More Taxes Please

by Simon Black of Sovereign Man blog,

By the 19th century, the Ottoman Empire had become a has-been power whose glory days as the world’s superpower were well behind them.

They had been supplanted the French, the British, and the Russian empires in all matters of economic, military, and diplomatic strength. Much of this was due to the Ottoman Empire’s massive debt burden.

In 1868, the Ottoman government spent 17% of its entire tax revenue just to pay interest on the debt.

And they were well past the point of no return where they had to borrow money just to pay interest on the money they had already borrowed.

The increased debt meant the interest payments also increased. And three years later in 1871, the government was spending 32% of its tax revenue just to pay interest.

By 1877, the Ottoman government was spending 52% of its tax revenue just to pay interest. And at that point they were finished. They defaulted that year.

This is a common story throughout history.

The French government saw a meteoric rise in their debt throughout the late 1700s. By 1788, on the eve of the French Revolution, they spent 62% of their tax revenue to pay interest on the debt.

Charles I of Spain had so much debt that by 1559, interest payments exceeded ordinary revenue of the Habsburg monarchy. Spain defaulted four times on its debt before the end of the century.

It doesn’t take a rocket scientist to figure out that an unsustainable debt burden soundly tolls the death knell of a nation’s economy, and its government.

Unfortunately, it can sometimes take a rocket scientist to figure out what the real numbers are; governments have a vested interest in not being transparent about their debts and interest payments.

In the Land of the Free, for example, the government routinely doesn’t count interest payments that they make to the Social Security Trust Fund.

They’ve managed to convince people that those debts don’t matter ‘because we owe it to ourselves.’

Apparently in their minds, solemn promises made to retirees simply don’t count.

It’s like a person who is in debt up to his eyeballs with both credit card companies and family members has no compunction about stiffing Grandpa.

Obligations are obligations, no matter who they’re owed to.

Taking this into account, total US interest payments in Fiscal Year 2013 were a whopping $415 billion, roughly 17% of total tax revenue. Just like the Ottoman Empire was at in 1868.

Here’s the thing, though– it’s inappropriate to look at total tax revenue when we’re talking about making interest payments.

The IRS collected $2.49 trillion in taxes last year (net of refunds). But of this amount, $891 billion was from payroll tax.

According to FICA and the Social Security Act of 1935, however, this amount is tied directly to funding Social Security and Medicare. It is not to be used for interest payments.

Based on this data, the amount of tax revenue that the US government had available to pay for its operations was $1.599 trillion in FY2013.

This means they actually spent approximately 26% of their available tax revenue just to pay interest last year… a much higher number than 17%.

This is an unbelievable figure. The only thing more unbelievable is how masterfully they understate reality… and the level of deception they employ to conceal the truth.


Source:  http://www.zerohedge.com/news/2014-03-25/us-now-spending-26-available-tax-revenue-pay-interest

Health Care Taxes You Need To Know About

Health Care Reform: 13 Tax Changes on the Way

By Joan Pryde

Here are 13 changes in the massive overhaul that could impact your tax bill, for b

etter or worse.

1. A new 10% excise tax on indoor tanning services on services provided after June 30, 2010.

2. The new law gives small firms tax credits as incentives to provide coverage, starting this tax year. Employers with 10 or fewer workers and average annual wages of less than $25,000 can receive a credit of up to 35% of their health premium costs each year through 2013. The credit is phased out for firms larger than that and disappears completely if a company has more than 25 employees or average annual wages of $50,000 or more.

Beginning in 2014, the system changes. The law requires each state to establish a health insurance exchange -- a marketplace where individuals, the self-employed and small businesses can buy health insurance coverage. The government-regulated exchanges would offer insurance policies with different levels of coverage and price tags. Small firms that sign up with one of the health exchanges to be created can receive a credit of up to 50% of their costs -- with the same phaseouts for average income and size as the earlier program. The credit disappears after 2015.

3. A requirement that businesses include the value of the health

care benefits they provide to employees on W-2s, beginning with W-2s for 2011. The amount reported is not considered taxable income.

4. Elimination of a deduction employers now take for providing Medicare Part D prescription drug coverage to their retirees to the extent that the federal government subsidizes the coverage. This will not take effect until 2013.

5. Doubling the penalty for nonqualified distributions from health savings accounts, to 20%, beginning in 2011.

6. A limit on the amount that employees can contribute to health care flexible spending accounts to $2,500 a year, but the cap won’t take effect until 2013. This was previously left to the employer's discretion, with many firms choosing a limit of $4,000 to $5,000 or so

7. A ban on using funds from flexible spending accounts, health reimbursement arrangements or health savings accounts for the cost of over-the-counter medications, starting in 2011.

8. Starting in 2013, a 0.9% Medicare surtax will apply to wages in excess of $200,000 for single taxpayers and over $250,000 for married couples. Also, for the first time ever, a Medicare tax will apply to investment income of high earners. The 3.8% levy will hit the lesser of (1) their unearned income or (2) the amount by which their adjusted gross income exceeds the $200,000 or $250,000 threshold amounts. The new law defines unearned income as interest, dividends, capital gains, annuities, royalties, and rents. Tax-exempt interest won’t be included, nor will income from retirement accounts.

