following observations are in order. I'm certainly not excusing Templeton for taking the stand he did. But before passing judgment its important to understand at the time he renounced US Citizenship, the lower bracket of taxation was 20%, and the highest 91%.

Of course this (rather excessive by anyone's standards) rate of taxation was incurred only at the Federal Level, meaning someone in Templeton's situation probably had an overall burden of at least 93% before State and Local taxes were levied.

I recall reading about his and other high earners frustration with the system, and how their efforts at securing legislative changes to the system were rebuffed (textbook at business school, not on line). In the end he voted with his feet, much like many other high earners of other nationalities have done.

But for Americans, unlike, The British, simply working or living abroad doesn't eliminate one's US tax liabilities. No, Americans living abroad (I'm one) are taxed on the basis of citizenship not residency. The Rolling Stones? Tax rebels, yes, as they live abroad and carefully monitor time spent in England to stay below the taxable threshold of (IIRC) 90 days. But they remain British as that's the way the UK system works. So as Templeton didn't have this option he chose to renounce US citizenship.

However that door has long been closed. If one choose to renounce US Citizenship now, the IRS will view this solely as means to avoid taxes. The burden of proof is upon you to show that you're doing this for political, or other reasons.

And while nobody can stop you from renouncing, the IRS certainly can - and will - send you a bill for the privilege. Each case is different, but I'm aware of two main approaches : first, review your back tax returns, select your highest annual obligation and require you to pay a decades such revenue, in advance. Second if the iRS suspects you will either soon have or a windfall or enjoy sharply higher earnings, they can require Americans renouncing citizenship continue to file tax returns for ten years AFTER they are no longer US Citizens. And, presumably pay any additional taxes owed.

Finally, after renouncing US Citizenship if one wishes to visit America a Visa must be obtained. If you renounced citizenship for tax purposes, you will be denied a visa, regardless of what new passport you carry.

Former Citizens Who Renounced Citizenship to Avoid Taxation

Any alien who is a former citizen of the United States who officially renounces U.S. citizenship and who is determined by the Attorney General to have renounced U.S. citizenship for the purpose of avoiding taxation by the United States is inadmissible. This provision took effect September 30, 1996 and applies to individuals who renounce their citizenship on or after that date.


Not excusing Templeton's decision, just trying to put it into context.

Like any of us, Templeton had some character faults.

But as investor Templeton was top notch.
posted by Mutant at 8:09 AM on July 9, 2008 [6 favorites]


Also, although I understand the sort of intuitive appeal of one’s tax rate being equal to the percentage of money that they “own,” why does that make sense?

The idea is that everyone should share the burden of of the state equally.

The argument, which I find fairly accurate, is that even 10% taxation for someone making $15,000 a year makes a huge negative different in their life, whereas increasing the marginal tax rate by 10% is basically meaningless to someone who earns millions.

There's certainly a fairness issue that appears - you can't extend this argument to the classic Beatles 96% tax rates.

But in my view, anything up to 50% is fair game (and yes, I'd apply that to myself in a second). No matter what you achieve, most of what you achieve beyond sustenance level is due to the fact that society exists and allows you to exploit it, not due to your great character virtues. You might believe that you're gifted by God to create money, but if you had grown up in a small isolated tribe near the Amazon you might be able to get as far as having a bigger hut.

Bill Gates et. al. wouldn't miss 50% off their income off the top - even if you did eliminate his capital. But no one's really thinking of taxing people by their worth, it's a non-starter; anyway, there are very few people with a high net worth who don't also have a high net income.
posted by lupus_yonderboy at 8:20 AM on July 9, 2008 [5 favorites]


If you renounced citizenship ... you will be denied a visa, regardless of what new passport you carry.

Which is the only reason I haven't done it yet.
posted by chuckdarwin at 8:27 AM on July 9, 2008


Mutant,

I may not be remembering this right, but didn't they change IRC Sec. 877 in 2004 to nix the 10-year rule? Again, very hazy on this, but I thought that under the new rules, only expats who exceed a certain income / net worth ($2 mil?) are subject to the rule, and even they are only subject to tax on gross income derived from / connected to U.S. sources, rather than worldwide gross income.
posted by jagalt at 8:53 AM on July 9, 2008


Look at the table again. I think if you factor in the other taxes – corporate income, etc., the effective tax rate for the top 1%-5% probably comes close to that 38%.

