Tax avoidance, the same thing that the rest of us do.
I claim what I can for deductions to avoid paying tax. It lowers my adjusted income. My marginal rate for the upper $60k of my family's gross income was 35%. My effective tax rate last year was something like 5%. All numbers are federal income tax. Nothing state, no payroll tax, not including sales tax or fees. Without that tax avoidance, even if the tax rate for the first $35k been 0% my effective rate on my income would have been 21%.
I avoid taxes with the standard deductions for me and dependents. Child care credit. Unreimbursed work-related expenses. Nothing really unusual.
One means of tax avoidance is having my health insurance paid pre-tax. Another is by having a retirement account. A third is by having a pre-tax health savings account. All legal. All fairly standard, if you have health insurance through your work like about half of Americans do. Don't know how many have any sort of retirement account.
If not for a few thousand in self-employment income from having my MIL use my wife's online account for some pay-for-piecework job she had years ago, but which is linked to my wife's SS#, I could use 1040A or even 1040EZ. I don't itemize. No accountant or paid professional has reviewed my tax forms. Ever. I'm in my mid-50s and have been doing my own taxes for over 30 years.
When I was a kid the top marginal rates were very high. And the result was two-fold. Family trusts to spread the income over many people. That's one reason for the old "rich family" trusts and their longevity. It's a lot harder for kids to not squander their inheritance if they're given cash instead of a disbursement from a family trust. It's one reason for a lot of the large endowments: If you, Richie Rich, have the choice of having a lot of your income go to the government for what the government wants or to a non-profit for what you want, you tend to shed lots of money in favor of non-profits that support your values, goals, and endeavors.
The other result was tax shelters, to reduce income in ways that shifted its impact on your life. You find losing investments that will later, when your income is lower, produce income but reduce your taxable income in the present. You find ways to put your wealth in munis so the income you receive is sheltered. When I was a kid, lots of people talked about tax shelters. Now, not really. With lower marginal rates and a lot of ways to avoid taxes, we don't need them nearly so much. We hear about offshoring cash, but a lot of those accounts are truly huge and furthermore involve wealth, not income. We don't have a wealth tax (and if we did, while it would be emotionally satisfying to some, it wouldn't continue to produce a lot of government revenues over time--wealth doesn't continuously grow if the income stream's also reduced).
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