Folks, I think its time. Clearly, the government(s) have gone completely bezerk with our money. It’s time to do something about it.
What are our options? Clearly, one is armed revolution. I don’t know about you, but I’m too old and fat to participate. If you wish to go that route, know that you have my best wishes. However, PLEASE don’t go the way of other armed revolutions and institute a more oppressive state than the one you overthrew.
Another option is to move. Again, I’m old and tired. I’m tired of moving. Furthermore, I cannot help but recall Ken Hamblin’s book “Pick a Better Country”. Overall, I just don’t know where to go. True, it may get to the point where other places ARE indeed better, but not quite yet. Furthermore, if we can turn things around here, it could be a lot less trouble than moving—particularly if I can get YOU to do the work.
Voting the bums and thugs out is always a possibility, but there are several things wrong with it. One is it takes too much time; another is that they have managed to Gerrymander the districts so that their re-election is fairly certain. Not only that, but it appears that even if we throw them out as we did in 1994, we just get a new crop of bums and thugs.
The problem seems to be money. Now, we all have (some) money, but Congress’ money problem seems that they have too much, so they have to find a place to spend it.
I once calculated that the average person in this country pays over 2/3 of their pay in taxes. The reasoning went something like this.
Tax freedom day is about April 1 or so. That’s about 25% for federal tax. Add in 15% Social Security and Medicare and you end up with a total of about 40% federal tax. Using the figures of 6% state income tax, 2% sales tax, 5% payroll tax (unemployment, disability, etc.) 6% property tax, and 1% gas tax yields a 20% state tax rate. That’s 60% total combined federal and state tax rate. Then add in marriage license, hunting/fishing/dog licenses, hotel tax, motel tax, phone tax, building permits, driver’s license, car registration, parking meters, traffic tickets, and any and all of the various and sundry other “miscellaneous” taxes and you easily reach 2/3. (Of course, that does not include the costs of complying with the tax laws or the added costs of products since taxes are included in their prices.)
Upon recalling that paper, I have concluded that there IS a way to fight the beasts—starve them. Cut off their money supply.
I suggest that we engage in a REAL “tea party”; a REAL tax rebellion. No, I’m not advocating anything illegal like refusing to file or pay taxes. Nothing as inane as sending tea bags to Congress. I’m not saying commit fraud or up your exemptions. Committing fraud to avoid taxes is like shooting a cop to avoid a traffic ticket.
What I AM advocating is that you take an active interest in your taxes. There are thousands of tax loopholes that you can legally take advantage of and decrease your tax bill. I am not advocating tax evasion; I AM advocating tax avoidance. (The difference between tax avoidance and tax evasion is 5 years.) These tax strategies were placed in the tax code so others could use them. There is no reason why YOU cannot also use them. (Do you know that you can rent your house for two weeks and not claim the income? Sam Nunn, Senator from Georgia, has a home in Athens, Georgia which he rents out for two weeks during the Master’s golf tournament. How “fortunate” for him.)
If you need $100 more each month and you get a part time job, you will have to earn $200 in order to have $100 “left over” for your expenses. On the other hand, if you can find a tax deduction strategy or “loophole” that will allow you to keep $100 of your money, you keep the whole $100. For most people, since their marginal tax is about 50%, reducing their tax bill 10% will give them a 5% raise. However, since they pay no taxes on that money and get to “keep it all“, it is effectively a 10% raise. That raise is good every year, year after year after year.
I suggest that you go to Barnes and Noble, Amazon, or even Good Will or The Salvation Army and pick up a book (or two) on tax avoidance. There have been many written and I won’t recommend one. Try to pick one that is a “cookbook” in that it describes what can be done in a recipe format. As you read them, you can determine if each one is “right” for YOU. Some will obviously not be relevant. Some will clearly be applicable. You may have to consult a tax professional to determine if you can use some of them.
The first book you use will probably yield about 10 courses of action that will reduce your tax liability. The second will probably yield about 5 more, in addition to repeating some from the first. The third book will probably yield one or two.
Here are some of the courses of action you may consider to reduce your liability.
Do you like to go to garage sales? Try buying all the clothes left over on Sunday afternoon. Value them according to fair market value (there are books to help you do this) and give them to Good Will. Take a deduction at FAIR MARKET VALUE. You will find that for $10, you have purchased $300-$400 of charitable tax deduction. Don’t forget to deduct the mileage to obtain the clothes (going to the garage sales). Make it a family outing. Have some fun and starve the bums.
