IRS Violating Privacy Rights

I’m glad to see more coverage of the IRS’s underhanded and illegal tactic of publicizing the confidential income tax data of private citizens. Here’s a story in the Washington Post, and another in the Sacramento Bee.

Now is the time to let our rulers in DC know that this will not be tolerated. Stay quiet and don’t be surprised if everyone has a chance to examine your personal tax returns.

KMK

Big Surprise

It never ceases to amaze me how stupid so many of our rulers are in regard to human nature. They just love to tack on new taxes and fees and are shocked that people will take steps to avoid paying them.

I’ve never been a smoker; but have long been amazed at how they allow themselves to be so persecuted. How can it be news to anyone that the huge extra taxes being aimed at smokers will result in smuggling from low tax states? I’m just surprised that more smokers aren’t growing their own tobacco.

KMK

Bone-Headed Forecasts

Emily Sedgwick has a good explanation of why the State governments are faced with unexpected budget shortfalls. As I’ve explained several times before, State & Federal government budget forecasters are complete idiots who would never succeed in the real business world.

They took a windfall year of tax receipts, when the stock market was going gangbusters and people were reporting huge capital gains and extrapolated that those kinds of gains would continue forever. As I said a few years ago, when I explained why all government budget forecasts are pure garbage, this is the same as someone who happens to win a lottery or a big casino jackpot adjusting his spending patterns under the assumption that he will continue to win the same amounts year in and year out.

Why shouldn’t the government accountants assume that tax revenues would be consistently high for as long as could be imagined? Their spiritual leader, Bill Clinton, proclaimed that he had tamed the business cycle, so that markets would always go up and never go down.

KMK

Is Accounting An Art Or A Science?

People often ask me how I could survive in the supposedly boring cut & dried accounting profession for so long. I have to explain that accounting and tax work have always had a lot of room for creative efforts. Some of the less legal creative efforts have made the national news recently.

It’s well known that a dozen different tax preparers can take the exact same set of facts and come up with well over a dozen completely different looking tax returns. That is why I have always considered the tax returns I prepare to be works of art, requiring a lot of time and consideration.

It also means that this spoof from SatireWire, claiming that the U.S. Supreme Court ruled that corporate earnings statements should be protected as works of art, since they “create something from nothing,” isn’t as far fetched as it may seem at first blush.

KMK

Fear Mongers Are Out

Every time the stock market has problems, the fans of big government use that as an argument against any attempt to change the Social Security system. Their arguments are wrong on several levels; but I only have time to cover a few here.

First is the assumption that any money diverted from SS would automatically be invested in the kinds of speculative stocks that have suffered. I’m sure some idiots would do that and they would deserve any loss from such a stupid move. Most people would invest the money more wisely. A savings account would still be preferable to the SS Ponzi Scheme. While it may not make a spectacular return, it will still be real money that can be left to heirs; something that is not possible with the IOUs in the imaginary nonexistent SS trust fund.

These assume that money is deposited in actual retirement accounts. While that may be Bush’s plan for changing the program, that isn’t the most effective way. In fact, it’s not even necessary to wait for our rulers to make any changes. The opportunity has already been available for decades.

For example, I was speaking with some new clients a few days ago on how setting up a new C corporation would enable them to very easily reduce their personal SS taxes by anywhere from $10,000 to $15,000 per year. They are in their late 40s, early 50s. Over the next 20+ years, the amount of money they will not have flushed down the SS toilet will amount to a huge sum. We won’t waste time crying over the hundreds of thousands they already flushed away.

I wouldn’t expect them to put that money into an actual account anywhere. Instead, they will invest it into their business or possibly buy some real estate. When time comes to retire, I can guarantee that they will be many times better off than if they had sent that $10,000 to $15,000 per year to DC. Contrary to Socialist Missouri Congressman Dick Gephardt’s advice from his imaginary billionaire friend to invest in SS, I would trust just about anybody to do a better job controlling their own money than our rulers in DC would. As the messiah of big government, Bill Clinton, said in a speech about possible tax cuts, “the people are just too stupid to know how to spend their money.” Only he and his fellow travelers know how to spend it wisely.

A big misconception I often hear is when people moan about not having a retirement account. They envision being destitute in their later years if they don’t have an actual bank account sitting there waiting for them. This isn’t true. All assets a person has are essentially their “retirement account.” They can sell them off or borrow against them and use that money.

Real estate is still the best long term reliable investment I have ever seen. I have seen so many people do quite well for themselves by buying a rental property each year until about the time they reach 60 or 65. They then sell a property each year and carry back the paper. The cash flow they receive each month makes Social Security benefits look anemic in comparison. And as I have said countless times, the properties and the notes that are left behind when they pass away are real assets that can be passed on.

KMK