That's not the measure that was talked about before.

It was 38% of the money pays 28% of the taxes. Not about marginal rates.
posted by ROU_Xenophobe at 9:11 AM on July 9, 2008


He renounced his citizenship in the 60's and made himself a tax exile in the Bahamas

Financial Times today said it had to do with enabling him to give money away in both England and America (and the Bahamas). They did not elaborate as to why this made sense.

Back in the early eighties, Adam Smith did a show interviewing Templeton and Buffett as great investors. I had a little money at the time and was so taken with Templeton's Invest The World Over thing, and so astonished at the price even then of Berkshire Hathaway ("no way this can go any higher!") that I put my pennies on a Templeton fund.

I rather wish I had bought BH instead.
posted by IndigoJones at 9:15 AM on July 9, 2008 [1 favorite]



Not sure that all this intelligent design stuff's entirely accurate...The Foundation’s website states:

We do not support the political movement known as "Intelligent Design". This is for three reasons 1) we do not believe the science underpinning the "Intelligent Design" movement is sound, 2) we do not support research or programs that deny large areas of well-documented scientific knowledge, and 3) the Foundation is a non-political entity and does not engage in, or support, political movements.

That seems pretty categorical to me...

http://www.templeton.org/newsroom/Intelligent_Design/
posted by muggsy1079 at 9:17 AM on July 9, 2008


I wonder what the Visa rules were though at the time Templeton renounced? I'm pretty sure he was still able to come and go as he pleased to the US as a UK citizen.

IndigoJones - That doesn't make sense that he had to go there to give his money away in the UK. Actually I thought charitable giving in the UK wasn't tax deductible in same way it is in the US? Also he wouldn't have had an UK income if Templeton Funds was based in NY. Undoubtedly any foreign entity they had would have been domiciled somewhere tax efficient. Unless tax planning was that much less sophiticated 50 years ago? Any one know much about the history of tax planning?
posted by JPD at 9:19 AM on July 9, 2008


But before passing judgment its important to understand at the time he renounced US Citizenship, the lower bracket of taxation was 20%, and the highest 91%.

I think the point is not that Templeton was a monster the likes of which the world has rarely seen.

Rather, it was just that his conduct stands in stark contrast to his wrapping the Good Christian cloak around himself and his mumblings about spirituality.
posted by ROU_Xenophobe at 9:25 AM on July 9, 2008


Lucky you Americans fought to expel foreign tyranny, eh? HAHAHAHAHA!!! Fuck me, forcing you to file after you've renounced citizenship? Being taxed when you live and earn outside the States? Throw in the imperial system of measurement, and hand-written cheques, and it's like living in Bizarro world.

Americans, join us in the progressive future! It's never too late to start over, this time it can be different.
posted by Meatbomb at 9:26 AM on July 9, 2008 [1 favorite]


If I could opt out of Social Security, I would. But I wouldn't move to Bahamas to get out of it.

If I were wealthy enough to move to the Bahamas and ditch Social Security, oh, I'd do it in a heartbeat. And then I WOULD GRIND YOU ALL BENEATH MY HEELS.
posted by octobersurprise at 9:28 AM on July 9, 2008


IndigoJones - That doesn't make sense that he had to go there to give his money away in the UK

That was pretty much my point, that it seemed senseless. Sorry if I was unclear. (So was the FT.)
posted by IndigoJones at 9:30 AM on July 9, 2008


You'll pay if you give up US citizenship. Apparently it triggers capital gains taxes on all of your assets as if you had sold them at the time you gave up citizenship.
posted by BrotherCaine at 10:11 AM on July 9, 2008


Not sure that all this intelligent design stuff's entirely accurate...

They've backed away from the intelligent design movement as its absurdity has become more and more apparent, but they have provided support to the Discovery Institute and others IDers in the past.
posted by mr_roboto at 10:13 AM on July 9, 2008


Wait: if you leave the country, never to return, and renounce your citizenship, the U.S. Government will still try to tax you? That's astonishing. Anyone else got similar hardcore taxation regimes?

(Of course, my country, the United Kingdom, has had to fend off recent accusations that the UK is a tax haven.)