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9. A hike in the 7.5% floor on itemized deductions for medical expenses to 10%, beginning in 2013. But taxpayers age 65 and over are exempt from the cutback through 2016.

10. A new 40% excise tax, beginning in 2018, on high-cost health plans, levied on the portion that exceeds $10,200 for individuals and $27,500 for families. The provision is aimed mostly at gold-plated plans offered by employers, although it can affect individual policies

11. A new tax on individuals who don't obtain adequate health coverage by 2014 -- this is often referred to as the individual mandate.. The tax is to be phased in over three years, starting at the greater of $95, or 1% of income, in 2014, and rising to the greater of $695, or 2.5% of gross income, in 2016.

12. Providing a refundable tax credit, once the individual mandate takes effect in 2014, to help low-income folks purchase coverage. To be eligible, a person's household income must be between 100% and 400% of the federal poverty level, generally around $11,000 to $44,000 for singles and $22,000 to $88,000 for families. The credit is a sliding scale, based on income. Low-incomers get a credit for all costs. Then, as income rises, the credit phases out.

13. A nondeductible fee charged to businesses with 50 or more employees if the firms fail to offer adequate coverage. The fee will equal $2,000 times the number of employees, though it won’t count the first 30 workers in that calculation.

Is a Merrill Lynch Broker Targeting You???

Merrill Lynch has been aggressively recruiting brokers from other firms with huge bonus incentives. According to an article published in Financial Planning, new Merrill recruits can earn 140% of their trailing 12 month production in addition to annual bonuses as high as 60% of their annual production!

As you can imagine, Merrill brokers (as well as others) have a tremendous incentives to increase their assets under management. The use of aggressive bonus policies has given Federal regulators cause for concern. SEC Chief Warns Broker Firms of Aggressive Recruiting Tactics .

WHO'S LOOKING OUT FOR YOU?

It goes without saying that investors need to be more cautious than ever regarding their financial decisions. If the Bernie Madoff case doesn't show you how easy it is to get duped, then your are setting yourself up for disaster. Needless to say, in tough economic times, more and more people are out to get your money. Who's Looking Out For You? Certainly you can't expect your salesperson to be looking out for you. He or she only has an obligation to offer you products that are "suitable" for you. It doesn't matter that the products are loaded with front-end or back-end fees, or that the salesperson is making a huge commission off of the sale. It's all legal!!

Is the Government Looking Out For You?

This thought might even cause you to chuckle a little. Favorability ratings for the government continue to drop to new lows while the politicians live the high life at our expense. Taxes keep going up, government perks keep going up and government effectiveness falls. If you have been following the analysis of the SEC's action in the Bernie Madoff case, you should be aware that the government IS NOT looking out for you. And even if they were, laws currently in place do not seem to be very effective.

I was once a regulator and remember speaking with a person who was grossly violating the law. I talked to him and he clearly and logically explained his actions to me and why he would not stop doing it. He told me that he was making millions of dollars a day doing what he was doing and what would we do about it? The maximum penalty would be a $10,000 fine! He said that the fine was merely the cost of doing business.

YOU CAN'T AFFORD NOT TO HAVE A PERSONAL FINANCIAL CONSULTANT

The financial world is getting way too complex and product salespeople often just sell you the sizzle. You generally don't ever find out that you are getting ripped off until you talk with another broker who is trying to get your business. Only then do you learn of the high fees and commissions you paid for some product that really wasn't in your best interest. And then what does this new salesperson do? I'll leave it to your imagination.

Each week I meet with people who not only make costly decisions about their money but it doesn't stop there. Mistakes are found in nearly every aspect of their financial life: taxes, insurance, estate planning and so forth. How sad it is that so many aren't willing to spend the money to hire competent advisers who are free of conflicts of interest. In the end, they lose so much more than the fee they might pay for such service. Usually only after it is too late do they seek advice.

WHO CAN YOU TRUST?

When choosing an adviser, be weary of someone who also sells products or manages money. If they call themselves financial planners and are also engaged in selling products or gathering assets under management, their goal is but one thing - to sell you products or get your assets under management. How can you expect them to provide you with the best advice possible? You can't.

Check Their ADVs or U4s

Every Investment Adviser or Investment Adviser Representative is required to fill out certain government forms in order to be registered. It is your right to review these documents and you should. Not only does it disclose all conflicts of interest (other ways the adviser makes money), it also discloses all unethical actions, complaints and undesirable actions that the adviser had been involved in. It is your right to know and your obligation to review this information. If you hire an adviser to provide you with comprehensive planning, make sure that this person is not trying to replace all of your other advisers (investment broker, insurance agent, etc.). Instead, direct your adviser to research all of your current advisers to be sure that they are living up to the standards that you expect.

For more information on how to protect yourself against high fees, taxes, and fraudulent financial practices, contact me at gary@assetdesigncenter.com.