Do you have a business? If not, you should. Try AMWAY or a similar organization. Use your garage to store the products, and take off a percentage of your electricity, rent, insurance, phone, repairs, mileage, etc. on your home as “business expenses”. Since you must make a profit 3 out of 5 years, fold the business after 2 years, and open up a different one (e.g. Mary Kay Cosmetics, Shaklee). By the time IRS gets around to audit you in three years, all physical records are gone with no hope of reconstruction. YOUR paper records will be the only source of information. Not only do you starve the bums, but who knows, you may be the next Bill Gates.
Do you have kids? Do you want them to go to college? Have the government subsidize their expenses. Have them advertise on the radio for your business. Pay them $2,000 or so. Normally that income would be considered family income and be taxed as part of your tax. However, since they have “earned income”, they qualify for an IRA. You get to deduct the “advertising expense” and they get a college fund that compounds tax deferred. At withdrawal time (college), they will have little income and they will pay little taxes. Since they are using the money for education, there is no penalty. This should be a traditional, not Roth, IRA. (Note #1: If you have no business, you can still pay the kids to do chores, and get the IRA. It just won’t be deductible. In such a case, use a Roth. Note #2: Since these are “retirement funds“, they do not count when determining “need“ in terms of student aid. Note #3: $2,000/yr for 16 years at ten percent is over $70,000.)
Speaking of college, one of the saddest stories I’ve heard (many times) is the story of the parents who carefully “put away” for their kid’s college fund by investing in a mutual fund. When college time came, they sold part of the fund and gave the money to the kid. Someone should have told these folks that they should have given the STOCK to the kid as a gift. The way THEY did it, they paid taxes on that money. Had they given the stock to the kid instead of the money and had the kid sell the stock, no taxes would have been due.
IRS says you cannot deduct commuting costs. However, if you have a business, you may deduct the costs of obtaining materials and supplies for that business. As such, each day, do not drive directly to work. Drive to a nearby store and pick up something for your business (e.g. a pencil). Do the same on the way home. As such, the costs of travel from the store to your home/business are not deductible, but the costs from your home/business to the store are. If there is a post office nearby, renting a post office box to get “business mail” will also work.
Going on vacation? While you’re there, apply for a few jobs. In doing so, your vacation becomes tax deductible as “searching for employment”.
Going on a cruise? Find one that gives “investment classes” and deduct the cruise as “investment expense”. In like manner, if you wish to take a trip to a certain city, buy stock in a company that has stockholder meetings in that city—then deduct as investment expenses going to the meetings. Traveling to find investment property has possibilities. Want to travel? Write a book and travel to research material—business expense.
Forming a church has certain benefits, though it is somewhat complicated and takes a bit of work. Tax laws pertaining to “farming” and “commercial fishing“ are “interesting“. Ronald Reagan paid little taxes due to his “ranch” in California.
There are MANY such “loopholes”. It’s your money—until you send it off to the various governments. I know you are concerned—IRS has deliberately cultivated such an attitude on your part. You need not be. One should consider the procedure for (e.g. income) taxes. If there is any doubt about whether or not to take a deduction, you should take it. What can happen??
1. The computer could simply pass it through—no problem
2. It could be kicked out for human review
a. the human could say, “This is acceptable”—no problem
b. the human could say, “I need an explanation”, and write for one
3. You write the explanation and tell them what you did
4. The human gets the explanation
a. the human says, “This is O.K.”—no problem
b. the human says, “This is NOT O.K. Pay up.”
5. You say, “O.K. here’s your money.” BUT you’re in no worse a position as if you didn’t take the deduction in the first place.
The worst that can happen is that you end up paying a few bucks in interest. Penalties are seldom assessed unless there is fraud or unreported income.
As an example of the attitude IRS has cultivated in the population, let me ask this question. “What happens if you are a month late filing your income tax?” Many folks stay up to all hours on April 15 in order to get their tax form in. No one has ever said what will happen if you don’t, but the whole country has been terrorized into thinking something horrendous will happen to them.
In actuality, it IS stated what will happen. You have to pay interest on any money owed. First of all, when you consider the deluge of mail coming into IRS on April 15th, do you REALLY think they have someone there checking the post marks? If you’re a week or two late, trust me, no one will notice. Second, if you owe no money (i.e. more was withheld than your tax liability), there is NO penalty. Third, assume you’re a month late and owe $1,000. At 6% (presently set at 5%) penalty, if you are a month late, the penalty is one half percent of $1,000 or five bucks!! Hardly worth staying up all night for.