Tax in a time of global freedom of capital, population movement and demographic change is a fascinating subject:
  • Poor people on means-tested state benefits can suffer from marginal tax rates of over 90%. Universal benefits are regarded as too expensive, means-testing creates perverse disincentives but does target people in need.
  • Old people vote and have capital wealth, young people don't vote and have income wealth, and our (European) populations are aging. There is therefore political pressure to tax income more and wealth less (for example, the proposal in the UK to replace a tax based on property with a tax based on income for local government expenditure.)
  • Ethnically-homogeneous states may find it easier to increase taxation, since people perceive that the resultant expenditure will be on people like them. So if you want to cut taxes, support a liberal immigration and asylum policy...

  • posted by alasdair at 10:22 AM on July 9, 2008 [1 favorite]


    there are very few people with a high net worth who don't also have a high net income.

    Not so. Most seniors are in this category -- have high net worth from having paid off mortgage but have a low income from pension and investments (if they have them) or else live off savings as they no longer have employment income.
    posted by binturong at 10:25 AM on July 9, 2008


    anyway, there are very few people with a high net worth who don't also have a high net income.

    It depends on what you define as "income". For some reason we've decided lately that capital gains and inheritances are sacrosanct and shouldn't be taxed like income is. I'm not certain what that reason is, but my best guess is that our tax laws are being increasingly influenced by wealthy people who didn't get where they are at $100 an hour.

    Or maybe their influence isn't increasing, it's just getting less subtle than it used to be. What is the national debt except a way of taxing based on income in order to pay interest based on wealth?
    posted by roystgnr at 10:42 AM on July 9, 2008


    For some reason we've decided lately that capital gains and inheritances are sacrosanct and shouldn't be taxed like income is.

    That's halfway right. Short-term capital gain (i.e., if the capital asset is held for less than one year) is taxed as regular income, but long-term is not. You also have to keep in mind that the capital gains tax is not adjusted for inflation, so you can end up with no real gain, but will still be subject to the tax.
    posted by jagalt at 11:05 AM on July 9, 2008


    The US's position on taxing expats is a lot more nuanced than it sounds. From googling, and I am very far from an expert on this:

    The first thing to recognize is that expats don't pay US tax at all, even in theory, unless they make a very healthy amount of money. Assuming a married couple, they only have to start paying US tax, in theory, with an income greater than $171400.

    The second thing to recognize is that you can take the foreign taxes as a tax credit against your US taxes. In other words, you only pay US taxes on foreign income if the country you live in has lower income taxes than the US. Such countries are few and far between in the developed world.

    In other words, you would only actually pay US taxes as an American expat if:

    (1) You make absolute pots of money, AND
    (2) You live in a country with even lower top income tax rates than the US.
    posted by ROU_Xenophobe at 11:13 AM on July 9, 2008 [1 favorite]


    support a balanced budget? Vote Democrat.

    Heh. The government made the deficit disappear by borrowing money from Social Security rather than bondholders. And honest Democrats who make this claim while holding the position(s) that they usually do on Social Security wind up contradicting themselves, whether or not they realize it.

    Anyway, that "balanced budget" was largely the creation of the unsustainable TMT boom, rather than especially good government. And even if it was the product of especially good government, it's quite a leap to say "Vote Democrat"-- even moreso when one realizes that the Clinton faux-surplus came at a time when the Republicans controlled congress. If I recall correctly, one of the dominant themes of the late 90's was "gridlock."

    support a balanced budget? Vote for divided government, hope for a geopolitical climate that enables a frozen defense budget, tap the super-ultra-secret free oil reserve, find a way to inflate an enormous capital spending bubble, and ignore those intragovernmental Social Security transfers.

    And thank you, Sir John, for denying the US Government the fruits of your labor, starving it of revenues that would have eventually found their way into the wars on drugs and terror.
    posted by Kwantsar at 11:20 AM on July 9, 2008 [1 favorite]


    Holy cow, I couldn't believe some of the comments that are crawling out of the woodwork in this post, especially the comments that equate generating investment income with harvesting the blood of the innocent. I'm no hyper-capitalist, but, goddammit, *anyone*, at any income bracket can invest, and they can invest in anything! Access to capital is one of the things that powers the American economy. Future Social Security payments (in your old age) depend on wise investment. When you buy a house to live in, you are making an investment, based on the assumption that, as an asset, the value of the house will appreciate (or at least remain constant, in real terms) over time, while the real value of the uninvested cash in your bank account will always decline.

