Master Your Money by Ron Blue

Author:Ron Blue
Language: eng
Format: epub
Publisher: Moody Publishers

11

TAX PLANNING

“I’m proud to be paying taxes in the United States. The only thing is—I could be just as proud for half the money.”

ARTHUR GODFREY

“Unquestionably, there is progress. The average American now pays out twice as much in taxes as he formerly got in wages.”

H. L. MENCKEN

“The hardest thing in the world to understand is the income tax.”

ALBERT EINSTEIN

“The avoidance of taxes is the only intellectual pursuit that carries any reward.”

JOHN MAYNARD KEYNES

If there is one cash outflow that everyone is eager to reduce, it is income taxes.

Someone once asked me to help him plan to pay zero taxes. He was a professional who earned a very good income, and yet he was adamant that he did not want to pay taxes. He did not agree with the way the government spent his money. I was tempted to ask him whether he would like to give up his automobile—because the road system would not be maintained without taxes—or whether he could sleep at night with no military forces to protect him, and whether he would like not to have national parks to visit.

I am in no way proposing that we should pay more than we rightfully owe in taxes. There is a big difference, however, between tax avoidance and tax evasion.

Tax evasion results in a jail sentence; tax avoidance results in lower taxes, but it almost never results in zero taxes. Tax avoidance is planning wisely and prudently to pay a fair share of taxes, but no more than what is legally owed.

I have often reflected on our attitude toward taxes and asked myself the question, why is it that we detest paying taxes? I believe the answer is multifaceted, but the primary reason is that we get no perceived benefit from paying taxes. Only in this area of our finances do we feel that once the money is gone, it seems to be gone forever. For the salaried and those living on a fixed income, fewer tax planning opportunities exist compared to those who are self-employed or own businesses with the opportunity and ability to use various tax planning tools and techniques.

When I was a practicing CPA, I prepared hundreds of tax returns each year and was asked hundreds of times over the course of several years, “How can I reduce my taxes?” I had a facetious answer for that question: “It’s easy to reduce your taxes—just reduce your income.” It’s a guaranteed way to reduce taxes, and there is no risk to it. The point is that if your taxes are going up, your income is also going up. Taxes need to be put into proper perspective, and the proper perspective is that income taxes are levied only when there is income earned. So instead of resenting taxes, we should be thanking God that we have an income on which to pay taxes. Also, though we may see waste and inappropriate use of some tax dollars, many are spent for services we use and need. We are not “entitled” to those services for free.

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