Do you feel like your paycheck continually gets clobbered with taxes and then the leftover dollar you just earned gets taxed again when you use it to pay for dinner or your utility bill? Taxes are one of the largest expenses we have in our lifetime. Understanding how they work is important so that you can create, cultivate and keep more of your wealth in a tax efficient manner.
Tax Foundation Data
On March 22nd, the Tax Foundation published the “Sources of Government Revenue in the OECD, 2018” (The Organisation for Economic Co-operation and Development, OECD). In most countries their primary tax revenue, over 32%, comes from “consumption” taxes. However, in the United States our highest focus of tax revenue is from “individual income” taxes.
Income taxes: wage income and investment income.
Social insurance taxes: unemployment insurance, health insurance, and old age insurance.
Consumption taxes: taxes on goods and services.
Property taxes: levied on the value of real estate, cars, and other personal property. This also includes estate, gift, inheritance and net wealth taxes.
Corporate taxes: a direct tax on corporate profits.
Why Does Taxation Revenue Matter?
With our growing debt and aging population, what action are you taking today to lower not only your tax bill today but also your future tax bill?
Those that steer through the 'rear-view mirror' may end up looking only at solutions such as qualified plans and miss other opportunities. By proactively 'looking through the windshield' you can mitigate future taxation by using multiple strategies in your wealth portfolio. After all, if qualified plan monies are our primary income source in retirement, they come to us with an “ordinary income tax” bill, Individual taxes due.
Savings is important, and qualified plan contributions with a match are a must. But think about your taxes over your lifetime, look through the windshield and review your options so that you create 'financial peace of mind' over your lifetime.