JOE THE PLUMBER AND TAX-PHOBIA

JOE THE PLUMBER AND TAX-PHOBIA

Joe the plumber and many Americans are depriving themselves out of potential growth in their income out of fear of paying too much in taxes. The way I see the tax situation is very simple and straight forward.

This page is an excerpt from my book 'How I Became a Millionaire Bushman' available at www.createspace.com/334542 or at http://www.amazon.com/.

If I could, I would rather make millions of dollars in a year and pay a lot of money in taxes to Uncle Sam, than make eleven thousand dollars and receive low-income credit from the government. A wise man once said, "Death and taxes are unavoidable." You may be able to lower your taxes a little, but do not worry about things you cannot completely control and can not do much to avoid. To repeat what I have said earlier (because it is very important), if it means that in order for me to earn more money, I have to give Uncle Sam a bigger cut, so be it. The way I see it is — I am not going to deprive myself from getting more money in order to stiff Uncle Sam of his share. If you are in the twenty percent tax bracket, just to avoid giving the government twenty cents from each dollar you earn, you are preventing yourself from earning the eighty cents from each dollar.

Bushman Debunks Financial Myths

As I said a few times before, I am not a financial expert. I am just a bushman. Nevertheless, as a bushman, I would like to share my opinions about many common sayings and financial assumptions that I believe are myths. You may or may not agree with me. I will stick to my beliefs because they have served me well so far. Again, I could be wrong.
I would like to dispel many of the myths, common reasons given, and common sayings, which keep many people from achieving financial independence. Most of the myths are so embedded in our consciousness and because of the fact that we’ve heard them repeatedly, we tend to take them for granted and consider them to be true. The first step to unravel these myths is to question each one of them and evaluate them ourselves. Doing so either will prove the myths wrong or at least will place some of them in our minds as questionable.
Reason #1. Uncle Sam phobia — (Tax phobia) — “If I put more hours, I will be working for Uncle Sam. Why should I?”
Many people curtail their income out of fear of paying too much in taxes. Nobody likes to pay taxes. Other than electing a candidate who promises to cut taxes, there isn’t much we can do about taxes. And of course, I assume, everybody is familiar with tax breaks, shelters and legal loopholes. I have heard of corporations hiring expensive tax lawyers and accountants who are known to take advantage of legal loopholes, some of which are borderline illegal. However, we are not talking about corporations here.
Don’t avoid working more hours or overtime hours which could allow you to earn more money just because Uncle Sam is going to take a slightly bigger cut. It is true that on the weeks you put a lot of overtime, your income level or bracket goes up just for that pay period. What this means is a bigger percentage of withholding is taken from your paycheck. Unless you consistently make the same higher income every pay period, you will receive a refund of the excess tax withholding at the end of the year. Remember that you pay tax on the yearly income. It doesn’t matter how you earned the money, you will be taxed by your income level. If your income is 50k, 75k, 100k, 150k … or more, you will be taxed according to your income level.
Don’t get discouraged by the amount of withholdings on your paycheck. Chances are you may get some of it back when you file your income tax return.
The way I see the income tax situation is simple. If Uncle Sam has to take a cut from any dollar I make, so be it. Because I am not going to deprive myself from earning — eighty cents because I don’t want Uncle Sam get twenty cents from each dollar. If it were up to me, I would make as much money as possible, pay a lot in taxes rather than make less money, and pay less in taxes.
There was a year when our household income was only eleven thousand five hundred dollars for the whole year. That year I didn’t pay a penny in taxes. When I filed for a tax return, I qualified for the earned low income credit. From the credit my self-employment social security tax, which was fifteen percent, was paid. I received a check for the balance of my credit, which was about five hundred dollars. On the opposite end, a couple of years ago, our annual household income was one hundred twenty five thousand dollars and we paid a lot in taxes. Obviously, I prefer the latter tax situation when we paid a lot in taxes than when the government gave us money for not earning enough.
Myth #2 — “It is tax deductible.” “It is a business write-off.”
We have heard many people say — ‘it is tax deductible’ a thousand times. What does it really mean?
What it means is, for every dollar you spend on something or give to charity, you save fifteen to twenty five cents on your tax. The exact amount depends on what tax bracket you fall under for that particular year.
* Give to charity for the sake of giving, not for the tax deduction.
* Don’t spend money, personal or business, just because it is tax deductible unless it is necessary.
How can you justify losing seventy-five to eighty-five cents of your hard-earned dollar just to save fifteen to twenty-five cents on the dollar on your taxes? That is the dumbest thing you can do.