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Panic among the rich

I believe rich people should pay more in taxes on realized income. Most rich people seem to agree. I don’t agree with taxing people on their worth. That has been tried in other countries and doesn’t work because it’s too easy to hide assets and/or low ball their real value.

Appraising the value of assets is fraught with uncertainty, optimism and fraud. The 2008 Great Recession occurred in part because the ratings agencies produced over-optimistic ratings. I would too if I were being paid by the issuer to rate his product so he could peddle it at high price?

Your house appraiser will value your house or business high or low — depending on your goal — to borrow against it, to edge down the taxes.

It’s easy to hide assets. But not where you think. Here’s a weekend piece that shows how:

How to set up a shell company by Malia Wollan, New York Times

“If you’re looking for secrecy, the United States is a far better bet than the classic tropical-island tax haven,” says Jason Sharman, a professor of politics and international relations at the University of Cambridge. To study the effectiveness of international rules against anonymous, untraceable shell companies, Sharman and two other researchers impersonated 21 different fictitious consultants and sent 7,400 emails to 3,700 so-called corporate service providers (often law or accounting firms) in 182 countries, asking for help setting one up. Nearly half the respondents failed to comply with regulations requiring the collection of identity documents. The conclusion: It is more than three times as hard to put an untraceable shell company in an offshore tax haven than in a developed country. For anonymity, set up your company in Nevada, Delaware or Wyoming; it can be done in 10 to 40 minutes, and for as little as $200.

Going offshore will most likely require you to upload an authorized copy of your passport’s picture page, along with some utility bills and maybe a banking reference. If you incorporate in places still dealing with the aftermath of recent scandals, like the South Pacific islands or Panama, banks in other countries might not let your shell company have an account. “Banks have their own hierarchy of domiciles that they regard as more or less trustworthy,” Sharman says. Wherever you end up, your company will need a name. “Usually, you want the name that’s furthest distant from your own,” he says. Go bland: The idea is to be forgettable.

There are effectively no upper limits on the amount of assets a shell company can hold. “For really rich people, rather than a single shell company, you have interlocking networks where company A owns company B, which owns company C, which owns an art collection or a big mansion,” Sharman says. A shell company isn’t evidence of illegality; limited liability, which the arrangement confers, can be useful to law-abiding people too. “A large majority are used for pretty legal, pretty boring purposes,” he says. Still, such companies are a basic feature of all manner of criminal schemes, including illegal arms trading, money laundering and tax evasion. Anonymity is a kind of legal immunity. “Companies can’t be chucked in jail,” Sharman says.

Bushfires are putting 6 million Australians in danger

They’re dousing homes in Sydney —  my home town — with red flame retardant.

They’re are rounding up burnt koala bears, and trying to save them.

Temperatures are over 100. Winds are approaching 70 MPH.

Extreme drought has aggravated the fires.

They’ve declared a martial law.

Australia is suffering from global warming.

From Australia: Here’s how bushfires get spread,

Australian fire:

Ditto for California. This was Los Angeles last week.

Reporter Amy Wilentz did a piece

Can You Still #Resist When Your State’s on Fire?
A postcard from the Californiapocalypse.

Worth reading. Click here.

Koala bears

I couldn’t bring myself to publish pictures of burnt koalas. Here are some healthy ones:

When I was a teenager I worked at Sydney’s Taronga Park Zoo photographing tourists cuddling  koala bears. I only got paid if the tourists bought my pictures. And they only bought them if the photos included happy koala bears. Koalas are shy, don’t like tourists and run away from them. My job was to fetch the koalas for their Kodak moment. When the koala bears didn’t want to be fetched, they peëed on me.  You can not wash koala urine out of your clothes. Important to wear old clothes you can throw away.

Today’s big market gainers — in our portfolio:

Amazon, Nvidia, Microsoft, Marvel, Salesforce (CRM) and Skyworks Solutions (SWKS)

Favorite recent New Yorker cartoons

Can you help my friend’s survey?

Peter lives in New York City and pays (like me) mega-taxes. He wonders

“What do people in NY, CT, NJ, Calif get for the income taxes they pay that TX, FL, NEV residents (where there are no state taxes) don’t get.”

Leave a comment on the web site. Or email me.

If I answered his question, I’d say I like living in New York. There’s a lot of things going on here. And my friends are here. But then, I’ve been here — and only here — 50 years. My framework is limited.

Send me your thoughts. — Harry Newton