If you own your home, you should protest your property taxes. It takes very little effort, and generally your assessed valuation will be reduced up to 10% with little or no conflict. The reason is that it is not worth their time to go through the formal hearing procedure for such a “little amount” of money. If you fail, you have lost nothing. If you do not fail, you can easily save as much a $1,000/yr. With the present situation in real estate, property valuations are being routinely lowered.
State governments generally get their money from their citizens (not corporations) in three ways—income tax, sales tax, and property tax. If you show me a state where there is no income tax, I’ll show you a state where the property taxes and/or sales taxes are quite high. Given a choice, the “trick” is to move to a state where the high taxes do not “hurt” you as much as you benefit from the other lower rates.
For example, Oregon has no sales tax. If you are a senior citizen that has purchased all the major items you intend to purchase, this is not as big a benefit as it would be for younger folk. Property taxes and income taxes in Oregon are high. If you want a “nice” house, you will pay dearly in property taxes.
Texas has no income tax. If you are working for minimum wage, this is of little benefit to you, but the high 8.25% sales tax is particularly onerous.
New Hampshire has no sales tax and no income tax; however, the property tax is quite high. New Hampshire would be tax heaven if you don’t mind living in a single wide trailer or a camper.
If it is possible, you should live on the border between two states with different tax exemptions and play one off against the other. For example, you could live in Vancouver, Washington (no income tax) and shop over the Columbia River in Oregon (no sales tax).
If you have an IRA, you should realize that when that money “comes out”, it will be taxed as ordinary income. It is MY recommendation that people should have traditional IRAs as long as their tax bracket is above 15%. Use a Roth IRA if your tax bracket is 15% or below.
During the years before exhausting the traditional IRA, quickly estimate your tax liability/rate before December 31. You will have some “lean” years—medical expenses, capital losses, lay off, etc. If your tax bracket is 15% or less, transfer as much as you can from your traditional IRA to your Roth without raising your tax bracket. Hence, you are putting money into your IRA and saving 30% tax, then transferring it to your Roth and paying 15% tax. In particularly lean years, you may well pay NO tax on the transfer.
If your IRA is “sizeable”, you may consider moving to a state where there is no state income tax. Such a move may effectively “increase” your IRA by the amount of the state tax you would pay—as much as 10%. You may consider moving to a state with no income tax for one year, converting any remaining money in your traditional IRA to a Roth, then moving back to your “home” state. A year’s “vacation” in Nevada might be worth pursuing in and of itself, in addition to saving enough money to pay for it. (While there, look for a job.)
So folks, it’s up to you. It may take a bit of work, some study, but the rewards are there. Not only do you starve the beast, but you can use the money to feed yourself a bit better. Remember, once done, the results are good until they change the tax laws. You continue to save with no added effort year after year after year.
Regards,Tony De Maio
December 22, 2009
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Remind the nice folks, Tony, that you’re an expert on the ins and outs of bureaucracy in general and I think the IRS in particular? You’re not Tony Turbo Tax who saw an H&R Block man fill out an Earned Income Credit form once! Unless I’ve turned senile suddenly Tony is no stranger to the halls of terror, right? Great article, thanks. Linda
One of the unintended consequences of this recession is that we ARE starving them — with tax receipts down 16% or so, the states (at least) are finally having to reign in their spending. Too bad the feds don’t have to do the same — Brian
Yes, that’s true. Also the low interest rates are cutting off interest income. With 10% (or more) unemployment, folks ain’t gonna be paying income tax like they used to.
Hopefully, they won’t just print more money and will cut back. If you think about it, if just 20 million folks chose to convert their $2,000 vacation to a $2,000 “employment search”, that would be just about $20,000,000 x $2,000 = $40,000,000,000 in deductions.
The states have their own problems with property values/taxes dropping and sales tax plummeting because folks ain’t spending. THEIR income tax is also down because of the unemployment.
On the flip side, their welfare costs are up.
They are particularly hard hit because they had accustomed themselves to budgets based upon rising property values and low unemployment.
Yep, I used to work for IRS. However, I worked in the research part, not the front lines. I did meet lots of folks that worked on the front lines.
