It’s Tax Day – Thank your Boss


 

Coffee money

In a speech in New York Hillary Clinton slammed the Sanders “free college for all” plan because it would mean that even Donald Trump’s children would have their college costs covered.  How terrible that these evil, sinful, malevolent people might have their college costs paid for.  Their crime?  Their parents make too much money.

I am not one of the top 1% of income earners, but I think this tax day we should give those who are a huge, “Thank you.”  I am sick of seeing the people who create the engines that create most of the products we use and who provide jobs for the majority of people be demonized.  I am equally tired of seeing the people who pay for most of the government services we enjoy being scorned.  “How dare they get to have their children go to college using some of the money they paid in taxes.  They must be punished for their deeds.”

I’m in the process of filing my taxes.  I’m only in the 25% bracket, but I hate to seeing $250 taken from each additional $1,000 I earn.  If I work over and earn some extra money, I need to work a quarter of the time for free.  I can’t imagine seeing 40% of my time spent working to pay taxes and only seeing 60% of my time result in additional income.

I can understand how Ronald Reagan said that if he had already made a movie or two during a year, he might pass up the chance to do the next one.  This was when rates were extremely high for the top earners – approaching 90% –   so it really didn’t make sense for him to leave the poolside and spend several weeks working long hours to make another movie.  He would only get paid for 10% of his time.  Would you make a third movie if you got paid $100,000 for that one but got paid $1,000,000 for each of the first two?   And when he didn’t make the movie, it meant all of the supporting actors, crew, and caterers didn’t work either.   This is why the economy took off after he cut back the top tax rates – productive people were spending more of their time working, which in turn meant other people were working as well.

So before you complain that the rich aren’t paying “their fair share,” imagine writing a check for $400,000 to the government for your taxes this year.  Think about the home they could have bought with that money.  Think of the early mornings they arrived at the office and the late hours they spent finishing up the work needed to build the company at which you now work.  Think of the years they spent without a paycheck and borrowing from relatives to get their company off of the ground.  Sure, there are a few trust fund babies that live off of record royalties or the work of their parents, but most of the people paying those top rates spent a lot of time and effort building the machine needed to make that income, and they probably lifted a lot of other people up with them along the way.

So this tax day, thank a high earner.  Thank her for your job.  Thank him for paying for the train you ride.  Thank her for the school your children attend.  Thank him for helping to pay to keep your family safe.  If you aren’t thankful, then send in more in taxes until you pay out 30-35% of your income.  I guarantee the IRS will accept the extra money.  There’s even a space on the form.

Your investing questions are wanted. Please send tovtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

 

 

How to Never File Taxes Again


"Come and Take It" Flag from Revolutionary War
“Come and Take It” Flag from Revolutionary War

How would you like to never need to file taxes again?  Never save a receipt.  Never worry about making a contribution to your IRA before April 15th again.  Never need to give your Social Security number to your employer, or even have a social security number at all.  How would this be possible?

The answer is the Fair Tax.  The Fair Tax would replace all federal income taxes and payroll taxes with a national sales tax on new goods sold.  This means that you would get your whole paycheck (there would be no withholding) and then only pay taxes when you buy things.  Any money you save and invest would not be taxed until you cashed in your investments and bought something.

But wouldn’t this be a regressive tax, hitting those at the bottom who needed to spend most of their income by necessity, while those who made a lot of money would pay very little?

The answer is “no,” because the Fair Tax also includes a prebate, by which everyone receives a check at the beginning of the year or the beginning of each month that covers the taxes for a certain level of income.  For example, if the Fair Tax was 20% and you got a prebate of $5,000 per year, you would not be paying any taxes until you spent $25,000 of income.  This mean that people making up to $25,000 per year would not pay any taxes even if they spent all of their money.  People making $10,000 per year would actually be getting more back than they paid since they would be paying at most $2,000 in taxes but receiving $6,000 in their prebate.  You could set the prebate at whatever level you wanted to exempt enough spending to cover basic necessities.

But 20% in taxes seems high.  Isn’t that a lot more than I pay now?

Probably not.  Even if you’re in the lowest tax bracket, you’re paying about 10% of your income in taxes plus 13% in payroll taxes (Social Security and Medicare).  This means that you’re paying 23% on all of your income even if you save it all.  The other factor is that corporations wouldn’t be paying taxes on income either, which means they could lower their prices because they wouldn’t need to spend so much money on tax planning and taxes.  Plus, you wouldn’t need to spend your time or your money preparing your taxes and keeping records, which represents another savings.  Think of all of the money wasted preparing tax returns and filing receipts.

