View Full Version : Muhammed Ali, $1 million income, 0% federal tax

02-14-2012, 07:31 PM
I heard of this a long time ago, AND I have no idea whether it's true.

But the claim back when Ali was near or just past retirement was that he'd arranged his finances so that he had $1 million in income a year, and 0% federal taxes due on that amount of income.

How that was possible is quite simple-- municipal bonds, which are free of federal income tax.

This part of the tax code allows cities to pay a lower rate of interest, which is the equivalent of paying a greater interest rate to the bondholder, if that greater interest were taxable. Which must have impressed people as a worthwhile benefit to the cities raising their bond issues.

Now this was available to any rich person from at least the '60s forward, maybe some decades before that. And it still is, although the interest rate is more unexciting than usual, probably in the 3% range for good quality bond issues. More, if you take the risk of cities in bad shape actually paying you.

In a way, it makes a 15% rate seem a lot better (although there was the societal value of helping cities raise cash through bond issues to recommend the 0% loophole, and not so much societal value for the carried interest loophole).

02-14-2012, 07:54 PM
Why shood Ali go for 3% per year when he kood get 3.6% per sale at Walmart. Now, if he haz one sale per day, dats 3 times 365 = 1095 plus 0.6 = 219 makes 1314%. But Ali would havta pay say 15% at the end of the year. But that 3.6% kan be reinvested in more underpants which are sold the same day or next day which means 3.6% compounding for say 365 days which iz i dunno praps 403,934,292% which only leevs 343,344,148% after tax.

Gottalove Walmart.
Aktually, if like in Ozz many of the producers havta send their produkt for free and hav it sitting on the shelf for free and only get payd if/when the produkt iz sold then that 403,934,292% needs to be divided by zero. Hold on, this shoodnt take long. I will be back shortly.