    And there is nothing virtuous about paying taxes. Sure, we must invest in our communities, and try to ensure to equitable redistribution of wealth (I'm speaking as a Canadian and as someone who has spent considerable time in Japan, where the gap, in both countries, between rich and poor is not as great as in the States).

    But why is paying taxes so great? Paying more tax is stupid. If you're smart, you'll figure out how to reduce your tax exposure. It's common sense.

    Leave it up to the government to squeeze out more taxes from high earners. If the government is doing a bad job, elect a new government.
    posted by KokuRyu at 11:38 AM on July 9, 2008 [1 favorite]


    Speaking of tax evasion - Templeton constructed a 'library' in Sewanee, TN, just a few minutes from his home town of Winchester. The expense was great enough as well as charitable, so it led to a large write off.

    However, after a few years there were still no actual books in the library. The building was fully operational with all the utilities and a silly painted statue in front, just completely empty and utterly useless. Naturally, University of the South students used it as a great location to go and get drunk.

    One night a group of students partied at the library; one of them thought it would be humorous to slide down the laundry chute. This was unfortunately the motion-detecting trash compactor, and the student broke his legs on impact so he couldn't escape. His friends thought he had left, so they all went home. The body was found the next day.

    It is a bit strange that there is no record of this - it happened only a couple of years ago. I know only because my father saw the coroner's report. My guess is that the Templeton foundation was somewhat liable for the death and, as the University is a recipient of large donations, the whole thing was settled and swept under the table. This is the way of southern justice - I have many more stories.

    In any case, Templeton's tax evasion was not so innocent - real lives were at stake.
    posted by infinitefloatingbrains at 11:42 AM on July 9, 2008 [2 favorites]


    In any case, Templeton's tax evasion was not so innocent - real lives were at stake.

    Let me get this straight. Templeton constructed a fake library as a tax-write off, students went there at night, got drunk, and one of them died in an accident that can charitably be attributed to drunken carelessness. Unless there's a whole lot more to the story, what does Templeton's tax evasion have to do with this? I don't know what the Tennessee premises liability law is, but generally - not to sound heartless - when it comes to adult trespassers, the property owner is only obligated to not intentionally hurt a trespasser, and is otherwise not liable for injuries they suffer on his property.
    posted by jagalt at 12:03 PM on July 9, 2008


    what does Templeton's tax evasion have to do with this?

    I'm not saying Templeton pushed the kid down the chute. And yes, liability laws do favor the property owner, that's easy enough to prove in court.

    But it does follow that the carelessness and neglect of the foundation, in the name of saving money, led to this death.
    posted by infinitefloatingbrains at 12:40 PM on July 9, 2008


    And there is nothing virtuous about paying taxes.

    Bullshit. Taxes pay for the infrastructure that allows that economy everybody's so fond of to function. Taxes pay for the police force that (at least in theory) protects against crime and works to catch criminals. Taxes pay for the fire fighters who protect the entire community from burning down. Taxes pay for medical services for the disabled, indigent, and elderly. Taxes pay for Section 8 Housing that keeps the poor from dying of exposure. Taxes pay for the food stamps that keep the poor from starving to death. Taxes pay for the military that defends the borders (and then some!). Taxes pay for the EPA, which (when run by people who don't regard its existence as offensive) protects the environmental wellbeing of the country. Taxes pay for the court system that deals with criminals and gives the wrong an avenue to seek redress from those that wronged them.

    Taxes are how our country as a communal group accomplishes things and provides for the common good. Sure, not everything that our taxes pay for is something that you'll agree with, or that I'll agree with. To not pay your taxes- to benefit from them without contributing- is theft. Everyone in the country benefits from taxes, and there is, in fact, virtue in paying them.
    posted by Pope Guilty at 1:37 PM on July 9, 2008 [1 favorite]


    So (Pope Guilty), you're saying that the more taxes you pay, the more virtuous you become?

    All I'm saying is that, if given the chance, government will try to maximize the amount of tax it collects from you. Therefore, it's in your best interest to beat the system, because the system doesn't care about you. And you could argue that government doesn't even do a good job of actually utilizing the taxes it collects - another sound reason for reducing one's tax exposure.

