Minimalist Wealth

Unsolicited Opinions


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Asset Classes Part 2: My Bondage and My Freedom (Bonds)

Last time, on Long Term Returns...

What is a Bond?

A bond is a loan contract, but more promiscuous: Some bonds get passed around ten times a day or more. But it's otherwise similar to a loan: You ‘buy’ the bond, or lend out your money, and will receive interest payments until the maturity date. When the bond matures you will receive your principal back.

When an entity goes bankrupt and tries to pay its debts, bondholders get paid before stockholders see a single cent- one reason why bonds are safer than stocks.

my opinion on taxes

On Ideas in the Making

Taxes has always been a weird issue in the state due the largely extremely divergent stances present in the political community. This year, taxes are substantially higher than ever after the bush tax cuts expired. not only that, but some types, if not most types, of income, are being hit by the affordable care acts 3.8% tax. Furthermore, some populous states, specifically new york and California, are stacking state taxes on top of that. Luckily some other populous states like Texas and Florida aren't taking this extreme of a stance. Here is my take on taxes and what the problem is.

1. Too confusing. The tax code in the U.S. is huge, categorized by numbers, sections, paragraphs and all sorts of really dry, boring, and highly mistakable stuff. none of it is easy to follow or understand, a lot of terms are invented, not reexplained, or extrapolated. On top of that there are countless of way to even start to report income and subcategories that apply or don't apply to each. Then to make matter even worse, there are state taxes which might take the same classification of incomes, and scrutinize them or label them in different ways, offering different types of deductions, subsidies, or benefits, making the balancing act a huge brain-exhauster. AND its not over yet folks, on top of all this, the IRS expects you to shell out money on tax professionals, which I find funny, because any mistakes you make are your own for not abiding to the tax code. Overall, this is ludicrous, if anything with the taxes U.S. citizens will be paying this year, the IRS should reimburse for tax professional advice (If they don't already do, not sure on this one, don't kill me).

4. Tax burden makes no sense is not adequately personified or individualized. As a young person, I don't get it, I see why its so hard or why it seems like you are climbing a huge wall for most young people out of college or starting their careers. You are getting taxes nearly the same as your peers. The tac bracket isn't slanted enough, and doesn't take into account wealth for the most part, only income. I'm not saying wealth should be taxed, that has its own repercussions, but at least income tax should be bracketed taking that into consideration. In some states the burden is so onerous that it can be difficult for recent grads, with no wealth or savings and tons of living expenses to me the ludicrous taxes they have to pay, while their superiors end up paying a little more but make substantially more, and take on much less risk. I find it is arguably the #1 thing or at least, one of the top things keeping young americans from really moving forward. tax burden significantly impedes your ability to invest and save. You work for a year, and after paying expenses, taxes, and the occasional small splurges how much do you have to show for it? 5k? maybe? I don't know, to me its ridiculous. Why should young people with almost no assets or net worth to speak of be taxed so highly? I only mention young people cause they fall under my category, and is one of the main concerns to me at the moment. The fact that someone with millions of dollars could easily leverage is capital and make way more than me, and pay only a 10% more tax or so, while I am stuck with little capital make substantially less, and as a percentage of my net worth, taking on extremely more risk, yet have to pay taxes almost as high. Tax, especially income tax and gains tax, do not adequately take into consideration the person, they only look at the cold-hard numbers and just slap on a tax, without looking at the person current situation.

3. I've said this countless of times, but now with the much higher rates reaching almost European levels of the top tax bracket, the quality and breadth of services provided by the U.S. government and/or state governments (highly depends the state) is very low compared to pretty much every other major country. We went to a war, that, we LOWERED TAXES going into, and now we need a huge inflation to pay it back. at the same time are being hit with new taxes for the affordable care act and for capital gains. On top of this states like California have raised their taxes super high, including a 13.3% tax on capital gains in California, which is absolutely ludicrous, and is actually motivating people to leave the state. Higher taxes does not mean better services peope, better management of revenue means better services. At the moment the budget and allocation is a total mess and the U.S. is somewhat, for some reason, still stuck in Cold- War hyper realist tendencies of expanding military and global presence, when we should instead be focusing only on defensive-security. Look at Russia, no global presence, very adequate security, significantly less spending. some submarines and carriers is all we really need out there, focus on protecting our important cities and developing reactionary protocols from within the U.S. instead of trying to have a ridiculous naval fleet (11 carriers people, i think 10 now, way more than any other country, yet not threats at the moment).

4. Worldwide income is taxed. I really hate this one, its like the final nail in the coffin. You live here, you don't like it for whatever reason, you want to leave, guess what? you're getting taxed anyways. I don't care if you are making money in The Congo or of some Andes mountain in Patagonia, you are gonna be a slave to the IRS no matter where you are, or for how long you are as long as you are a U.S. Citizen. Literally the only way to get around this law is to relinquish U.S. citizenry, which is very tough if you are trying to get citizenry in another nation that has a good passport. sometimes you have to spend several year, sometimes a decade, to get it. The only shortcut is marriage, and even that isn't enough in some places. Military service seems quite effective depending where you want to enlist, but that can have it own problems. Some countries let you get away with proving ancestry, but thats all on a person to person basis. Regardless the fact still stands, the U.S. doesn't want to let you go, they don't care about whether or not you use their services (I guess you might be using their embassies?) you better be paying taxes. Luckily they have a foreign exclusion act that lets you write off a solid amount each year if you are out 330 days of the year, which is a huge plus I guess. But with literally every other major country letting you not pay taxes when you don't live there, the U.S. seems like the odd one out.

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