As a Comprehensive Financial Advisor, among my services are risk management, investments, estate planning, retirement planning, cash flow management, debt analysis and tax planning. The one that energizes me the most is reducing your tax obligations through perfectly legitimate tax strategies. This joy comes from one simple fact and that is, “The Tax Laws are Inequitable to All.”
300 years ago Adam Smith, one of the greatest economists of all time, said that taxes should be levied only to support a limited government and should have the four characteristics of being fair, certain and not arbitrary, easy to pay, and able to deal with the needs of government. Unfortunately, today’s tax law is so capricious and political, it is no longer Fair, Transparent or Easy. In addition, government is so dysfunctional it is not able to use the massive amount of proceeds to fund itself without debt.
Let’s look at the concept of unfair. Adam Smith clearly agreed with the thinking that taxes should be paid proportionately by the degree of wealth a citizen made or possessed. The type of income a well-to- do citizen makes, determines the taxes paid. Yet,
- A person earning their primary income from dividends and capital gains pays a significantly lower tax rate than the person who makes the exact same income in salary. Why?
- Taxes should be easy to pay, but no one would argue that our tax laws are easy. Why Not?
- When Congress waits until December to tell us what the final tax laws are for the year ending, it is clearly arbitrary. Ridiculous?
- No matter how much money comes in, Government is always short of their needs. Is there ever too much?
Because the US Government refuses to simplify the tax code, make the laws certain, create an easy process and to live within its means, I personally delight in helping clients minimize their tax liability. Since Government employs rigid laws against my clients, I use those same laws to the client’s maximum benefit. Never ever should a professional allow a client to massage the tax laws for their benefit; however, the tax laws are so complex that if someone has a good grasp of the tax laws there are numerous completely legal opportunities to minimize taxes.
One example of these opportunities follows:
According to current tax law, if you have child in college and pay their tuition you can get up to $2500 of tax benefits from the government, unless your income is over $90,000 single or $180,000 married. Even so, there is a strategy by which you can create income in the name of the child and let the child garner the $2500 of tax benefits, despite your income.
My passion is to constantly pursue tax planning strategies to minimize a client’s federal income taxes, state income taxes and federal/state estate death taxes. Since the laws are unfair, uncertain, complex and government never seems to have enough, then it should be your passion, as the IRS Commissioner has stated, “to Pay Only Your Fair Share in the Context of the Law.”