I have had the privilege to build a career and business focused on advanced tax planning. The passion I have for my business is based on my belief that it is your moral and patriotic duty to pay as little in taxes as legally possible.
Before you jump to any conclusions about my view and/or mindset, let me explain my perspective. Every time you file your taxes you are proving to the government why you owe “X” amount in taxes, or more commonly, why you are OWED “X” amount in a refund. In our legal system, anyone who is charged with a crime has a presumption of innocence and it is up to the prosecutor (or state) to prove your guilt. In our tax system it is quite the opposite; there is a presumption that you are guilty or owe taxes, and it’s your obligation to prove your innocence, i.e. owe less, or nothing.
In a system where over 90% of all individuals who are W2 employees receive a tax refund, meaning they overpaid in taxes; and only a little more than half of Americans (55%) pay federal income taxes. Is it fair, or even moral to have a presumption of guilt? It is a system whereby if you don’t attempt to prove your case, you are automatically guilty; i.e. you owe taxes.
If I haven't ruffled too many feathers and you're still reading, let me explain why it is also your patriotic duty to pay as little in taxes as legally possible. You may staunchly disagree with that statement, which is understandable and I will not judge you for doing so. I fully understand why many people believe it is their patriotic duty to pay taxes and I'm not making the argument that you shouldn't pay taxes at all. And if you think it's your patriotic duty to pay taxes, you are welcome to pay more in than you’re legally obligated to. You can even write out a check to the Bureau of Fiscal Service if you feel guilty for not paying enough.
Before you write that check, I need to point out that the federal government is the most financially irresponsible organization in America, and I believe the data and past behavior proves this. Other than a brief period between 1835-1836, the U.S. Government has always had a national debt. Think about that; the moment the U.S. Treasury was created, giving the government the ability to have debt, they’ve had debt. In the past 60 years, there have only been five years in which the federal government operated with a "balanced budget" and/or had a surplus, and this trend is standard throughout U.S. history. And every year since 1949 when the Federal Government had a surplus, the National Debt still increased. How careless is it to have a "surplus of income," but still have a debt increase?
The government is so financially careless, that it has caused (or at least had a large part in) other industries to go bankrupt, then bailed out those industries with money it didn’t have, and then turned around and blamed the industry it bankrupted for the very crisis the government helped to create. That’s the 60,000-foot view of the 2008 financial crisis. To break it down further, essentially banks were not giving loans to individuals who didn't qualify and, this was viewed as “discrimination” against people with bad credit and/or low incomes. Unfortunately, it is fiscally responsible to not give loans to individuals who cannot pay those loans back.
The government then implemented programs like The Housing and Community Development Act of 1992 which had a mandate that 30% of Fannie and Freddie Mac’s loans purchased be for borrowers who were below normal lending standards. All of which were government created catalysts to “encourage” careless financial responsibility among both banks and the government. While it may seem like a good deed to give someone a loan if they are low income, or have bad credit, you are creating a liability and putting them in a terrible position financially if they cannot pay back the loan.
The irony is that if any business were as financially irresponsible as the U.S. Government is, there is only one organization that would loan or give them money, and that is the U.S. Government. This has been done several times before and is referred to as a “bailout.” When a company gets to “bailout” status, it means that all banks, investors, creditors and other financially institutions do not just believe that it would be extremely risky to loan them money, but it would be financially irresponsible as well. So naturally they aren't willing do to so, but the Federal Government is willing to. If you're one of these people that has been led to believe that the bailout was paid back, and there weren't any golden parachutes, etc. You should know there is a lot of data that shows they paid back the bail out money with other federal money.
I’m aware that I’m leaving some information out, and that there are other factors that were also catalysts that lead to the 2008 financial crisis, but this is a high-level explanation. I’m also aware that if you include a price to earnings ratio or debt to income, that the government doesn’t look as awful, but the information I’ve left out doesn’t help the government look more financially responsible, and I would argue that it would only strengthen my case.
Have I proven that the U.S. government is the most financially irresponsible organization in the United States of America? If I haven’t then stop reading and if you’re a subscriber, unsubscribe. We aren’t professionally compatible and you’re not going to like where this is going.
So, if the government is the most financially irresponsible organization in the U.S., then why would you give them more money than you must? By paying more in taxes than you’re obligated to, you are enabling the government, and encouraging this poor behavior. And by paying as little in taxes as legally possible, you are forcing fiscal responsibility on the government, or at least attempting to. It is a way for you, as a taxpayer, to keep the government in check. If you don’t attempt to keep the government in check, it will behave just like a child would and test barriers and push the envelope.
The other reason it is your patriotic duty to pay less in taxes; it fights corruption. The two best ways to fight corruption are; transparency (normally when you shine a light on bad behavior it tends to go away) and limiting the amount of resources (funds). The latter can be done if you pay less in taxes.
By limiting the amount of government resources, we are again forcing responsibility. When we force that responsibility by limiting resources it means the government, or politicians, have less funds to throw at erroneous matters, organizations, and causes. So instead of that politician giving a contract to the business, organization or cause they like. Because maybe it’s their friends, or families, or even their own business. They will be required to give that contract or money to the most competitive bidder. And instead of the General Services Administration spending over $800,000 on a conference in Las Vegas they will be required to have a workshop to cover the same material in their local office. Part of the irony in that story is that one of the roles of the GSA is to develop government-wide cost-minimizing policies.
If all the above is not enough for me to sway your opinion, then you should ask yourself this; “does the government waste money?” The answer is yes, and there are some estimates that show that the government wastes more than $1 trillion a year. If you do an hour of research, you should be able to find that the government wastes at least $500 billion a year. So, wouldn’t it be unethical for the answer to be; the taxpayer should pay more? Why shouldn’t we correct the massive misallocation of funds before we dip into the pocket of the taxpayer?
You might be saying to yourself “This Dan character makes a lot of sense and these are all valid points, but don’t most people want to pay as little in taxes as legally possible? And if most people are paying as little in taxes as they can then why isn’t there less corruption and why isn’t our government more financially responsible.”
The answer is simple; most people are unknowingly not fulfilling their moral and patriotic duty and are paying too much in taxes. Too many business are paying too much in FICA taxes because they aren’t using a Payroll Tax Reduction Plan for a more tax advantageous payroll structure. Most business owners don’t have a fully insured a defined benefit plan [412(e)3 Plan] to reduce their taxable income and keep more money in their estate. Most people aren’t using Charitable Estate Replacement Plans (CERP) to reduce or eliminate capital gains tax and/or income tax on assets with low costs basis, and few people are utilizing a Delaware Statutory Trust to add flexibility and reduce capital gains tax when doing a 1031 exchange.
However, you can start fulfilling your moral and patriotic duty today. You can do so by sharing this on social media, and with your friends, family, clients, CPA and tax professionals. And you can fulfill your patriotic duty by working with professionals that have built their businesses and careers on advanced tax planning strategies.
My office and I are doing everything we can to fulfill our patriotic duty, by helping the individuals and businesses we work with pay as little in taxes as legally possible. And if we can put you, or any of your friends, family, clients or colleagues in the same position as our current commander and chief, and eliminate your tax obligations, we will. We do what we do because we feel a moral and patriotic obligation to do so.
If you would like to explore opportunities to reduce your tax obligations you can respond by emailing me directly at my email below or reach out to my office here or at the number below.
Dan Nuwash, MBA
Founder and Managing Partner, Finance For Thought