    For the record, I'm not against taxation or social programs (I'm from Canada, where we have universal health care, and top-notch, affordable post-secondary education).

    Taxes are how our country as a communal group accomplishes things and provides for the common good.

    You forgot the part about how taxes allow us to build up our military and invade and destroy other countries.

    But paying as much tax as possible is virtuous, right?
    posted by KokuRyu at 2:05 PM on July 9, 2008


    To not pay your taxes- to benefit from them without contributing- is theft. Everyone in the country benefits from taxes, and there is, in fact, virtue in paying them.

    Okay. I don't think that you can argue that the people who pay the least taxes benefit the most from what the tax dollars pay for (public schools, subsidized health care, public assistance programs, etc.). I have nothing against this, for the record, but according to what you are saying, this is theft, since they are benefiting more than what their tax contribution should allow. Conversely, it's equally apparent that somebody paying hundreds of thousands or millions of dollars in taxes receives significantly less bang for his/her buck, since he/she gets precisely the same police protection, fire services, garbage man, etc., and is less likely to use other tax-sponsored services (private schools rather than public schools, private health insurance, etc.). Under your logic, are they more virtuous because they are paying more than what they get in return? Are those who make very little money less virtuous because they can't afford to pay for what they are taking out of the system?
    posted by jagalt at 2:43 PM on July 9, 2008


    Anyone else got similar hardcore taxation regimes?

    No, but this did remind me that a naturalized citizen of South Africa can lose their South African citizenship if they're away too long, even if they haven't taken any action toward becoming a citizen elsewhere.

    If you renounced citizenship for tax purposes, you will be denied a visa, regardless of what new passport you carry.

    According to (I know, I know) wikipedia, However, the loss of right of entry (8 USC 1182(a)(10)(E)[16]) has never been enforced by the Attorney General since its enactment in 1996. Further, since the creation of the Department of Homeland Security in 2002, the Attorney General (Department of Justice) would no longer be empowered to bar a former U.S. citizen from entering the United States.
    posted by K.P. at 2:53 PM on July 9, 2008


    According to some, the library in Sewanee was to have held his papers, but has instead been converted into condos. Any confirmation or denial appreciated.

    Meantime, for a cheap laugh, check this, said to grace the outside of the place.
    posted by IndigoJones at 5:48 PM on July 9, 2008


    So (Pope Guilty), you're saying that the more taxes you pay, the more virtuous you become?

    No, and that's a ridiculous statement that doesn't follow from what I wrote. Please address my points instead of the points you want to address.

    All I'm saying is that, if given the chance, government will try to maximize the amount of tax it collects from you.

    Also, if given the chance, government will try to minimise the amount of tax it collects from you! See, I'm saying "government" and referring to an institution full of human beings which is impacted by a nation of human beings, and not as the fanciful self-aware engine of self-aggrandisement that conservatives and libertarians insist on pretending that it is.

    Therefore, it's in your best interest to beat the system, because the system doesn't care about you.

    Well hell, it's also in your best interest, by that logic, to steal as large a percentage as possible of your consumption. Just because something serves your short-term self-interest (and of course it's short-term; a nation full of people doing their damnedest not to pay any taxes is going to wind up in the shitter in short order) doesn't mean it's right.

    And you could argue that government doesn't even do a good job of actually utilizing the taxes it collects - another sound reason for reducing one's tax exposure.

    Only if you have some kind of ridiculous notion of moral purity.

    For the record, I'm not against taxation or social programs

    Which doesn't seem to have stopped you from being in favor of people making taxation ineffective as possible and doing their damnedest to personally defund those programs instead of legislatively.

    You forgot the part about how taxes allow us to build up our military and invade and destroy other countries.

    And hammers allow us to hit people over the head and take their possessions. You are confusing the thing with its use.

    But paying as much tax as possible is virtuous, right?

    Again, please to be addressing my points and not the ridiculous strawman that you just can't wait to knock down.
    posted by Pope Guilty at 7:26 PM on July 9, 2008


    I have nothing against this, for the record, but according to what you are saying, this is theft, since they are benefiting more than what their tax contribution should allow.

    Nonsense. Those who are least able to pay are entitled to benefit the most from social programs.

