Pay less taxes?
How is it possible that there are others I have heard of making more than me and paying less in taxes?
Justice Learned Hand answer this question best when he said, “There are two systems of taxation in our country today, one for the informed, one for the uninformed.” He also went on to say, “Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike, for nobody owes any public duty to pay more than the law demands.”
The current tax code is over 70,000 pages! To put that into perspective, if the average book is 200 pages, the tax code is equal to 360 books! The reality is that no one can know the tax code completely. Therefore, those that are paying less in taxes have simply found specialists that understand the tax code as it relates to their situation.
For example, business owners have their own set of unique issues and opportunities available to them in the tax code. There are opportunities available to use different or multiple corporate structures to take advantages of reduced taxes and/or tax-free benefits. There are specialized tax incentives for business owners who own commercial property or who are innovative in their processes or products or who hire new employees.
Taxes on retirement accounts are another big issue. Uncle Sam is often your number one beneficiary on these accounts, we call that hidden estate taxes. There is a book entitled A Voluntary Tax that says there are only two reasons to pay any form of estate taxes, taxpayer indifference or poor planning advice. It goes on to say, “For most of the past generations, the rate of tax has been as high as 77 percent. Yet, because the owners of great wealth retain planners skilled in tax avoidance, the estate and gift tax laws have never seriously interfered with the intergenerational transfer of large fortunes.”
Depending on your unique situation, it is possible to reduce your effective tax and reduce or eliminate taxes on retirement accounts, capital gains, and hidden estate taxes. It is about finding specialists to help and using the code to your advantage.
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