Rudy Giuliani takes advantage of Income Tax Code
In an article in Fortune, Robert Wood explains the federal income tax treatment of any payments of the nearly $150 million that Georgia election workers Ruby Freeman and Shaye Moss may receive after their legal victory.
The article points out:
- If Mr. Giuliani was working as a lawyer for President Trump, which he asserts was the case, he will be allowed to deduct any payments to the election workers as a business expense.
- In contrast, it appears that Ms. Freeman and Ms. Shaye will have to pay federal income taxes on any amounts they receive.
- Amounts received from verdicts to pay for physical injuries and physical sickness are not taxable.
- However, these amounts are from a defamation suit and the resulting emotional distress. The recovered amounts will be treated as ordinary income subject to federal income tax.
- The $75 million in punitive damages awarded are also ordinary income to the ladies.
- It is also likely that any part of the judgment paid to their lawyers as attorney fees will not be deductible.
Assuming Mr. Wood is correct in his analysis:
- This means that if $10 million is eventually paid, Ms. Freeman and Ms. Shaye will owe ordinary federal income taxes on the entire $10 million.
- If the federal income tax rates remain the same as today, each of the ladies will each owe $1,150,000 in federal taxes or a total of $2,300,000.
- $10 million minus $2.3 million is $7.7 million. $7.7 million minus the estimated $4 million in lawyer fees, leaves them $3.7 million or $1.85 million each.
- In contrast, Mr. Giuliani will be able to deduct his attorney fees and the entire $10 million on his federal income tax return. This means that his actual cost will be reduced to about $6.5 million with the other $3.5 million being paid by the U.S. taxpayers.
If you support the two ladies, then this is very unjust. If you support Mr. Giuliani, then you see nothing wrong with this result.
CONCLUSION
However, regardless of where your sympathies lie, everyone can agree that the Internal Revenue Code is a mess and full of twists and turns that none of us really understand.
One thing is clear, the jury has decided that Mr. Giuliani defamed the two women. But one question that no one is asking is why should the rest of us have to pay 35% of the amount paid by Mr. Giuliani?
This is just another example of why the income/payroll tax system has to be replaced with a fairer and more workable system that provides the revenue the federal government needs to fund its operations.
The choice is easy—do we want a system for funding the federal government:
- That is so simple everyone can understand it.
- That shows the costs of the federal government on every retail receipt so all of us understand what we are paying.
- That helps U.S. companies compete with foreign competitors.
- That keeps jobs in the U.S. rather than exporting them to other countries.
- That permanently establishes the solvency of Social Security and Medicare.
- That eliminates special treatment for any group of taxpayers.
- THAT IS THE LARGEST TRANSFER OF POWER FROM D.C. TO THE PEOPLE SINCE THE CONSTITUTION WAS ADOPTED.
D.C. is ignoring the one real solution that allows us to remain citizens and not subjects, the FAIRtax. The FAIRtax is simple, non-invasive, but most of all, IT WORKS!
THE SOLUTION—PASS THE FAIRTAX!
The FAIRtax transfers power from Congress and the bureaucrats to the people. We, not D.C., decide how much federal tax we pay.
Join us and TAKE BACK CONTROL OF OUR COUNTRY AND OUR LIVES—NOT WITH BULLETS BUT WITH THE ELIMINATION OF ONE OF THE BIGGEST THREATS TO OUR LIBERTY AND ECONOMIC PROSPERITY—THE INCOME/PAYROLL TAX.
We all should remember Edmund Burke’s warning that applies to our efforts to TAKE BACK CONTROL,
“Nobody made a greater mistake than he who did nothing because he could do only a little.”
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