April 15th - Taxman vs Upside Down

Happy Tax Day!

Personal Strategies against a Government Policy Sponsoring Destitution

The Making Work Pay Credit

Part of the government's 2009 American Recovery and Reinvestment Act, this credit was designed to put more money in taxpayers' pockets by taking less money out of their paychecks throughout the year. With less money being withheld, fewer people are getting large refunds. Remember, getting a tax refund means you've given the government too much and now you're getting your money back. Since the government took less, you have less to get back.


I believe there are going to be a lot of pissed off people when they realize this when they pay taxes this year. You do not want to owe the government and do not want the government owing you. If you are a saver than you would rather owe than be receiving tax return. This is why you set up a fund and withhold taxes(you want to be around $0.00). So when it is time to pay uncle sam you have that money sitting somewhere making a little interest rather, than letting the government borrow it from you and they make interest off it.

House Gambles with Economic Future

Visit msnbc.com for Breaking News, World News, and News about the Economy

Dylan's four (shockingly logical) proposals on how to fix the broken financial system:

Inject transparency, primarily to bring almost $500 trillion in swaps to the forefront.

Capital to back Wall Street's gambling. It is a guarantee that very few firms will have Goldman's trading pattern each and every quarter.

Enact a tax-code to discourage short-term profits. "Fortunes should not be made in minutes but over years through the creation of value to society."

Break up the Too Big To Fail banking institutions. Start with Goldman Sachs. Right Now. Christine Varney, we are still looking at you.

Gold and Economic Freedom

So you think Gold shouldn't be in your portfolio? See what ex-fed chairman Alan Greenspan wrote 1967. I learned a great deal reading this article.

An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense-perhaps more clearly and subtly than many consistent defenders of laissez-faire -- that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.

What medium of exchange will be acceptable to all participants in an economy is not determined arbitrarily. First, the medium of exchange should be durable. In a primitive society of meager wealth, wheat might be sufficiently durable to serve as a medium, since all exchanges would occur only during and immediately after the harvest, leaving no value-surplus to store. But where store-of-value considerations are important, as they are in richer, more civilized societies, the medium of exchange must be a durable commodity, usually a metal. A metal is generally chosen because it is homogeneous and divisible: every unit is the same as every other and it can be blended or formed in any quantity. Precious jewels, for example, are neither homogeneous nor divisible. More important, the commodity chosen as a medium must be a luxury. Human desires for luxuries are unlimited and, therefore, luxury goods are always in demand and will always be acceptable. Wheat is a luxury in underfed civilizations, but not in a prosperous society. Cigarettes ordinarily would not serve as money, but they did in post-World War II Europe where they were considered a luxury. The term "luxury good" implies scarcity and high unit value. Having a high unit value, such a good is easily portable; for instance, an ounce of gold is worth a half-ton of pig iron.

In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.

Whether the single medium is gold, silver, seashells, cattle, or tobacco is optional, depending on the context and development of a given economy. In fact, all have been employed, at various times, as media of exchange. Even in the present century, two major commodities, gold and silver, have been used as international media of exchange, with gold becoming the predominant one. Gold, having both artistic and functional uses and being relatively scarce, has significant advantages over all other media of exchange. Since the beginning of World War I, it has been virtually the sole international standard of exchange. If all goods and services were to be paid for in gold, large payments would be difficult to execute and this would tend to limit the extent of a society's divisions of labor and specialization. Thus a logical extension of the creation of a medium of exchange is the development of a banking system and credit instruments (bank notes and deposits) which act as a substitute for, but are convertible into, gold.

A free banking system based on gold is able to extend credit and thus to create bank notes (currency) and deposits, according to the production requirements of the economy. Individual owners of gold are induced, by payments of interest, to deposit their gold in a bank (against which they can draw checks). But since it is rarely the case that all depositors want to withdraw all their gold at the same time, the banker need keep only a fraction of his total deposits in gold as reserves. This enables the banker to loan out more than the amount of his gold deposits (which means that he holds claims to gold rather than gold as security of his deposits). But the amount of loans which he can afford to make is not arbitrary: he has to gauge it in relation to his reserves and to the status of his investments.