IRS, like many government organizations, has been gutted by affirmative action, unions (sweetheart contracts where employees don’t have to show up, they can “work at home”; transfers of layoff endangered positions to technical positions for which the employees were unqualified, inability to terminate), political patronage (both through inserting language into the tax code and hiring staff of turned out legislators, or hiring friends of influential people), and a massive bureaucracy you would not believe.
As an example, a friend of mine got a letter asking how long he had known his colleague, since his colleague’s name had been submitted for a security clearance. He replied, “Twelve years.” He did not say that he had met the guy at work when he first went to work for IRS. Twelve years, and just getting around to processing the security clearance. They never did process mine. Heck, I never even got business cards.
For the most part, the folks there are the same as the folks elsewhere in government. Mostly incompetent; some just outright bungling. They WILL NOT make a decision that might reflect badly on them. If you ever get audited, simply appear sure of yourself and tell them they are wrong. They’ll back down because they don’t want no trouble. Since they know little, they are constantly unsure of themselves.
As one guy in the research section told me, “I read a book on research.” Another guy was taking an algebra class at night so he would have the prerequisites to take a basic stat class. One gal was “working” in research. She didn’t know much, but she was a real blonde knockout. It turned out she was the “assistant to the director” which had left.
It is terribly hard to believe that:
“Close enough for government work.”
was once considered high praise.
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I’m not going to repeat my positions from the last topic “How do you view the classroom from the left”
however, I recommend reading a book by Peter Eric Hendrickson that seems particularly relevant to this post.
“Cracking the Code”
Best Beast Starver – http://www.lossthorizons.com
Oops that’s losthorizons.com
Goof! “Close enough for government work” isn’t praise! It used to mean “All anyone sensible would expect;” “adequate but not good,” “not worth what it cost but it will work,” and similar things.
These days, what we expect out of government work is waste, fraud, corruption, preferential treatment for those who donate time and money to politicians, and stupid, irational ideas which destroy wealth and buy votes.
Your advice is always excellent; the IRS is not something with set rules (far less clear ones) and they will negotiate. If there is some sensible explanation for a deduction, why not try it? That’s assuming you have been honest about the rest of it–and a good CPA or tax expert can be well worth the money, simply by knowing about deductions we ordinary folks aren’t ever going to discover. I’m with you: let’s all become more self-sufficient, do everything possible to starve the tax beast (reduce expenses, buy used, do without, contribute nothing voluntarily to anyone–see upcoming article–and vote “NO” every chance we get. NO to hospitals, NO to more school spending, NO to more firefighting equipment, NO, period. The real truth is that impoverishing us for taxes does NOT lead to better lives for anyone. We all know that the most expensive public school systems produce the worst product. Those who do not pay taxes are quick to vote for the rest of us to be robbed, which is why the founding fathers intended for ONLY those who owned property and paid taxes to have the vote. They knew that those who rob Peter to pay Paul will always have Paul’s vote. As for 2010…hang onto your hats, friends, because it may be a very bumpy ride. Pull back to your principles, reduce your expenses (far easier than raising income), forget about your credit rating, and prepare to look out for number one–which is the MORAL thing to do. Our nation grew great on unity and taking care of ourselves. Back to basics. Hugs, Linda
Dear Brothers and Sisters, Sons and Daughters of Liberty,
There are only two types of human beings.
One type just wants everyone to leave everyone else alone and these humans are students and advocates of the Philosophically Mature Non-Aggression Principle.
The other type refuses to leave others alone and these humans are the Mobocracy Looter Minions with their hords of bureaucrats, jackboots, and mercenaries that perpetuate the perpetration of the loot and booty gravy-train. Please help us and yourselves by ending the rob-peter-to-buy-paul’s-vote bread and circuses of the doomed Amerikan Empire.
You are either the one…or the other.
The John Galt Solution of Starving The Monkeys is the only solution. Stop funding and forging your own chains and shackles. What are you leaving for your children, grandchildren, and humanity!?!
The Mobocracy Looter Minions must be allowed to consume everything around them, then each other, and finally themselves. There is no other way. Ayn Rand wrote about it over fifty years ago and it rings as soundly today as it did then.
Get your copy of Starving The Monkeys by Tom Baugh today, before the book is banned and the author is hunted down and Vince Fostered!
John and Dagny Galt
Atlas Shrugged, Owner’s Manual For The Universe!(tm)
Many thx. Looks like a good site.
