Regardless of where you turn there is a tax – income, sales, property, gas, estate, gift, liquor, tobacco, telephone, import, export, capital gains, unemployment, Social Security, Medicare and several hundred more that you pay knowingly and unknowingly. The National Bureau of Economic Research has estimated that the average worker is in the 40% marginal tax bracket. It has gotten so bad that not only must you pay a Social Security tax while working but you’ll most likely pay income taxes on the Social Security benefits you receive. In fact, about the only tax that has been abolished in a retiree’s lifetime is the “poll tax” – you are no longer taxed for voting. It seems that new taxes are being invented at an alarming rate. Politicians are fond of taxing corporations because they don’t vote. Generally “tax-the-corporation is acceptable to citizens” because most think corporations actually pay taxes. Corporations do not pay taxes – they simply pass them forward to customers in the form of higher prices and lower wages/benefits.
Currently the economic and financial situation is in awful shape; as mentioned in this retirement blog. Elected officials, and the regulators that they have appointed to run our country’s institutions, have grossly mismanaged our economy to the brink of absolute failure. Our government has taxed us to the hilt to support entitlement programs like Social Security, Medicare, Medicaid, unemployment benefits, free education and other promises they can no longer deliver. To compound the problems they have foolishly gotten involved in war after war by rationalizing that our “national interest is in jeopardy”. Certain businesses have enjoyed favorable tax treatment and/or allowed to operate with little regulation to the detriment of the general population. Our financial institutions have been encouraged to promote spendthrift ways to foster consumption today and pay tomorrow. In recent years the nation’s saving rate has plummeted into minus territory as we’ve borrowed against the equity in our homes to take vacations, buy bigger cars, update wardrobes and buy second homes for relaxing from the stress-filled environment of a helter-skelter life of making more money to spend. The government solution to all these excesses is, you guessed it, spend our way to prosperity. This will lead to the cruelest tax of all, the silent killer that affects those least able to afford it and the one tax that few of use call a tax: inflation.
We now find our nation facing the worse economic and financial calamity since the great depression of the 1930’s. In an effort to stem the economic tsunami that threatens to derail the American way of life, our governments is taking bold initiatives to bailout the wrecked institutions – from banks to housing to automobiles to individuals. Our Congress is busy piecing together a quilt-work of program to infuse trillions of dollars into the economy’s businesses to keep them solvent to brighten the hopes they can survive in a global landscape. The massive collective debt that is being incurred by our government will have to be repaid – either by those now living or a future generation. In the meantime, those who hold the colossal U.S. debt will receive debt service payments in the form of semi-annual interest checks. In order to repay these huge deficits now piling up on top of an already gigantic national debt, it will be necessary to return the national savings rate to the plus category. This can be done in one of two ways or a combination: cut expenditures or raise taxes. There is a third way – that awful tax we call “inflation” – but this is simply a subtle way of taxing by increasing the prices of everything. In fact, inflation has been called “the cruelest tax of all” because it falls on those least able to afford it: the poor, retired and other living on fixed income.
So, in the face of this mounting massive debt, which remedy do you suppose will be pursued by our governments? Will it be cutting expenditures? Or will higher taxes, including galloping inflation, be the answer? More than likely it will be a slight-of-hand maneuver sold as “more government expenditures to promote faster growth to restore economic and financial equilibrium”. In other words, incentive will be provided to consume more and faster even though this is exactly the economic prescription that cause the problems we now face. This economic nostrum is tantamount to the snake oil elixir that was peddled in yesteryear to cure all ills and it will have the same curative powers. If you believe that governments are incapable of solving our economic and financial problems, you’ll have to take matters into your hands to make sure your economic well-being, and that of your loved ones and heirs, is secure. Let’s talk about some ways that can be accomplished.
First and foremost, there are taxes which I suspect will be rising over the foreseeable future. Of course, there will remain sizeable tax loopholes through which the wise can find ample fresh air to live a prosperous life. You’ve simply got to take advantage of every tax break approved by Congress – whether the benefits accrue to you while still alive or to your heirs once you’ve passed on to a heavenly economy where gold is used as a paving material. In what follows, I’ll review some easy-to-use and relatively unknown ways that you can pay fewer taxes.
Shelby J. Smith, Ph.D.
Related Resource: You, Taxes and Retirement (Video Seminar 10 minutes)
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Stay tuned for You, Taxes and Retirement Part 2: Tax Deferral & Annuities, Part 3:Tax Savings Benefits of Roth IRAs, Part 4: Getting Social Security Right and Part 5: Life Insurance is the Ultimate Tax Dodge.
I discovered your homepage by coincidence.
Very interesting posts and well written.
I will put your site on my blogroll.