When banks loan money to finance productive and profitable endeavors, the loans are paid off rapidly and bank credit continues to be generally available. But when the business ventures financed by bank credit are less profitable and slow to pay off, bankers soon find that their loans outstanding are excessive relative to their gold reserves, and they begin to curtail new lending, usually by charging higher interest rates. This tends to restrict the financing of new ventures and requires the existing borrowers to improve their profitability before they can obtain credit for further expansion. Thus, under the gold standard, a free banking system stands as the protector of an economy's stability and balanced growth.

When gold is accepted as the medium of exchange by most or all nations, an unhampered free international gold standard serves to foster a world-wide division of labor and the broadest international trade. Even though the units of exchange (the dollar, the pound, the franc, etc.) differ from country to country, when all are defined in terms of gold the economies of the different countries act as one -- so long as there are no restraints on trade or on the movement of capital. Credit, interest rates, and prices tend to follow similar patterns in all countries. For example, if banks in one country extend credit too liberally, interest rates in that country will tend to fall, inducing depositors to shift their gold to higher-interest paying banks in other countries. This will immediately cause a shortage of bank reserves in the "easy money" country, inducing tighter credit standards and a return to competitively higher interest rates again.
A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World War I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.

But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists -- why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely -- it was claimed -- there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks ("paper reserves") could serve as legal tender to pay depositors.

When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates.

The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market -- triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's.
With a logic reminiscent of a generation earlier, statists argued that the gold standard was largely to blame for the credit debacle which led to the Great Depression. If the gold standard had not existed, they argued, Britain's abandonment of gold payments in 1931 would not have caused the failure of banks all over the world. (The irony was that since 1913, we had been, not on a gold standard, but on what may be termed "a mixed gold standard"; yet it is gold that took the blame.) But the opposition to the gold standard in any form -- from a growing number of welfare-state advocates -- was prompted by a much subtler insight: the realization that the gold standard is incompatible with chronic deficit spending (the hallmark of the welfare state). Stripped of its academic jargon, the welfare state is nothing more than a mechanism by which governments confiscate the wealth of the productive members of a society to support a wide variety of welfare schemes. A substantial part of the confiscation is effected by taxation. But the welfare statists were quick to recognize that if they wished to retain political power, the amount of taxation had to be limited and they had to resort to programs of massive deficit spending, i.e., they had to borrow money, by issuing government bonds, to finance welfare expenditures on a large scale.

Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues, and cannot easily be absorbed by the financial markets. A large volume of new government bonds can be sold to the public only at progressively higher interest rates. Thus, government deficit spending under a gold standard is severely limited. The abandonment of the gold standard made it possible for the welfare statists to use the banking system as a means to an unlimited expansion of credit. They have created paper reserves in the form of government bonds which -- through a complex series of steps -- the banks accept in place of tangible assets and treat as if they were an actual deposit, i.e., as the equivalent of what was formerly a deposit of gold. The holder of a government bond or of a bank deposit created by paper reserves believes that he has a valid claim on a real asset. But the fact is that there are now more claims outstanding than real assets. The law of supply and demand is not to be conned. As the supply of money (of claims) increases relative to the supply of tangible assets in the economy, prices must eventually rise. Thus the earnings saved by the productive members of the society lose value in terms of goods. When the economy's books are finally balanced, one finds that this loss in value represents the goods purchased by the government for welfare or other purposes with the money proceeds of the government bonds financed by bank credit expansion.

In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.

--Alan Greenspan
1967

Source: http://www.usagold.com/gildedopinion/greenspan.html

What do you think? Please leave me a comment!

State Tax Holiday

This week North Carolina kicks off its state tax free holiday as do may other states. Sales tax is some of the most important tax levied by states. This provides temporary sales tax for consumers for purchasing a array items from clothes, computers, and back to school items. Carolina's law reads:

G.S. 105-164.13C provides an exemption for certain items of tangible personal property sold between 12:01 A.M. on the first Friday in August and 11:59 P.M. the following Sunday. For 2009, the dates are Friday, August 7th through Sunday, August 9th. Clothing, footwear, and school supplies of $100 or less per item; school instructional materials of $300 or less per item; sports and recreation equipment of $50 or less per item, computers of $3,500 or less per item; and computer supplies of $250 or less per item will be exempt.