It really doesn’t make much never mind WHERE you get the information–book, site, video, CD, presentation, or any other place. My strong recommendation is that you DO take the time and effort to secure the information which can help you secure your future.
It is well known that if you save $2,000 in an IRA for 40 years and get 11%, you will end up with quite a bit more than a million dollars. At the 50% marginal tax bracket, that’s only ferreting out $4,000 in tax deductions.
A little work NOW could well end up giving you a million dollar retirement (IRA).
I notice my comment didn’t make it. That book must be on this “free countries” censored list! LOL.
While I agree with “Starve the Beast” on general principals, some of your advice above isn’t legal. For example, “all physical records are gone with no hope of reconstruction. YOUR paper records will be the only source of information” sounds nice, but if the IRS doesn’t like the looks of your records, they can disallow the expenses. They can also “reconstruct” your income, and YOU have to PROVE them wrong, or you lose. And deductions to Goodwill are limited to your basis or the FMV, whichever is less.
A great way to starve the beast is to spend less money-then you pay less sales tax, less property and utility taxes if you spend less buying a smaller house, the sellers pay less income tax, etc. How many people really need more than 2,500 square feet of house anyway?
Absolutely, STARVE THE BEAST. Living in TX, I do almost all of my discretionary buying on the internet – I pay very limited sales tax (somehow I forget to pay that pesky usage tax) and in TX, necessities (like food and some other things) are not subject to the sales tax.
One observation – it’s a common belief that a business must make a profit 3 out of 5 years (or some other ratio). Actually, that’s not true. Making a profit is ONE way to show the IRS that the business is in fact a business (and not a hobby – in which case no deductions for business expenses are allowed; all gross income is taxable), but it’s NOT the only way. All that is actually required is to treat your activity AS A BUSINESS – keep good records, document your income producing activities, and so forth (which you would do anyway). There’s a famous tax case from a few years ago that proves this point (sorry, I don’t have it right at hand): an independently wealthy person ran a horse-breeding operation as a side business for 7 years and never made a profit in any of those years. On audit, the IRS took the position that the activity was a hobby, and disallowed everything (several million dollars in deductions). The breeder took the IRS to Tax Court and showed that he had treated the activity from the beginning as a business – kept meticulous records, documented everything. The Tax Court reversed the IRS, holding that the mere failure to make a profit over a given past period of time did not mean that the activity was a hobby if there was the possibility that the activity could make a profit in the future, and if the person conducting the activity treated it as a business.
Good to know.
In my state there are provisions in the property tax statutes that freeze taxes at the amounts levied at the time the residence owners reach “Full Retirement.” The property assessments continue to rise but the taxes stay the same. If the owners qualify for one of those licence plates for the car with the little wheelchair icon, the tax is reduced. Same if the VA sends disability payments.
The biggest tax avoidance is if the residence is “paid for.” Not having a mortgage payment is similiar to having an increase in income sufficient to pay that mortgage (or rent)(plus the taxes that the income would have to pay). There is no tax at all on “Ghost Income.” Not local, not state, not Federal.
REAL home ownership is having a residence free of a mortgage. Live long enough, keep making those payments, do not keep going out and buying something newer and bigger made of increasingly larger piles of tickey-tackey by individuals who are unqualified to stick it all together (nail guns and other power tools? the users do not know how to drive a nail by hand! Or how to saw a board. . . ). Sometimes the costs of doing the improvements will generate a tax benefit or reduce the cost of residing there. Or both. More “Ghost Income.” Money spent on turning a pile of tickey-tackey into a solid home can have many benefits. A place to hide from the wind and rain almost forever is on the list but tax avoidance is on that list too.
Keep it simple. Fold the business if you’re not making a profit and go on to something else.
We can’t ALL be Ronald Reagan.
Not being a tax expert, I cannot argue. Furthermore, as I’ve often sed, I’m too old to fight and too fat to run.
If it were “easy”, everyone would do it and be millionaires. If there is doubt, you should consult a tax professional. HOWEVER, know this: The optimum answer for a tax professional is “no”. If he says “no” and you do it, he can claim you were “lucky” and “got away with it”. If he says “no” and you get caught, he just smiles smugly. If he says “yes” and it’s questioned, he has to represent you and look like a fool–unless he is correct. In that case he’s wasted a helluva lot of time. If he says “yes” and it goes through, he gets no points for “just doing his job”. Hence, he’s in a “lose/no win” situation. (Maybe someday Gary will publish my paper on “The Abominable NO Men”.
