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Taxes and government waste: Is there a better way?

Should the current American tax system be simplified?

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This year I’m getting a bit of a refund, but I’ll never see it. Because my income varies, it’s hard to know how much to pay every quarter, so I usually overpay. But then my accountant just applies the refund to next year’s tax bill.

One day I want to get the check in my hand. I send so much to Uncle Sam, for once I want him to send some cash to me!

Where does it go?

Like many Americans, I can’t help but think about where all that money goes. And I’m always a little disappointed when I find out.

The Citizens Against Government Waste publishes a book every year outlining wasteful spending. From their research I find that, in addition to national defense, the courts, and the administration of the government, I’m also helping fund:

  • $13 million for the Save America’s Treasures program, which funds renovating museums and opera houses;
  • $16.7 million for the East-West Center in Hawaii, which works to foster better relations with Pacific and Asian nations; and
  • $65 million to help the Pacific Coastal Salmon recovery.

These aren’t big numbers, but they definitely make you wonder.

And this year, in addition to funding things that frustrate me, I have to pay my accountant more to figure out my taxes because of the recent tax reform.

I’m not sure if my bill to the government went down, but I know my bill from the accountant will go up.

What happened to the promise of tax returns on a postcard?

Simplify the system

Maybe Herman Cain, Trump’s newest and already embattled potential nomination for the Fed, can revive his 9-9-9 plan, which called for a nine percent tax on corporate income, personal income, and sales.

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No deductions. No way to avoid. Just pay the tax and move on. Talk about radical truth that even Trump and Ray Dalio could get behind!

People with varied incomes sometimes never see their tax refunds as these go to next year’s taxes. (Photo by negmardesign via Shutterstock)

Of course, this will never happen. The government uses the tax code as both a weapon and piggy bank, punishing some behaviors (spending a lot on a house) while encouraging others (having children and donating to charity).

I’ve got a better idea: get the government out of our personal decision making.

Get rid of deductions. Renters shouldn’t subsidize homeowners, and families without children don’t need to subsidize those that have kids.

Why should we cross-support each other’s charitable contributions? You might not like mine, and I might not like yours.

Left playing the game

Without wholesale changes to the tax code, we’re left playing the game of minimizing our taxes, which the famous jurist Learned Hand noted was our personal responsibility when he said:

“Over and over again courts have said that there is nothing sinister in so arranging one’s affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant.”

So I’m left reconsidering where I live, contemplating a move not just for the reasons, but also because it would significantly shrink my tax footprint.

This time of year also makes me take another look at Charles’ Peak Income service, where he holds several tax-free investments, two of which earn about five percent. That’s the same as earning 7.7 percent in the 35 percent tax bracket, which is nothing to sneeze at in this low interest-rate environment.

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Because in addition to keeping as much as I can to fund retirement, I also need to make sure I have enough left over to buy anniversary and birthday gifts.

(Featured image by Doucefleur via Shutterstock)

DISCLAIMER: This article expresses my own ideas and opinions. Any information I have shared are from sources that I believe to be reliable and accurate. I did not receive any financial compensation for writing this post, nor do I own any shares in any company I’ve mentioned. I encourage any reader to do their own diligent research first before making any investment decisions.

Rodney works closely with Harry Dent at Economy and Markets to study the purchasing power of people as they move through predictable stages of life, how that purchasing power drives our economy and how readers can use this information to invest successfully in the markets. Rodney began his career in financial services on Wall Street in the 1980s with Thomson McKinnon and then Prudential Securities. He started working on projects with Harry in the mid-1990s. He’s a regular guest on several radio programs and is featured on television where he discusses economic trends ranging from the price of oil to the direction of the U.S. economy. He too is a regular guest on Fox Business’s “America’s Nightly Scorecard.” Rodney’s book, Irrational Economics, explains the forces that you cannot see but that really drive the economy and markets and can cause your wealth to rise or fall. To survive and prosper, you need the new money rules of the 21st century, which he outlines in this book. He holds degrees from Georgetown University and Southern Methodist University.

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