I am proud to be paying taxes in the United States. The only thing is I could be just as proud for half of the money. – Arthur Godfrey
I’m sure most of you have had your tax return completed or are in the process of doing so. Depending on your situation, the latest “tax reform” may have impacted you positively or negatively. For many I talk to, they still feel like taxes are high, but compared to historical rates, we’re actually at pretty low levels (see below graph).
By keeping the rates at these low levels, how can the government afford to pay for all the services they provide? Well, you go into debt. If you’re interested, check out http://www.usdebtclock.org/, and you’ll see that the US debt has grown to over $22 Trillion (doesn’t even factor in the future obligations of Social Security & Medicare/Medicaid), and it’s projected the annual deficit for 2019 to be close to $1 Trillion. This is when the economy is supposed to be good.
So what does this mean for Americans? Well, some believe that could mean a signficant rise in tax rates down the road, reductions in services provided by the US government, or likely both.
Now is the time to thinking about how these trends could impact you down the road and what you can do now to mitigate the risk.
For most Americans who have a w-2 job, there may not seem like options to reduce your current and future tax burdens. For the estimated 70,000 pages in the tax code, only a small percentage is dedicated to what you pay in taxes.
However, the majority of the code tells you how you can reduce it by simply doing what the government wants you to do (e.g. own a business and employ people, own rental real estate to house people, own certain insurances to protect people).
Remember, every dollar you pay in taxes is a loss and reduces your ability to protect, save, and grow your wealth for the things that matter most in your life.