Oh, those billionaire cheats

As we all know and are told often, billionaires cheat on their income taxes. Is it only billionaires and is it cheating?

I have no doubt there are income tax cheats out there and that includes Americans at all income levels. There are far more average American cheats than billionaire cheats.

However, most of the time it’s not cheating, but trying everything possible under the tax code to avoid or minimize taxes. The wealthy hire tax lawyers to stretch the law as far as possible – sometimes too far.

Average Americans avoid reporting cash transactions as income and also leverage the tax code – the IRS estimates that 40% of tips go unreported.

Using a ROTH IRA not only generates future tax free income, but helps avoid income-based Medicare premiums (IRMAA) in retirement despite an individual having seven figures in assets.

All this maneuvering and manipulating is the result of a mind boggling complicated tax code and, of course, the desire of every citizen to pay the lowest possible in taxes while obtaining the maximum in benefits supported by government – other taxpayers or debt.

Younger retirees (and non-retirees) can manipulate their incomes to obtain taxpayer subsidized health care premiums. As one retiree put it:

My premiums for me and my wife are a little over $500 per month. If we didn’t have the advanced premium credit it would be $1700! When I retired at 59, I made sure I was able to keep my income well below $70k

I use a Qualified Chartable Distribution to make donations directly from my IRA to avoid taxes on the donation even though I use the standard deduction- anyone 70-1/2 can do the same.

Many workers pay their health insurance premiums on the job with tax free premiums. Their employer only need to adopt a Section 125 plan under the tax code.

There are many more examples of the tax code creating benefits and opportunities under the right circumstances.


  1. It is ironic when lawmakers castigate individuals for hiring lawyers and other experts to fully exploit all the nuances in the tax rules and pay the least amount legally possible. If they don’t like it, maybe they could simplify the laws that they made.


  2. I would bet that waiters, bartenders, and hairdressers cheat more on taxes than billionaires. Trying to take advantage of all possible tax breaks is not cheating but playing the game set out by Congress. The name of the game is to pay only the taxes you owe.

    As another example of how complicated the tax code is, words matter. I believe the final tally was that 4 states who gave covid relief checks to its citizens have to report those checks as income. The rest of the people in the other states do not. Why? because those states gave that money out as tax relief and taxes returned is income that is taxed.

    Another game that NJ is currently playing is the ANCHOR program (Affordable NJ Communities for Homeowner and Renters). It is a property tax relief program that was passed in the spring of 2022 that will be paid in the spring of 2023 based on your income and property taxes on October 1, 2019. If they over collected my taxes in 2019, why am I waiting until 2023 to get them back? Or how about just lowering my current tax rates instead?

    If the government plays games with taxes, why shouldn’t the people who pay them?


    1. The IRS estimates that waiters, etc do not report about 40% of tip income. It used to be 80% before new reporting requirements on businesses.


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