I was just listening to a recording of a conference call this morning where a financial planner began his presentation with this premise:
Taxes will be increasing in the future
I haven’t listened to the rest of it because I had to pause it and write this post. I’m sure when I go back this guy will paint a whole picture based on the assumption of taxes increasing in the future.
Well, first, let’s admit to ourselves that there is a very real, hard maximum taxation point. That’s 100%. A taxpayer cannot pay more in taxes than he has. Beyond that is impossible.
Second, let’s admit that there is effectively a maximum taxation point that is well below 100% of what a taxpayer has. Taxes going beyond this point is improbable. Let me explain…
Whether you may realize this or not, you probably pay 60%, 70% or more of every dollar that has ever been “yours” in taxes. Income taxes, property taxes, sin taxes (on booze), gas taxes, sales taxes, excise taxes, franchise taxes, death taxes, etc. Some of these taxes show up on paper that you can see, and some of these taxes are never declared to you at the point at which you pay them.
Where the Line is Drawn
So with the majority of the money that was ever yours already going to these direct taxes, how much more taxation can you take? Imagine a scenario where we go from systematically losing 70% of our money to losing 90% of our money.
Do you think millions of Americans would simply stop paying taxes? Undoubtedly.
Do you think underground markets would develop where Americans could work and spend money outside of the government system? Surely.
…and the government knows this. That’s why it has been drastically increasing its taxation on us without us even knowing and without us even paying it directly.
Of course I speak of the most disastrous tax: inflation. Inflation is a hidden tax that takes wealth away from every American without permission or awareness.
The Secret Government Funding Source
It’s the secret government funding program. Without inflation, taxpayers would have never funded the trillions in boondoggles that our government has become famous for. You see, we don’t vote on whether or not to print up money and give it to the government for their wasteful programs. That’s why it’s the easiest tax to collect.
And with our government schools making dummies out of everyone, our populace is almost completely ignorant to the inflation tax.
To me, the government has already shown its cards. It knows it can’t directly tax us as much as it wants to or else we would fire it, kill it, and replace it (or maybe not replace it but that’s another blog post).
Since 1913, the dollar has lost over 95% of its value. The message is clear: we are near the point of maximum direct taxation. There are millions of republicans with an itchy trigger finger ready to make a big stink if Obama raises direct taxes.
The Government Wants to Survive
Obama, his advisors, and his puppet masters are not dumb enough to raise direct taxes significantly. They will do what the last men in power did. They will cover the bulk of their bankruptcy through borrowing and inflation… and the borrowing will eventually be paid back through inflation or war (kill the lender and the loan goes away!).
So next time a financial advisor wants to talk to you about distribution planning and prefaces the entire game with the idea that taxes will be increasing a lot in the future, I think you should walk out on him (or hang up the phone) and start looking for someone who will acknowledge what’s really going on.
Oh, and I almost forgot. The most exciting part is that once you acknowledge what’s really going on… investing, wealth building, and wealth protection become MUCH easier. Stay tuned for future posts that address the “Okay, what now?” voice in your head 🙂