So is a tax holiday really good thing for the state government or individuals? Here are some of the pros and cons.

Cons: (From the Institute on Taxation and Economic Policy)

Sales tax exemptions create administrative difficulties for state governments, and for the retailers who must collect the tax. For examples, exempting groceries requires a sheaf of government regulations to police the border between nontaxable groceries and taxable snack food. A temporary exemption for clothing (or for any other back-to-school item) requires retailers and tax administrators to wade through a similar quantity of red tape for an exemption that lasts only a few days. Last year's tax-free weekend cost the state(North Carolina)nearly $12 million in lost revenues.

The benefits of sales tax holidays are not limited to state residents, but also extend to consumers visiting from other states. For states struggling with continuing budget deficits, sales tax holidays offer less “bang for the buck” than more targeted tax breaks.

Retailers know that many consumers will shift their spending toward sales tax holidays to take advantage of the temporary tax exemption. Unscrupulous retailers can take advantage of this shift in consumer behavior by increasing their prices (or failing to reduce them by the full amount of the sales tax break) during the tax holiday.

Perhaps most important for cash-strapped lawmakers, sales tax holidays are costly. Revenue lost through sales tax holidays will ultimately have to be made up somewhere else, either through painful spending cuts or increasing other taxes.

Pros:

Helps out struggling families that need a boost during these hard economic times for purchasing items such as school supplies and other items of need. The National Retail Federation's annual report says parents will spend close to 8 percent less this year to get their children ready to return to school.

The tax savings combined with all the sale prices that retailers typically offer during the weekend make the dollar go further.

The benefit to cash-strapped shoppers outweighs any inconvenience to merchants and state and local administration work.

Overall: I think that it would be nice to spread a little tax relief, cough, cough... throughout the year instead of a 3day weekend, but then the lawmakers wouldn't be able to take credit for helping the people of their state out. I am guessing for some families this cannot come fast enough. Even though I do not agree fully with it, I hope it can help out some families/individuals that really need the help this year, as it has been a rough one economically.

What do you think? Are these a good idea or should they just give the tax relief spread throughout the year? Leave a comment.

Atlas Shrugged, Health Care, and Collectivism

This weeks quote is from Atlas Shrugged and since one of the main topics being discussed in Washington right now is Socialized health care I thought I would share a story to illustrate the devastating effects of collectivism. The story is about a tramp Jeff Allen, former shop foreman at Twentieth Century Motor Company who had snuck onto the The Comet(train) and Dagny offers him to be her guess for diner. He explains to Dagny how the owner of the Twentieth Century Motor Company had passed away and that the heir had come in and brought a new plan of how to run the factory.

The following is an excerpts from Atlas Shrugged, © Copyright, 1957, by Ayn Rand.

"They let us vote on it, too, and everybody—almost everybody—voted for it, We didn't know. We thought it was good. No that's not true, either. We thought that we were supposed to think it was good. The plan was that everybody in the factory would work according to his ability, but would be paid according to his need.

The Starnes heirs made long speeches about it, and it wasn't too clear, but no body asked any questions. None of knew how the plan would work, but every one of us thought the next fellow knew it. And if anybody had doubts, he felt guilty and kept his mouth shut—because they made it sound like anyone who'd oppose the plan was a child-killer at heart and less of a human being. They told us that this plan would achieve a noble idea.

He goes on to explain how it worked

"Try pouring water into a tank where there’s a pipe at the bottom draining it out faster than you pour it, and each bucket you bring breaks that pipe an inch wider, and the harder you work the more is demanded of you, and you stand slinging buckets forty hours a week, then forthy-eight, then fifty-six - for your neighbor’s supper - for his wife’s operation - for his child’s measles - for his mother’s wheel chair - for his uncle’s shirt - for his nephew’s schooling - for the baby next door - for the baby to be born - for anyone anywhere around you - it’s theirs to receive, from diapers to dentures - and yours to work, from sunup to sundown, month after month, year after year, with nothing to show for it but your sweat, with nothing in sight for you but their pleasure, for the whole of your life, without rest, without hope, without end … From each according to his ability, to each according to his need…"

"We’re all one big family, they told us, we’re all in this together."