The “trick” of buying used clothes was obtained from a book. You see, there is no way IRS can DETERMINE how much you paid for the clothes. You have the receipts from Good Will and an authoritative book determining those values deducted. IRS may question the VALUE of the deduction (and apparently did), but that can be substantiated. To expect you to save receipts for clothes for several years would be unreasonable.
With respect to “folding the business after two years”, I was NOT recommending “hiding income” or “cheating”. I fully recommend you keep accurate records of expenses and income. My thesis was that at the time they get around to auditing you, there is no longer any inventory or trace of the business. Certainly, if your records are suspect, the business is suspect. The point was that they HAVE ONLY YOUR RECORDS. HOWEVER, it is my understanding that with the “kinder, gentler IRS”, the burden of proof in now on the IRS to prove “misbehavior”.
check out http://auditors.com/whatisaudit.php
Again, Tony’s law is, “If there is any doubt–take the deduction.”
I am concerned with your statement, “How many people really need more than 2,500 square feet of house anyway?”
The only thing people “need” is a couple of pounds of food a day, some clothes to keep the cold out, a warm place to lay down at night, and some useful work to occupy their time. This country is great because folks can pursue their “wants” and desires.
It is interesting to note you say “2,500 sq/ft.” My first house was 700 sq/ft. After WWII returning servicemen purchased 800-900 sq ft houses with 2 b/r, 1 bath, and a single car garage. I can’t understand why anyone would WANT 2,500 sq/ft. Nor can I understand why anyone would want a 50 foot yacht, corvette, 4 carat diamond, Rolex watch, an antique car, a fur coat, Cuban cigars, a race horse, a race car, or any number of other things.
Fortunately for those that want such things, the fact that I cannot understand their desires can’t keep them from getting them.
Yes to that Tony, plus when a man keels over he can’t take any of that “stuff” with him anyway. Okay, you ladies may think differently, er, Linda, the Jag Lady. Also every time a person accumulates more stuff or a higher lifesyle there is more maintanance which attracts even more taxes. Also, having more stuff eats away at the time you have left in your life to do the things you really want to do, like having a nice nap in your easy chair. Regards, CanadaNorth
Yep, few folks take the time to determine what is important in their lives. Certainly, it’s different things to different people. (Perhaps Gary will publish my “You Too Can Be Bought” paper which says, “everyone has his price” and uses the thesis that if you want two things, you will choose the one that is most important to you. As such, you will “sacrafice” one for the other. Hence, everyone has a price for everything but one thing–and that “thing” is different for different folks.
The older I get, the more I realize I’ve got to get rid of things. The more “things” you accumulate, the more maintenance is required. I planted some fruit trees. Buy, plant, trim, fertilize, spray, pick the fruit, can/dry the fruit, haul the leaves. They are “nice”, but I’m not sure they are worth the trouble. Garden? same thing. Sailboat? refinish the wood, mend the sails, polish the fiberglass, repair as necessary, grease the wheel bearings, winterize it, etc. Note what’s missing–sail it. We won’t even talk about a car.
Even if it’s just tools–mower, chain saw, leaf blower, etc. All require maintenance. Even retired, there is little time for the hobbies.
Wot’s the old joke. God grants a man any favor he wishes. The guy decides that when he dies he wants to bring something from earth into heaven. Years later, he dies and arrives at the gates with a suitcase. After clearing it with God, St. Peter asks, “What did you bring?” The guy opens up the suitcase and it is loaded with gold ingots. St. Peter says, “I don’t understand. You could have brought anything you wished, and you brought PAVING STONES??”
