Love that Tax Code

Love that Tax Code,

Yesterday we just finished pulling our numbers together for the accountant. I actually enjoy this time. It’s a time of reliving the year, thinking about all that has taken place. If we invested for others, shared generously, lived for others it a time of a lot of happiness. If I lived for myself, buying whatever, certainly it is a day of reckoning.

So why did “Joe the plumber” get so much air time during the campaign. He was afraid to go into business because he thought he would make so much money that he could not pay his taxes. It was not just one time but a constant replay of the same story it became obnoxious, especially because it was such a hoax. I wish I could have said to Joe, “Go for it Joe”. You only pay taxes if you make a profit. I wish for you to pay a lot of taxes. Any complaint about paying lots of taxes is really an undercover boast of how prosperous you are. Of course there are ground cover expenses of any business, real estate taxes, payroll taxes, and social security withholding where the employer pays half and I would not want to minimize these expenses, but except for social security, the federal government has nothing to do with those state and local taxes. In fact I feel like all the rules of the game seem to be written for the small businessman. If you have a good year you can reduce income by buying something to enhance your business like a new truck, tractor, or machine. This year your one year write off for new capital investments is over $100,000. So I wish our presidential candidates would have been clear about the issue and said, Go for it Joe, you probably won’t have to pay any income taxes for 10 years even though you’re living well and your net equity grows considerably. After 10 years you probably will start paying taxes but only if you are nicely profitable. Of course there are lots of other costs such as mortgage/rent, capital expenses, interest, labor, materials, bad management, medical expenses, or hard economic times which will determine the success or failure of a business but certainly the Federal Income Tax will not contribute to the failure of any business.

That’s why I love the tax code. It encourages all kinds of great virtues. It encourages buying a home because interest is deductible, it encourages having children, giving to charities, investing because you write off losses and laundry profits through a capital gains tax qualification, and starting a business as I just described. It may sound complicated but all in all I believe it lays out an economic game of fair play.

I suspect this writing sounds a bit strange to many persons because taxes are the whipping boy of all campaigns. Talk show hosts constantly extol the virtues of a flat tax, no deductions. Ron Reagan and Steve Forbes wanted a flat tax in their campaigns. I could not understand why. Then I learned with earnings of $800,000 Reagan only gave $6,000 to charity. Then I understood.

So “Go for it Joe”, work hard and play this economic game. Use the discipline of the tax code to bless someone and in the end all the blessings will come back to you.