Some of you may have heard some noise in the media over the past week about the small dip in ...
Taxes chase away wealth
Taxes chase away wealth
May 15, 2012
High tax rates chase away wealth and job creation. Wealthy people have the ability to move capital around to avoid high taxation.
Nebraska’s Tax Rates Unfriendly to Retirees
April 3, 2012
A number of factors go into a decision on where to live during retirement. Many folks choose Nebraska because they have family here, or because of our low cost of living.
However, retirees also might want to look at the state’s tax rate when making that decision. An article published last week on Marketwatch.com - click here to view the article - reveals that Nebraska is far from a tax friendly state.
- Nebraska is only one of 16 states in the union that taxes Social Security, and the state also taxes pension income
- The state’s tax rate on personal income – which during retirement might include Social Security, pensions, personal assets and wages – ranges from 2.560 percent to 6.840 percent.
- The state’s sales tax rate is 5.5 percent, which is close to the national median
And we all know about the state’s property tax rate. Taxes can be a considerable retirement expense, and based on these numbers, they will likely be one of the largest expenses for those choosing to retire in Nebraska. It’s tough to convince older family members to move here when taxation is so high.
At least we still have our famously low cost of living.
Our Tax System Explained through Bar Stool Economics
March 15, 2012
I’d like to share a story I read recently in a forwarded email* that captures our tax system at work in a bar stool scenario. Enjoy!
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that’s what they decided to do.
The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.
“Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.” Drinks for the 10 now cost just $80.
The group still wanted to pay their bill the way we pay our taxes so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers?
How could they divide the $20 windfall so that everyone would get his ‘fair share?’ They realized that $20 divided by six is $3.33. However, if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33% savings).
The seventh now paid $5 instead of $7 (28% savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six were better off than before. And the first four continued to drink for free. But once outside the bar, the men began to compare their savings.
“I got a dollar out of the $20,” declared the sixth man. He pointed to the tenth man, “but he got $10!”
“Yeah, that’s right,” exclaimed the fifth man. “I only saved a dollar, too. It’s unfair that he got ten times more than I!”
“That’s true!!” shouted the seventh man. “Why should he get $10 back when I got only two? The wealthy get all the breaks!”
“Wait a minute,” yelled the first four men in unison. “We didn’t get anything at all. The system exploits the poor!”
The nine men surrounded the tenth and beat him up. The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn’t have enough money between all of them for even half of the bill!
This piece teaches us that people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier!
* In the forwarded email, this piece was attributed to David R. Kamerschen, Ph.D., Professor of Economics at the University of Georgia. However, when I asked Dr. Kamerschen for his permission to use the piece, he responded that he was not the author and didn’t know who wrote it. So, I would like to thank and acknowledge the unknown author of this story for writing this powerful piece.
And for a musical look at our government…
December 30, 2011
You've got to see this!
Lessons from Canada
November 22, 2011
In recent years, Canada has made great strides with its former fiscal problems. Just how did they do it?
http://mjperry.blogspot.com/2011/11/lessons-from-canada-on-how-it-fixed-its.html
Attentive Listeners Wanted
August 19, 2011
If you’re not listening to our radio show, you’re missing out on important news and commentary that will help put everything into perspective and keep you on the long-term path to wealth. We love getting feedback on the show. This last week, I mentioned how President Coolidge cut taxes, and how that, in part, led to the boom of the “Roaring ‘20s.” One of our valued clients, Travis, wrote in a correction that it was actually Warren G Harding that initially cut the taxes and that Coolidge continued cutting taxes throughout his administration. He was even nice enough to back up his claim with evidence, which is always useful. Good ear, Travis, and thanks for listening!
http://www.cato.org/pub_display.php?pub_id=13561
Government Consumes Americans’ Earnings
August 12, 2011
The Americans for Tax Reform Foundation author an annual Cost of Government Day report. This year, according to their research, Americans will work 224 days to support the current levels of government spending and regulation. This leaves Americans with only 4 ½ months to pay their bills and save for retirement. Read More.
A 62% Top Tax Rate?
May 31, 2011
Stephen Moore of the Wall Street Journal examines the math behind all of Obama’s tax increases.
Click Here to read more.
The real cost of taxes
April 18, 2011
It seems that tax laws just get more and more complicated as time goes on. Working through all these rules is probably costing you more than just your time.
Read: "The 30 cent tax premium" at The Wall Street Journal
Socical Security vs. Madoff Security
January 4, 2011
Author: anonymous.
| Anyone can understand this: Why did Bernie Madoff go to prison? To make it simple, he talked people into investing with him. Trouble was, he didn't invest their money. As time rolled on he simply took the money from the new investors to pay off the old investors. Finally there were too many old investors and not enough money from new investors coming in to keep the payments going. Next thing you know Madoff is one of the most hated men in America and he is off to jail.Some of you know this. But not enough of you. Madoff did to his investors what the government has been doing to us for over 70 years with Social Security. There is no meaningful difference between the two schemes, except that one was operated by a private individual who is now in jail, and the other is operated by politicians who enjoy perks, privileges and status in spite of their actions. Do you need a side-by-side comparison here? Well here's a nifty little chart.
'The taxpayer: That's someone who works for the federal government but doesn't have to take the civil service examination.' ~ Ronald Reagan "If you put the federal government in charge of the Sahara Desert , in five ~ Milton Friedman |
