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  •  Note: tax rate in hypothetical is 20 percent . . . (1+ / 0-)
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    Julia Grey

    not 25 percent.

    Still, if he's as adept at gaming the tax code as Mitt, there are plenty of ways that he could maximize his returns.

    e.g. incorporate, and rather than paying himself a salary, classify the income as capital gains from stock or dividends.  He'd get taxed at a 15 percent rate on the profits via capital gains, but wouldn't have to contribute a dime to social security, Medicare, or Medicaid.

    He could reduce his tax burden further by setting up an offshore account.  With some creative accounting, and lawyering, he might even be able to move the profits around so that the expenses are booked in a high tax country, which reduces his effective tax rate, and the profits are booked in a low to no-tax country, which makes him wealthy even faster.  If Mitt's tax plan goes through on off-shore earnings too, he might be able to avoid any tax whatsoever when he tries to bring that money back into the U.S.

    Another option, if he went the Romney way would be to simply buy up an existing snow shoveller's business, rather than doing the hard work of creating his own business.  There are many advantages to going this route.  

    He'd want to target a mature business with low debt, initially, with the goal of leveraging the snow shoveling buy-out target to the gills.  He'd put up $5 dollars.  He could take out a loan for $495 in the name of the company against the business assets and future earnings.  A portion of the proceeds to buy out the company would go to the original business owner.  He could then use a portion of the debt to pay himself a management fee, which would be transferred to the LBO firm that's he's set up to make the acquisition.  If the snow shovelling business fails, the money in the LBO firm will probably be safe from the businesses creditors.  He's already made money at this point on his $5 "investment" through some creative accounting.  Another couple wrinkles to the process would be to talk to other LBO firms and to convince them not to bid on the company that he wants to take over.  He would agree to leave their take over targets high and dry too.  Granted this is illegal, but it's only a problem if he gets caught.  The advantage of doing this is that he can under-bid on the price of the take-over target, which would guarantee even more money in his piggy bank.

    Note too that the interest payments on debt on his recently acquired snow shovelling business are tax deductible, so he can use the funds to reduce the effective tax rate of the take-over target.  If he runs into problems with cash flow, he can use the threat of bankruptcy to force his snow shovelling labor force to take wage cuts.  That extra money now is added to his own bottom line, which he can now transfer to his LBO firm, so that his own spoils are partitioned off if his business fails.  

    If he can find some new investors, he might even be able to buy up some other snow shoveling businesses using a combination of debt and a small upfront down payment, and repeat the process many times over.  

    If he's lucky he might even be able to corner the market.  He might have to give some money to politicians who share his values about not enforcing anti-trust, monopoly laws.  

    Of course there can't be an explicit quid pro quo.  Just an understanding about having "shared values". Once he's cornered the snow shovelling market, he can start charging his customers a premium, and he will make even more profit as he's been able to use the threat of layoffs -- and actual layoffs -- to extract additional concessions from his work force, so that his operating costs are about as low as possible.  He's minimizing business expenses, and maximizing profits the old fashioned way.

    If he ends up destroying the business, it's no big deal.  He's already recovered his initial investment and then some, by shifting money from his take-over target to his leveraged buy-out firm.  If he pushes the mega-company into bankruptcy and there are contingent pension liabilities, the taxpayers have to pick up the costs through our pension guaranty system, so it's no loss from his bottom line.

    That approach may not be good for America, or for the workers who have the misfortune of being his employees, but it could make him very rich in a very short amount of time.  He'll be a regular old Mitt Romney before he knows it.  And some people will admire him simply because he is rich, without asking too many questions about how he actually made his money.

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