How to game the new tax system, according to Krugman

The obvious trick is to keep doing exactly what you’re doing now, but redefine yourself as an independent contractor rather than an employee. The bill contains rules that would supposedly limit that kind of abuse, but tax experts have already found huge loopholes. And these experts were just a handful of people working pro bono for a couple of days. Over the months ahead, as thousands of top-dollar accountants and lawyers get to work, expect to see many more routes to tax avoidance emerge — but only for the rich and well connected.

Consider one example we already know about. Imagine a partnership involving several doctors. Under the new rules, such a service business won’t qualify for the tax break (although it would if they were architects. Why? Who knows?). But the doctors can get around the rule by buying the building they work in, then charging themselves an exorbitant rent. Voilà! They get to pay much lower taxes — because real estate investment trusts, strange to say, do get the big tax break.

Or suppose some of my colleagues form an economics consulting firm. Such a firm won’t qualify for tax breaks. But suppose they also start selling nerdy T-shirts (“Economists do it with models”). With a little hocus-pocus, as I understand it, they can basically define themselves as a T-shirt business, and pay much less in taxes.

via Daily Kos How to game the new tax system, according to Krugman

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