"It took us just one meeting to discover that we had become beggars - rotten, whining, sniveling beggars, all of us, because no man could claim his pay as his rightful earning, he had no rights and no earnings, his work didn’t belong to him, it belonged to ‘the family’, and they owed him nothing in return, and the only claim he had on them was his ‘need’ - so he had to beg in public for relief from his needs, like any lousy moocher, listing all his troubles and miseries, down to his patched drawers and his wife’s head colds, hoping that ‘the family’ would throw him the alms."

He goes on to explain how good men were forced to become bad

What was it they’d always told us about the vicious competition of the profit system, where men had to compete for who’d do a better job than his fellows? Vicious, wasn’t it? Well, they should have seen what it was like when we all had to compete with one another for who’d do the worst job possible. There’s no surer way to destroy a man than to force him into a spot where he has to aim at not doing his best, where he has to struggle to do a bad job, day after day. That will finish him quicker than drink or idleness or pulling stick-ups for a living.

“God help us, ma’am! Do you see what we saw? We saw that we’d been given a law to live by, a moral law, they called it, which punished those who observed it - for observing it. The more you tried to live up to it, the more you suffered; the more you cheated it, the bigger reward you got. Your honesty was like a tool left at the mercy of the next man’s dishonesty. The honest ones paid, the dishonest collected. The honest lost, the dishonest won. How long could men stay good under this sort of a law of goodness?

Rand demonstrates the hypocrisy in the behavior of the villains.

Was there any reason why this sort of horror would ever be preached by anybody? Was there anybody who got any profit from it? There was. The Starnes heirs. I hope you’re not going to remind me that they’d sacrificed a fortune and turned the factory over to us as a gift. We were fooled by that one, too. Yes, they gave up the factory. But profit, ma’am, depends on what it is that you’re after. And what the Starnes heirs were after, no money on earth could buy. Money is too clean and innocent for that.

And the downfall..

Well, we got what we asked for. By the time we saw what it was that we’d asked for, it was too late. We were trapped, with no place to go. The best men among us left the factory in the first week of the plan. We lost our best engineers, superintendents, foremen and highest-skilled workers. A man of self-respect doesn’t turn into a milch cow for anybody. Some able fellows tried to stick it out, but they couldn’t take it for long. We kept losing our men, they kept escaping from the factory like from a pesthole - till we had nothing left except the men of need, but none of the men of ability.

To work - on a blank check held by every creature born, by men whom you’ll never see, whose needs you’ll never know, whose ability or laziness or sloppiness or fraud you have no way to learn and no right to question - just to work and work and work - and leave it up to the Ivys and the Geralds of the world to decide whose stomach will consume the effort, the dreams and the days of your life. And this is the moral law to accept? This - a moral ideal?

Well, we tried it - and we learned. Our agony took four years, from our first meeting to our last, and it ended the only way it could end: in bankruptcy.

Pretty powerful writing and would take the time to not only read the book but read this part of the book. I know some might say it is extreme, but Health Care is not right it is a service. And to tax the wealthy to run/make deficit neutral is not right, I'm sorry it just isn't. Why are we forcibly taking someone’s income to the benefit of someone else?I have a problem with the concept of taking the fruits of someone’s hard earned labor simply so that I or someone else may benefit at their expense.

In order to truly reform health care we must unleash the potential of the free market. The reality is that there are over 133,000 pages of health care regulation in the U.S. Code currently. This obviously goes beyond simple consumer protections and begins to invade in business’ and people’s affairs.

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I know this is a hot topic, leave me a comment and let me know how you feel? Am I a child-killer? Is the government given us a moral program?

Recovery: Government Spending vs Private Spending

Last night I was reading a post over at Cafe Hayek about Henry Morgenthau and the success of the New Deal. He  conceded this to the congressional Democrats in May 1939: 

"We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and if I am wrong ... somebody else can have my job. I want to see this country prosperous. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises... I say after eight years of this Administration we have just as much unemployment as when we started... And an enormous debt to boot!"