Is that it?  Any other advantages?

The biggest advantage is that you would no longer need to keep records.  Just as you don’t need to keep records with state sales tax, you wouldn’t need to keep anything for federal taxes.  You’d just buy something, pay the tax, and be done.  The only ones the IRS would need to check on is the merchants, meaning there would be a lot fewer IRS agents needed.

So, we could fund the country but get rid of all of the paperwork.  We’d pay less since there would be a lot less money being spent on tax compliance, tax avoidance, and record keeping.

So where do I sign up?

Write to your representative and both senators at least once a year (how about April 15th) requesting they enact the Fair Tax.  You can email them from the government sites for the House and Senate.  Plus, tell a friend, or two or three.  Tweet about the Fair Tax.  Put a post on FaceBook.  People who hear about the Fair Tax generally like it – it is just a matter of educating people. It will take time (change is always difficult to create), but if enough people write and request it, it will happen.

Got and investing question? Please send it to vtsioriginal@yahoo.com or leave in a comment.

Follow on Twitter to get news about new articles. @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Not Making the Income You Want? Maybe You’re Being Selfish.


MushroomsSomehow people who do well in a free enterprise system have been made out to be greedy and selfish people.  We have images of Ebenezer Scrooge, Mr. Burns, JR Ewing, and Gordon Gekko when we think of Capitalists.  We’re always told that corporations are greedy and anything big is bad.  Small businesses are good, unless they do well and then suddenly they’re bad.  The person who makes a good salary or runs a successful business is bad while the minimum wage employee or the guitarist who pays for donations on the street is good.  People who are wealthy should pay high taxes because they are somehow evil, while people who do nothing and make no income should be supported because they are virtuous.

In the area of art, an artist who paints things that appeal to people is considered a sell-out.  A singer who sings popular songs likewise is a sell-out.  Every artist wants to “be true to themselves” and “be true to their art” and complains that people don’t appreciate (and buy) the things they want to produce.  In proclaiming how wonderful Obamacare would be, then-Speaker Nancy Pelosi talked about how it would free people to chase their dreams like play the guitar instead of going to a job each day that provided their health insurance.  Their happiness in what they were doing was more important than spending the day doing something that benefitted other people.

There’s an odd thing about free enterprise, however, that many people miss.  People who are the most successful are not the ones who are greedy, or selfish, or cheaters, or swindlers.  It is the people who are the most selfless,  The ones who give the most of themselves to help others and meet their needs.  It is those who treat others fairly and provide their customers more in value than they receive in payment.  It is the guy who gets up at 6 AM and works until nine or ten at night building a business to take care of some need.  The restaurant that is open nights and weekends when people want to eat.  The drug store that is open 24 hours so that people who are sick at 2 AM can get the medicines they need.

The same goes for employees.  Employees who are always watching the clock and running home right at the end of their shift don’t tend to do as well as those who stay to get the job done.  The ones who “set their hourly rate” by slacking off and wasting time don’t do as well as those who get as much done as they can.  The employees who are cheerful and helpful to customers do better than those who treat customers like a nuisance.

The same is true for artists.  There is no difference between an artist who “paints what they want” and someone who sits and watches football games on TV all day or spends all day fishing or spends all day gardening.  If you are doing things that you like for yourself, you are spending your time on a hobby.  Just as you would not expect someone to be paid for watching football all day (unless they are a sports announcer or a sports writer and thereby do something that someone else wants), you shouldn’t expect to get paid for producing art that no one else wants just because you like to make it.  If you can paint a painting that others like, and maybe matches the couch or fits the room of your customer, you can make some money.  If you are a great musician who can play songs other want to listen to, you can make money.  To make money you need to do something for someone else.  Not just for yourself.

So if you are not making the money you want, think about what you do all day.  Are you being selfish, doing things for yourself, or are you being giving, doing things for other people?  Are you working a shift to get a check, or are you providing your employer with your best efforts to meet her needs?  Are you spending your time doing what you want to do and getting a check from the government in the mail, or are you out meeting the needs of other people?

Be giving of yourself and your time, and wealth will follow.  Your income is in direct proportion to how many people you help during any given day.  The person who provides for the needs of others gets rewarded.  The person who meets the more pressing needs makes more.  The person who meets the needs of a lot of people gets rich.  The person who meets the most pressing needs of the most people gets ultra-wealthy.

Contact me at vtsioriginal@yahoo.com, or leave a comment.

Disclaimer: This blog is not meant to give financial planning advice, it gives information on a specific investment strategy and picking stocks. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.