    Conversely, it's equally apparent that somebody paying hundreds of thousands or millions of dollars in taxes receives significantly less bang for his/her buck, since he/she gets precisely the same police protection, fire services, garbage man, etc., and is less likely to use other tax-sponsored services (private schools rather than public schools, private health insurance, etc.).

    Meanwhile, those who are most able to pay are, in fact, receiving more services than those with less money, as governments are usually much more interested in protecting their assets.

    Under your logic, are they more virtuous because they are paying more than what they get in return?

    What is this "more virtuous" nonsense? You brought in that notion, not I.

    Are those who make very little money less virtuous because they can't afford to pay for what they are taking out of the system?

    Of course not. You're trying very hard to find complexity where none exists.
    posted by Pope Guilty at 7:31 PM on July 9, 2008


    Pope Guilty -

    I think KokuRyu gets your point, as we all do: Taxes are important for the functioning of society. On a broad scale, we get that. What I think KokuRyu is arguing is that the tendency of government is to tax, tax, tax, tax and tax more until the people say: ENOUGH.

    Unchecked, taxes lead to excessive government growth and excessive government growth leads ultimately to more government control. I'm stretching this, I understand, but I hope you understand my jist.

    I do everything legal in my powers to reduce my tax liability, and I assume others around here do the same for much the same reason: they like keeping the money they've earned. Considering the return on investment for my tax dollars, the government (local and federal) are doing a pretty shitty job with the capital they're taking from me.
    posted by tgrundke at 7:51 PM on July 9, 2008


    What I think KokuRyu is arguing is that the tendency of government is to tax, tax, tax, tax and tax more until the people say: ENOUGH.

    That's ridiculous. The "government" is not the self-aggrandising beast that conservatives and libertarians like to claim it is. It's made up of real human beings. Some of those human beings believe will want to raise taxes, and others will want to lower them. Suggesting that tax increases are a victory for "government" and tax decreases are a victory for "the people" is ridiculous and dishonest.

    Your whole argument revolves around this idea of the government as some entity with no agenda save its own aggrandisement that exists on top of society and which is not comprised entirely of human beings with various agendas and motivations and philosophies. As long as you persist in this misconstrual of reality, your ability to accurately describe political realities will continue to be nonexistent.
    posted by Pope Guilty at 8:14 PM on July 9, 2008


    What Pope Guilty is saying.

    The wealthy have all the advantages when it comes to taxation: they can hire the best tax advisors, they can take advantage of tax shelters others can not, and their tax burden is ultimately has little to no effect on their ability to enjoy a privileged life.

    When they use unscrupulous means to dodge their responsibility to the society that made it possible for them to become wealthy, they are plainly fucking their fellow citizen over. It may be legal to set up a tax-free account in the Bahamas, but it is not best for society that they do so. Their short-term gain causes long-term pain for everyone else.

    Eat the rich!
    posted by five fresh fish at 10:25 PM on July 9, 2008 [1 favorite]


    it's equally apparent that somebody paying hundreds of thousands or millions of dollars in taxes receives significantly less bang for his/her buck

    Bullshit. They owe most of their wealth to the infrastructure of the country. If the country lacked an interstate system, lacked an education system, lacked a health care system, etcetera, they'd be up shit creek. I think one can successfully argue that the ultrawealthy get more bang for their buck than the poor and middle class.
    posted by five fresh fish at 10:33 PM on July 9, 2008 [2 favorites]


    jagalt -- "I may not be remembering this right, but didn't they change IRC Sec. 877 in 2004 to nix the 10-year rule? Again, very hazy on this, but I thought that under the new rules, only expats who exceed a certain income / net worth ($2 mil?) are subject to the rule, and even they are only subject to tax on gross income derived from / connected to U.S. sources, rather than worldwide gross income."

    Ah well done jagalt! I couldn't for the life of me recall that statute. In any case, I thought IRC Sec 877 applied only applied to foreigners who obtained US Citizenship and then later renounced purely for economic reasons. In other words, not native born Americans who renounced US Citizenship.

    I found this reference, which supports your numbers to an extent - it seems if the foreigner earns more than $124K per year (section two), but even after reading this I'm not totally clear on the ten year rule.