Burton Folsom, Jr., New Deal or Raw Deal? (New York: Simon & Schuster, 2008)

What I really enjoyed about the post was reading all the comments and seeing such a wide variety of thoughts on the subject. I think there will always be a debate about the great depression and I am pretty sure that there is going to be a lasting debate about this economic recession/depression. 

One of the comments that I found the most interesting was the last commentator Michael Smith. My personal beliefs are somewhere around his ideas:

"Government spending will not “stimulate” the economy for the simple reason that all government spending is ultimately done at the expense of private spending. To spend, government must either 1) take money directly from the people in taxes, or 2) borrow the money from the people, or 3) print the money up.

If government spends a dollar that it got by taxation, that is simply a dollar spent by government that was not spent by the taxpayer. Likewise, if government spends a dollar it borrowed from the citizens, that is simply another dollar the citizens don’t have to spend. And if government spends a dollar that it printed up, that simply reduces the value of all the citizen’s dollars proportionally. But in no case has government created new, additional purchasing power that can drive new, additional economic activity.

Government spending can divert production (and consequently employment) from one area to another. But it will not, in aggregate, increase production or employment.

Look, if government spending/action were the key to economic growth, we should be experiencing full employment and record economic growth, because the Bush administration has increased government spending by over 1 trillion dollars a year. An increase of a TRILLION dollars per year. Yet, here we are sliding into a recession."

I think the reader make a very strong case in his last paragraph, that everyone is quick to blame the last administration (and look, as they should) for getting us into this mess. As Peter Schiff says that the old administration is driving us towards a cliff and all the new one is doing is steeping on the gas. I know it is more complicated than this, but overall government spending is just not the answer to this situation.

Only time will tell and I am sure that 70-80 years from now we will still be debating this...let's just hope we are not talking about the second great depression by the Bush and Obama administrations instead of the Hoover and Roosevelt.

These are the opinions of our founding fathers and myself that call for limited government. What do you think? Are we headed to recovery or to depression? How is this administration doing? Leave me a comment.

Robin Hood, the Foulest of Creatures?

It's time for another quote of the week, I usually try and post these on Tuesdays but I have been playing catch up this week.

So I have reached the Atlantis in Atlas Shrugged but I want to go back to a part of the noval that I had booked marked. This part only seems fitting since this week was Tax week. This great part of Atlas Shrugged is when Hank Rearden is talking to Ragnar Danneskjöld. 

The following is an excerpts from Atlas Shrugged, © Copyright, 1957, by Ayn Rand.

“I’ve chosen a special mission of my own. I’m after a man whom I want to destroy. He died many centuries ago, but until the last trace of him is wiped out of men’s minds, we will not have a decent world to live in.”
Hank Rearden: “What man?”
Danneskjold: “Robin Hood.”

Hank Rearden doesn't really know what he means and Dannesjold goes in and explains the horror which Robin Hood immortalizes as an ideal of righteousness.

He is remembered, not as a champion of property, but as a champion of need, not as a defender of the robbed, but as a provider of the poor. He is held to be the first man who assumed a halo of virtue by practicing charity with wealth which he did not own, by giving away goods which he had not produced, by making others pay for the luxury of his pity. He is the man who became the symbol of the idea that need, not achievement, is the source of rights, that we don't have to produce, only to want, that the earned does not belong to us, but the unearned does.

It is the foulest of creatures - the double-parasite who lives on the sores of the poor and the blood of the rich-whom men have come to regard as a moral ideal.

Without getting to political, I have to say that some of our politicians today feel that the people who have created an abundance of wealth should pay more for people that haven't created anything but feel the right that they are owed something. Don't believe me? Check out Man vs Debt's article about some of his lesson learned while preparing taxes this season.

Have a great weekend! I am headed to the beach to surf this weekend so I am really excited! Hope yours is good as mine!

It's the money you could be making!

I just finished up my federal taxes yesterday and I am getting back $140.00. I am super glad that is all that I am getting back. Why, because I have adjusted my IRS withholding to make interest on the money instead of the government. This was the first year that I had changed my withholding on my W-4.