Hey, Canada, have you ANY idea how much Jag I can buy for two to five thousand dollars? With at least 150,000 good miles left in all that luxury? Why pay for a sleazy new Honda I’ll hate? All that extra money can go on cattle, the Blue Bell ice cream truck that substitutes for an insanely expensive walk-in freezer for a tiny fraction of the price, and other machinery or supplies. “Luxury” is whatever you think it is–and sheer gleeful joy is figuring out how to get it on the cheap. Tony, get a grip, dear. Back when I wasn’t the rancher lady bucking to become Liege Lord to a band of bold barons my idea of squalor was anything under 3400 square feet. IF you can have it after everything else is provided very little is as enjoyable as spacious, gracious surroundings. SOME things we acquired in our old lives when they were consolation prizes for not even daring to dream. I have…four mink coats, a fox, and two fur-lined coats. I have diamonds and crystal chandeliers…and all they do now is make me smile, keep me warm, and sparkle. What we are talking about NOW is cutting out nonessentials because we CAN see the dream is not only there but provides the most safety in lengthy periods of economic depression. I gave Charles a big meat band saw for Christmas! He was thrilled. Our “big” present to each other was an older 40′ luxury bus that will be our “bug out vehicle” and take everything we want including some of the livestock if necessary! At 80 mph, cruising range of nearly a thousand miles. Sure, $5500 will buy a pretty nice piece of jewelry and I love the stuff but the old consumer-show-off-meaningless days in America are dying. This is the chance of a lifetime. Get rid of the dross, find a way to lease or share a few acres, and work out how to have the basics of food production under your control. Besides, a lady with diamonds and furs can wear ten-buck separates from Ross Dress for Less or Target and nobody notices. Get books, skills, a place to keep some chickens and a goat. Relocate to a small town or rural area if you can work out any sort of decent commute while you must have a job. What you don’t know yet is how exciting cutting expenses is when you have a war chest towards your dream, or how utterly meaningless most of what people own–or are owned by–is. Use it up, wear it out, make it do, do without, shop Good Will, plan…and you can probably build a wonderful life with real meaning in it. Who needs Blockbuster? Who needs ANYTHING found in a mall? I paid for my toys with all those years living a life my husband loved. He would have loathed how I live now, but he is dead, bless him, and I am free to revel in what I always wanted. NO we do not sell our toys; my furs would not begin to return the value they have to me. Craig’s List is full of people selling the gaudy dreams of the past for ten to thirty cents on the dollar. When they have eaten their old toys, then what will they do? Vacations? Look for a little house you can rent that will let you keep goats and chickens. You’ll love that far longer than fading memories of too many Margueritas in Acapulco. Live, people! Dare!
My Pub 17 specifically states the expenses of attending stockhold meeting are NOT deductable. Look on page 207 of the 2009 issue. Now if you are a Director the answer is the reverse.
Re: Comment #16
But, Tony, that’s the POINT of treating it like a business. The breeder was independently wealthy – by treating his hobby (for that is what it was) AS A business, he converted expenses into deductions, reducing his tax burden. I do the same. I’m self-employed in my full-time occupation, which produces substantial annual profits. I have two hobbies on the side that generate around $10k in annual revenues (hobbies which I would continue to do even if they produced NO revenues). By treating the hobbies AS A business, I convert all of my expenses into deductions. As the deductions consistently are greater than the revenues, I have recurring losses which shelter some of my profits from my primary business, thus starving the beast.
An effective strategy. Thanks for your column – a number of good points in there.
This is probably not the place for this missive, but I have no other.
Do you have the date of that publication. Last I looked many years ago, I believe it was. Looking it up today, I find you are correct.
While logic is not the strong suit of IRS, I find such a decision puzzling. Certainly if you went to a business to check it out to determine if you should ivest in it, that MUST be deductible. (Thought that is not what I claimed.)
Again, if there is doubt, look it up. It only takes a few minutes and can save much time in the future. Anyone who takes MY word for IRS rules deserves what they get.
many thx for the correction,
You are quite fortunate. Not only that, but you seem to have already discovered the tax benefits of “side buseinesses”.
The paper was directed more to those who work 8-5 and have no outside marketable skills. “Businesses” like AMWAY, (which I use only as an example) fill the void for those who do not wish to strike out on their own. A side benefit of such businesses is that there is a long history of them beating IRS in court, and they can provide some assistance.
Hard2Believe: There IS no deliberate censorship, ever. Period. Well, maybe Gary would do it if you used really vile language. The problem is the spam filter W&G uses, as capricious a monster as ever was. I have cajoled and complained for months and it can’t be changed. Things I write disappear! If you don’t get an answer write again until you do. Tony and I love answering. The big guns who publish investment letters on their own almost never do, so we play with their mail. Since I don’t know what your comment was, I can’t respond. Keep trying! Linda
The Tax Freedom Day calculation already includes federal taxes, state taxes, local taxes, Social Security, Medicare, and other payroll taxes.
“Folks, I think it’s time.”
The nation’s general apathy on the subject might have something to do with the fact that Tax Freedom Day has occurred on April 1st or later for almost 60 years.
“Washington, DC, March 31, 2009 – Tax Freedom Day will arrive on April 13 this year, according to the Tax Foundation’s annual calculation using the latest government data on income and taxes.