    If you're so inclined to plow through it and can clarify the confusion please let me know your take. I'm just sorta curious how tightly the US holds on as it certainly isn't the case in England (although there is talk of changing that).



    ROU_Xenophobe -- "In other words, you would only actually pay US taxes as an American expat if:

    (1) You make absolute pots of money, AND
    (2) You live in a country with even lower top income tax rates than the US.
    "

    I'm not so sure its that simple, and I can only fall back on my own (admittedly subjective) experience as taxes are complex and especially so if you're subjected to two (US & UK) regimes.

    I've been living outside the United States for about eleven years now, and (strictly off the top of my head mind you) I think on the US side I've pretty much paid every year. That's largely because I'm very active in the markets and tend to make money every year from my personal trading, but lots of people living & working abroad end up paying two sets of taxes, regardless. Here's how it works.

    US Citizens living & working abroad are eligible for a foreign earned income exclusion, which is intended to prevent double taxation, as we're subjected to the taxes of two countries. So let's consider a simple example of a single American citizen, who is living and working in the UK.

    So that first $86K or so (the threshold changes somewhat from year to year) is tax free on the US side. Anything above that is fully taxable at the applicable marginal rates. Just to clarify: we're talking about revenue earned while living & working abroad (this point is important as The United States is the ONLY G20 country to tax citizens abroad).

    Also, any interest and dividend, business, rental or capital gains income is fully taxable on the US side if derived from domestic sources (e.g., bank account, property, etc back in The United States).

    So that's the US side, first pass.

    On the UK side the American is fully taxed on earnings from employment in England.

    If you've got any interest and dividend, business, rental or capital gains income from UK sources, they're fully taxed by both countries.

    In addition to taxes assed by England on UK domestic revenues, any interest and dividend, rental or capital gains income is (now, just changed this year) fully taxable even if derived from domestic US sources. That's right: work hard, save your money for decades, then go to work in the UK for a while and that dollar you earned a ten years ago? That you put into a US bank account? That's earning interest back in the United States? Now the UK will tax you on it. Somehow they believe themselves to be entitled to a piece of it (there are ways around this but I find the greed of governments repugnant).

    So that's the UK side, first pass.

    Now some adjustments. First of all, there are MLAT ("Mutual Legal Assistance Treaties") in place which prevent double taxation as potentially illustrated above. But you still gotta pay first and later claim a credit, as you're certainly not getting cash back from any government if they can avoid it.

    Instead you receive what's called a Tax Loss Carry Forward which can be used in future (no, not the year you actually were double taxed, that would be too 1) simple, 2) fair) to offset income. I've already got enough to last me a good portion of my working life.

    So in the current tax year, for your US return you can apply a Tax Loss Carry Forward helping reduce current years income taxes by the amounts overpaid in previous years.

    Also, Council Tax, some utilities, and a few other sundry items are deductible from your US current year taxes, as costs necessary to maintain a residence abroad for the purposes of employment.

    But on the other hand, if you receive housing from your employer, or any of the other benefits usually offered to ex-pats to entice folks to move abroad, these are fully taxable as "benefits in kind"; essentially the value is assessed and taxed as income (i.e., get a business class return ticket every year from your employer and you'll be taxed on that as it you'd earned it as income).

    So you end up with two sets of tax returns (US & UK) that don't agree in terms of tax years (US starts in January, UK starts in April) nor marginal rates, no what is deductible, etc. It's a complete mess.

    Now that being said, with effective planning (i.e., professional advise) it is possible to use the two countries tax codes against each other reduce one's overall tax obligation, significantly, but that incurs costs on its own as the professionals needed aren't cheap. In years past I've used KPMG and recently have switched to a firm called "Global Tax Network".

    And my tax picture will now get more complicated as last year I married a Dutch national, so now there's a third set of returns that must be completed, and I've got business interests that all three countries are eager to tax.

    Either way, I've had to pay, and I've known lots of people living & working here of lessor and greater means than myself who have had to pay, so I don't think its so cut and dry as Americans working abroad pay zero taxes . Without a doubt you can pay less if you play the two systems involved off against each other and structure things properly, but most working abroad don't avail themselves of these possibilities.
    posted by Mutant at 3:21 AM on July 10, 2008 [2 favorites]


    Pope Guilty - that's exactly what government is: a self aggrandizing beast that will continue to grow so long as the electorate permits it to. Bureaucracies have an incredible ability to ingrain themselves and find ways to maintain their power. They do it through things like agricultural subsidies or ethanol subsidies that benefit a particular constituent group that suddenly becomes "vital" to America's well being and cannot go without government support.