The average tax return in 2008 in the US was $2400.00 that’s $200.00 a month. Lets say you put that $200 per month into an investment (401k, Roth IRA) that makes 6% over ten years. You would make $33,532.00 instead of $24,000.00. You just made yourself $9,532.00 and didn’t have to do anything except go to your HR department fill in the W-2 to the withholding you want. Here is a calculator on the IRA site where you can figure out how much to withhold to reduce your tax refund. Here is a calculator for seeing how much money you could be making if you switched you withholdings. Reminds me of those Geico commercials, hehe don't let it sit with the government to waste but grab it and watch it grow with a least a high yield saving account!

Currently I have about $250.00(tax money) a month going into a money market. I did not touch that money because I wanted to make absolutely sure that I was not going to have to pay the government when I filed taxes for 2008. I probably will not put it an anything right now as I am saving up for a down payment on a house and its still making me a little money on side.

I started out last March with around $300.00 in my emergency fund/tax withholdings. I am currently sitting at around 10k plus I have made close to $150.00 in interest while building my small amount of wealth. Along with the $250.00/month tax money and an extra $140.00/month on top of that, my savings have grown so much over a span of one year. Now this money will stay in the same account and I will be putting the same amount in every month. Since I already have my emergency fund in place this money will be going towards my house down payment along with the $140.00 tax return I am getting back from the government.

I know how good it feels to receive a tax return and boy I surely felt it yesterday when I found out that I am getting back only $140 and my girlfriend is getting back $2000.00. I wanted to have a nice big tax return too but I have to tell myself that I am making more money in the long run. This decision cannot be based of emotions but based on what is wise when it comes to the creation of my wealth.

Taxes, Surcharges, and Fees!

So I am headed to California in April and am starting to book hotels, cars, etc...

We are going to be renting a car and driving up the coast of California for a week. I found the vehicle at the price I wanted and made reservations. Once I got to the purchase page I see that my price had sky rocketed. I went and looked at the pricing and saw the breakdown of taxes, surcharges, and fees.

Airport Concession Fee 11.1 % = 28.62

Los Angeles World Airport Fee $10 = 10.00

Travel and Tourism Fee 2.5% = 6.45

State Sales Tax 8.25% = 23.63

Total = $68.70

This is just renting a car...I might have to calculate all the taxes, surcharges, and fees from my trip(Flight, Car, Hotel, etc...) and see the total of all these. I also have a surfboard that I kept out at a friends in California after I moved. I was going to bring it home with me after this trip. Guess what? If you guessed that there is a fee you were correct, a $175.00 fee to bring my surfboard back. A brand new surfboard cost between $400-$700 so its not worth it to me to bring it back. I will be giving it to a friend in the end.

I love traveling and don't mind flying 4-5 hours for a weekend trip if it was cost effective, but all these fee and surcharges along with tax it just not affordable. My question is do you think in the long run that travel oriented business hurt themselves by adding cost on to the regular price of goods and services? I don't know I am guessing someone is charging these companies and they are just passing along the charges to the consumer?

I would love to stay in a hotel every night out there but we just cannot afford it? I am willing to bet that once I add up all the cost associated with my trip I could have stayed a couple extra nights or brought more business to other hotels, restaurants, etc...

I don't mind spending money for experience and fun things, but it cost so much that we can really only afford one big vacation a year and thats still hard. I would love it if I could take more trips more frequently especially surfing. I can tell you one thing though, I will not be flying Delta to any surf destinations. That is a shame because A) Delta is my airline of choice (Amex and frequent flyer) and b) surfers travel to destinations all over the world. If I was a business I would cater to customers like surfers who spend a lot of their hard earned money every year to travel.

Why in anyones right mind would they want to turn those types of customers away? I know every company has to tax but fees and surcharges can only be hurting business in the long run, no? Let me know what you think?

Tax Questions

Which president gave the biggest tax cuts for the rich -- Reagan or Bush?

If there's an imposition of a property tax on your land, who pays the tax?

