April 16, 2019
I write this on April 16th, one day after our tax returns were due and in 2019, it is also tax-freedom day. Tax Freedom Day is the calendar day in which the average American as a whole will finally have earned enough to pay all of the taxes its Government(s) require. According to the Tax Foundation (a leading independent Tax Policy Research organization) in 2019 Americans will pay $3.4 Trillion in federal taxes and $1.8 Trillion in state and local taxes. That is about 29% of the nation’s income. [i] That is more than we spend on food, clothing, and housing, combined. Taxes are, by a wide margin, our largest household expense.
It was just in FY 1990 that tax revenue surpassed the $1 trillion mark and here we are 29 years later and we are over $3.4 Trillion.[ii] The USA has the largest GDP in the world and consequently, our government spends more than any other country in the world—even China and Germany added together. In fact, add Germany, Japan, France, and the UK’s fiscal spending together and we still spend more.[iii] And our $3.4 Trillion in taxes collected are more than any country in the world.
There’s not much we can do about our taxes—taxes are one of the two proverbial things that are guaranteed in life. We all know the other. You work and earn money for yourself and for your government. And we never cut government spending—we may reduce the rate of increase and we call that a cut, but we do not reduce the overall spending.
Sadly, we spend a lot more than we take in (and it will always be that way.) Our country’s debt is simply insurmountable—the best we can do is continue to make interest payments. And it is not possible to tax ourselves out of debt; for example, if we magically stopped spending anything—not a red penny—and continued to bring in $3.4T, it would take over 6 years to pay off all our loans. But those 10 Aircraft carriers, Army, Navy, Marines, Air Force, politicians, Social Security payments, education, welfare payments, the endless war on poverty, foreign aid, Medicare/Medicaid, and everything else we spend money on, all costs train-loads of cash.
So, in the end, perhaps it is not so bad that we only have to work 4.5 months a year for Uncle Sam. And this year the tax-burden was less than last year—so there’s a silver lining. (So enough of my annual tax griping.)
Moving on to more pleasant things, mark your calendars for our shredding day—this year it will be on Thursday, May 23 here at the office. The truck will arrive at 9 am and stay till 11 am. If you can’t make it that day, you can drop your shredding off beforehand and I’ll make sure it gets in the grinder.
Oh, by the way, according to the IRS, you should save tax-returns for three years—with certain exceptions extending that for 7 years. So to be on the safe side just stack them up for 7 years and then begin peeling off the oldest one and destroying that one every year. If you want to live on the edge, here is the link for IRS’s suggestions; https://www.irs.gov/businesses/small-businesses-self-employed/how-long-should-i-keep-records As per the source, it’s overly complicated.
As we get through Maryland’s Spring, it slows down a bit here at Chesapeake Investment Advisors. That makes it a good time to schedule our meeting(s) to go over your accounts and your financial plans. Please give us a call if you want to talk.
OK, I just can’t help myself, here’s something humorous I copied off one of my Libertarian pages:
Government: You owe us money. It’s called taxes.
Me: How much do I owe?
Government: You have to figure that out.
Me: So I just pay what I want?
Government: Oh, no we know exactly how much you owe. But you have to guess that number too.
Me: What if I get it wrong?
Government: You go to prison.
Actually, the government and the IRS are not really sure how much you owe although most of the information is transmitted to them via back channels from your employers, Banks, Pershing, and mortgage companies, etc. But every taxpayer’s situation is different and they depend on the honesty and integrity of the citizenry to provide that extra data. Moreover, the Federal Government gives us the Internal Revenue Code (which is 2,600 pages long.) See this link if you want to read through it. https://www.law.cornell.edu/uscode/text/26
(As a point of reference the New Testament is about 1,200 pages long.)
Lastly, we want to congratulate Kristen Owen on passing her CFP® exams this April. She is now an official Certified Financial Planner TM.
Thank you for reading.
Marty
[i] https://taxfoundation.org/publications/tax-freedom-day/
[ii] https://www.thebalance.com/current-u-s-federal-government-tax-revenue-3305762
[iii] https://www.cia.gov/index.html