    Organizations like NASA develop from a mission driven, skunkworks-like agency in the 1960s into a massive bureaucracy in the 1970s that learned to "play the game" by placing offices in major population states such as California, Texas, Florida and Ohio. NASA has become more adept at maintaining its funding than in its mission.

    Hell, look no further than the Pentagon if you want a good example of why big government can be bad and how bureaucracies often exist merely to support themselves. Eisenhower warned us of how the tentacles creep into every corner of society, and it sure does today.

    Government is made of people, but it's made of people with agendas to spend money in ways they see fit, not in ways I see fit. They then try to ingrain themselves because they are dependent upon the government for money.

    Pope - come on over to Cuyahoga County in Northeast Ohio for a great example of a bureaucracy that has learned to aggrandize itself over the years. We're in a complete cluckerf**** these days because of a County Commission system that thinks the people are there to serve it. Bullshit.
    posted by tgrundke at 5:48 AM on July 10, 2008


    Pope Guilty: Ridiculous. You put forth the premise that there is virtue in paying taxes, and now you are accusing others of not addressing your points. When I responded to you by pointing out that under your terms, the poor are effectively stealing because they are taking out more from tax-funded programs than they are putting in, you respond by saying that "Those who are least able to pay are entitled to benefit the most." Fine. I don't disagree with that. The problem is that this statement had zero connection with your previous post: "To not pay your taxes- to benefit from them without contributing- is theft." Also, exactly what "services" are the rich receiving from the government that is, according to you, more interested in protecting their assets?

    Finally, again, you brought in the taxes=virtue connection: "there is, in fact, virtue in paying them." If you are asserting that paying taxes is a virtue, I really can't see how you can disclaim the inference that paying a higher percentage of your income than someone else in taxes is more virtuous; otherwise, the taxes=virtue connection is meaningless because somebody could pay .1% of their income in taxes and still be virtuous.

    Reading your posts, the problem seems to be that we are speaking on entirely different terms. I believe that, all things being equal, large bureaucratic structures will trend toward self-perpetuation and expansion. You seem to think that just because those structures are made of up individuals with different agendas, this is not the case.



    Mutant: I took a quick look at IRC Sec. 877. By its terms, it applies to every "nonresident alien individual," and does not appear to distinguish between natural-born U.S. citizens and foreigners who had obtained U.S. citizenship. The rules are not the most intuitive, but upon a quick read, it looks like an ex-citizen is covered by the expatriation rules if, as of the date of expatriation / termination of U.S. residency, (1) his average annual net U.S. income tax liability for the 5 years preceding that date is $124,000 or more, to be adjusted for inflation; or (2) his net worth as of that date exceeds $2 million, or (3) he fails to certify under penalty of perjury that he has complied with U.S. federal tax requirements for the previous five years.

    I think you may be getting the idea about the distinction between foreign and natural-born ex-citizens from the remainder of the section. Under 877(c), the ex-citizen will not be taxed as a covered individual if he certifies compliance with U.S. federal tax requirements, and either (1) is a citizen of U.S. and another country at birth, and is still a tax resident of the other country, or has resided in U.S. for not more than 10 of the previous 15 taxable years, or (2) renounces U.S. citizenship prior 18 1/2 if he did not reside in U.S. for over 30 days during the preceding 10 years.

    Again, the section is long and detailed, so this is just my impression after a quick glance.
    posted by jagalt at 7:51 AM on July 10, 2008


    First, I'd like to acknowledge that I did perhaps create a straw-man argument. I hope there are no hard feelings.

    Anyway, I have been self-employed until recently, and, because I mistakenly submitted one lousy piece of paper (in good faith), I have had to hire an accountant who has spent the last eight months trying to sort out a mess whereby the government would like to compel me to pay nearly $20K in income tax on income I have not earned. Government is a machine.

    I now work in government, both helping develop and implement policy. I am somewhat aware of how policy is formulated for various programs, and it leaves me feeling cynical and depressed.
    posted by KokuRyu at 10:54 AM on July 10, 2008


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