Can you be in the 0% tax bracket and still be a good citizen?’ is a common question that David gets fairly frequently.
David relates an exchange he had with a listener on Facebook where they stated that paying less taxes is inherently selfish and paying taxes is how we take care of people as a society.
Most people have the thought of “what happens to society if everyone is in the 0% tax bracket?” The trouble is they are coming at the question from the wrong angle.
Everyone who earns an income will be paying income tax. The only way to not pay taxes is to not be working and basically be in poverty, the income you earn is below your standard deduction, or you’re retired and have done all the heavy lifting of positioning your money to tax-free.
Are we in danger of having 78 million Baby Boomers being in the 0% tax bracket? Not really, at this point, there is still $23 trillion in the cumulative IRA’s and 401(k)’s in the country and only about $800 billion in the Roth IRA’s and Roth 401(k)’s, which is about a 25:1 ratio.
Even when people do hear the message of the Power of Zero paradigm they don’t always act on it. Even though people believe that tax rates are going to be higher in the future, they are not doing anything about it. There is an incongruency between what they believe and what they do.
That means we are marching into a future where tax rates are going to be higher than they are today and advisors have a lot of heavy lifting to do to get the message out.
“Over and over again the courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike, and all do right for nobody owes any public duty to pay more than the law demands.” -Judge Learned Hand
The tax code actually encourages us to pay as little taxes as possible. David uses the analogy of a toll road and the question of using a different route.
The question comes down to when you are paying the taxes, not if you are paying taxes. You can either pay taxes now at historically low rates or you can postpone the payment of those taxes until the future when taxes are likely to be much higher.
People can feel perfectly guilt-free for taking advantage of tax rates while they are low. There is simply nothing wrong with appreciating the fiscal landscape of our country and that a revenue-hungry federal government is going to have to pay for their bills one way or another.
It is perfectly moral to keep as much money that you have earned and saved within your own pockets as you can. You are completely within your rights to pay your taxes today while they are historically low instead of waiting until the tax sale is over in 2026.
Mentioned in this episode:https://www.amazon.com/Tax-Free-Income-Life-Step-Step/dp/0593327756/ref=s_nodl
Site powered by Illuminated Advisors