This is eight days earlier than in 2008, and a full two weeks earlier than in 2007.”
With such a gross thing (and I DO mean “gross”), there is just one helluva lot of “slop”.
For one thing, many folks pay no (income) taxes, so if we limit the essay to those that DO, it goes up.
The paper was written several years ago. If you look at 2007, you 4/12 or 33%. in 2008, you get 3.5/12 or 30%.
Alternatively, you can look at the GDP vs the federal budget. In 2008 the gdp was about 14 trillion; the federal budget was about 3 trillion, yielding about 21%–BUT that don’t count the “off budget” items like the wars and Social Security, plus other “goodies”.
I think we can agree, that while the actual number (or percent) may be off, the taxes are too high.
OK, I will Linda. I recommend “Cracking the Code” by Peter Eric Hendrickson
Seems particularly relevant to this topic, and is very enlightening to say the least.
One time it took FOUR attempts to get my post up.
Dusty, dear, home ownership BEGINS with not having a mortgage, but so long as we hold our properties only by paying yearly Danegeld to assorted “taxing authorities” they are NOT ours, free, clear, safe, and secure.
Hey, Lonestar, where ’bouts you live in Texas? County will do fine.
To post #15, Karen
Wow! The line “How many people really need more than 2,500 square feet of house anyway?” Really struck me! Thank you Tony and Linda for the well reasoned and inspiring responses. Wish I had one. Mine is more of a rant…
How big is your family? In my area Asian and Indian families live multi-generational, willfully and happily in 3000 sq ft plus. What is your climate? Interests? Etc. I am not picking on Karen, just the line of reasoning. I have heard this many times from friends on the left who think if we all have the same and live the same there will be no conflicts. Who needs more than X amount of income? We can tax them more. This way of thinking is very dangerous. It is the not in my backyard, as long as it doesn’t effect me “mentality“. This is how societies agree to be sold down the tax/regulation river a step at a time.
Unfortunately, reducing my life or seriously restricting my activities to “Starve” the tax beast doesn’t sound like winning to me. Sounds like loss denial or the perversion of genuine production for subversive purposes. The best revenge is to live well and prosper on your own merits. ~C
PS I know the current game is so horribly rigged that prospering on your own merit isn’t as easy as it used to be.
I found this today and thought of our exchange. I believe it supports my contention that “Tax Freedom Day” reflects only federal taxes. Also, since about the population don’t pay income taxes, the rate for those that DO pay taxes is probably higher then reported, since the reported value is averaged across all citizens.
Take it for wot it’s werth. From:
Sunday, August 22, 2010 10:01 AM
2. Cost of Government Highest Ever in 2010
American workers spent the first 231 days of this year toiling to pay off the costs of state, local, and federal governments, leaving just 4 1/2 months to provide for themselves and their families.
Each year, the Americans for Tax Reform Foundation and its Center for Fiscal Accountability calculate the day on which average Americans have paid off their share of the cost of government spending and regulations. This year that day fell on Aug. 19, eight days later than last year and the latest Cost of Government Day ever recorded, according to Mattie Corrao, government affairs manager for Americans for Tax Reform.
“The fact that Cost of Government Day falls in the later part of August is alarming enough. It is even more harrowing that the 2010 Cost of Government Day constitutes a 34-day jump from COGD just two short years ago, when it fell on July 16,” said Grover Norquist, president of Americans for Tax Reform.
Like I sed, about 2/3
Guess I’m getting old and can’t proof read anymore. It SHOULD READ
I found this today and thought of our exchange. I believe it supports my contention that “Tax Freedom Day” reflects only federal taxes. Also, since about HALF the population don’t pay income taxes, the rate for those that DO pay taxes is probably higher THAN reported, since the reported value is averaged across all citizens.
Getting old ain’t so bad when you consider the alternative.
Great stuff. One thing, though, is about state income taxes. I live in Wyoming. We have no state income tax. Our sales tax is 4.6% in this county (highest in the state) and my property tax is $475/year. To compare, we lived in Utah and our sales tax was 5.2%, the state has an income tax, and a property half the size with a price tag 3x as high (in “value”) had a property tax rate of $1,800/year.
Nevada also has a comparatively low sales and property tax rate with no state income tax (with the exception of the Las Vegas area).
So it is possible to live in a state with low taxes all the way around.
Thanks. I’m going to start studying this.
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