Which worker receives the higher pay: a worker on a road construction project moving dirt with a shovel or a worker moving dirt atop a giant earthmover?

These are some of the questions Walter Williams ask in in column this week. Walter Williams is a professor at Gorge Mason University and his syndicated column is one that I read weekly and definitely one of my favorite. I seem to learn so much by reading his column every week. He goes on to answer those questions at the top and has this to say about America's Prosperity.

"It's not rocket science to conclude that whatever lowers the cost of capital formation enables workers to have more capital to work with and enjoy higher wages. Policies that raise the cost of capital formation such as capital gains taxes, low depreciation allowances and high corporate income taxes, and thereby reducing capital formation, serves neither the interests of workers, investors nor consumers."

He also gives an example:

Taxes also reduce transactions. I need my computer repaired. You and I agree that the job is worth $200. Suppose there's the imposition of a 30 percent income tax on you. That means you would net only $140 and might refuse the job. You might suggest that if I were willing to pay you $285 you would do the job because at that price your after-tax earnings will be $200 -- what doing the job is worth to you. There's a problem. The repair job was worth $200 to me, not $285. So it's my turn to say the heck with it, or would we and society be better off if you and I agreed to the repair job but did not tell anybody? I'd say yes, but we'd be criminals.

Taxes are out of hand and the more we get taxed the harder it is for anyone to gain wealth. Here is list of some of the taxes we American's pay.

Accounts Receivable Tax
Building Permit Tax
Capital Gains Tax
CDL license Tax
Cigarette Tax
Corporate Income Tax
Court Fines (indirect taxes)
Deficit spending
Dog License Tax
Federal Income Tax
Federal Unemployment Tax (FUTA)
Fishing License Tax
Food License Tax
Fuel permit tax
Gasoline Tax
Hunting License Tax
Inflation
Inheritance Tax Interest expense (tax on the money)
Inventory tax IRS Interest Charges (tax on top of tax)
IRS Penalties (tax on top of tax)
Liquor Tax
Local Income Tax
Luxury Taxes
Marriage License Tax
Medicare Tax
Property Tax
Real Estate Tax
Septic Permit Tax
Service Charge Taxes
Social Security Tax
Road Usage Taxes (Truckers)
Sales Taxes
Recreational Vehicle Tax
Road Toll Booth Taxes
School Tax
State Income Tax
State Unemployment Tax (SUTA)
Telephone federal excise tax
Telephone federal universal service fee tax
Telephone federal, state and local surcharge taxes
Telephone minimum usage surcharge tax
Telephone recurring and non-recurring charges tax
Telephone state and local tax
Telephone usage charge tax
Toll Bridge Taxes
Toll Tunnel Taxes
Traffic Fines (indirect taxation)
Trailer Registration Tax
Utility Taxes
Vehicle License Registration Tax
Vehicle Sales Tax
Watercraft Registration Tax
Well Permit Tax
Workers Compensation Tax

Total tax percentage paid by the average US citizen in 2005 is estimated at about 54% when you figure in all the miscellaneous taxes and fees.

I understand that we have to have taxes and I pay mine every year but we need to have more accountability in Washington for the turkeys who are spending our hard earned money and making everyone of us poorer as individuals and as a country. And we need to each have accountability for our own money and not depend on the government so much. Have a great weekend!

Bigger PAYCHECK! Making Work Pay Tax Credit

On the 15th of this month I received my bimonthly paycheck and noticed that it was $22.00 more than last paycheck. Once I got into work today I emailed the lady who does paycheck and asked her what the deal was. She said that it was due to the new wage withholding rates. She mentioned that most employees saw a decrease in federal income tax. I came home and looked it up and found this new withholding table. Even though I believe in the fair tax I am not complaining about getting an additional $528.00 a year. Sense I have a budget and I stick to it it will most likely not be going back in the economy but I came across this article and actually make me feel better for saving.

I am not a fan of the American Recovery and Reinvestment Act of 2009 that became law earlier this year but I am sure as hell not going to be giving it back to the government. It says on the site that the Making Work Pay Tax Credit will mean $400 to $800 for many Americans. Did anyone else receive this...let me know!