If you spend money….. they tax it
If you die…………………..they tax it
U.S. Representative Rob Portman (R-OH)
"The income tax code and its associated regulations contain almost 5.6 million words — seven times as many words as the Bible. Taxpayers now spend about 5.4 billion hours a year trying to comply with 2,500 pages of tax laws…."
U.S. Representative Jim DeMint (R-SC)
"The federal tax code with its 44,000 pages, 5.5 million words, and 721 different forms is a patchwork maze of complexity and a testament to confusion over common sense."
U.S. Representative Walter Jones (R-NC)
"The IRS tax code is 44,000 pages and growing"
By the way, if you go to the US Government Printing Office ( http://www.gpo.gov ), you can order a complete set of Title 26 of the US Code of Federal Regulations (that’s the part written by the IRS), all twenty volumes of it, at the bargain price of $974, shipping included.
This does not include the estimated 100,000 US tax cases.
(Note these quotes were extracted from the representatives’ official press releases and statements as found on http://www.house.gov)
MAJOR TRANSFER OF YOUR WEALTH
In your everyday existence, you are confronted with transfers of your wealth.
Qualified Retirement Plan
Owning a home
These ten transfers can create financial losses for you. You must study each one and determine how they will affect you.
A common definition of the word “tax” might be: “A contribution for the support of the government required of persons, groups or businesses within the domain of that government.” “A burdensome or excessive demand, a strain.” The only power an elected official has is his ability to spend money, our money. The one thing the government does well is collect taxes. The problem is they spend more than they collect. The government now spends a majority of its time trying to raise revenue through taxes in order to continue their increased spending.
Income taxes have been the central focus of many debates. Most financial planners mention only a couple of taxes that may affect a client’s future. These are usually the income tax and the estate tax. These two taxes are formidable foes of wealth, yet they represent only the tip of the iceberg when it comes to the overall taxation that really exists. Here is a list of taxes that you are confronted with on a daily basis:
Federal Income Tax
Social Security Tax
Personal Property Tax
Long Capital Gains Tax
Short Capital Gains Tax
Tax on Gas-Heating Oil
License Plate Tax
Cable TV Tax
Workers Comp. Tax
100’s of Regulatory Fees
NO ONE TOLD ME
If it came to your attention that you were unknowingly and unnecessarily paying a tax you didn’t have to, would you continue to pay it?
IT’S ONLY TEMPORARY
In 1913, the 16th Amendment of the U.S. Constitution was passed, allowing federal government to impose an income tax on the citizens of the United States. Ironically, 20 years prior to that, as part of a trade bill, the government passed into law an income tax that the Supreme Court struck down as unconstitutional. But persistence paid off, and Congress ratified the 16th Amendment in October, 1913. The tax measure was passed as a temporary measure. The original federal marginal tax was around 6%, and initially only about 5% of the population had to file tax statements.
Clearly, the federal government wasn’t shy about raising income taxes. During World War I and World War II, the marginal tax rates were high and remain at a level of over 50% for almost 50 years.
UNDERSTANDING THE MATH
Recently, I happened to come across my father’s 1960 tax return.
No matter how you look at it, taxes will continue to be the largest transfer of your wealth now and in the future.
THE PROBLEM IS THE SOLUTION AND
THE SOLUTION IS THE PROBLEM
There are many types of government-sponsored savings plans.
The second type of plan enable the employer and the employee both to contribute to the plan with restrictions of course. The employer will match a certain dollar amount or percentage of the employee contribution. Matching contributions by the employer is an option. It is not uncommon for the employer not to contribute anything. One of the most familiar plans that fall into this category is the 401(k). The 401(k) made it easier and less expensive than the old traditional retirement plans for the employer. Why? For the cost of administrating the plan, a company can proclaim that it offers benefits for its employees. Even though the employee is funding most, if not all, of the plan.
The third type of plan that was created is one where the participant funds the entire program. IRAs, 401(k)s, and others are the most widely used plans by most individuals. Since these are the most commonly used I am going to focus on these plans.
When it comes to transfers of your wealth I wanted to simplistically separate these plans by one factor: Who pays for these programs. If you can get someone to help fund your retirement with money, terrific, do it! But as for the money you contribute into these plans without company matches, I want you to start thinking a layer deeper. If you’re funding the full amount for these plans, there are things you need to know in considering whether or not to participate in them.
My intent here was not to explain and describe how these plans work and all their complexities, but simply to examine where is the funding coming from, and to discover who is encouraging the use of these plans and why.
The government creates the plans, the financial professionals deliver them.
THE GOVERNMENT: YOUR PARTNER IN LIFE
We have invested the government of compromise. For the past 100 years or so, the government has passed on compromised solutions to our problems. Years later even the compromises are compromised. This, over a period of time, waters down the original solution, thus creating loopholes in the law that now need new compromises to close up the loopholes. If the Ten Commandments had been compromised over the years in this fashion, you would end up with the rules for time wrestling.
The larges financial transfers of your wealth are created by the government in the form of taxes.
Qualified retirement savings plans will become a bigger tax revenue target in the future.
They are taking it seriously. You should too.