Chances are, you’ve heard that tax “reform” is right around the corner—that is, if you can call it “reform” when hundreds or perhaps thousands of new pages are about to be added to the tax code. First, the White House released its tax legislation wish list. Now the Republicans in the House of Representatives have released a proposal called the “Tax Cuts and Jobs Act,” which fleshes out some of the details.
The most common way to transfer assets to your heirs is also the messiest: to have a will that is so out of date that it doesn’t relate to your property or estate, to have your records scattered all over the place, to have social media, banking and email accounts whose passwords only you can find—and basically to leave a big mess for others to clean up.
Is there a better way?
It’s tax time again, and as you look over your tax payments for calendar 2016, you’re undoubtedly wondering where those dollars are being spent.
The Wall Street Journal recently published a chart which breaks down spending for every $100 of tax receipts—and concludes that the U.S. government is actually a very large insurance company that also happens to have an army.
If you think taxes are higher than their historical rates, well, it depends on how far back in history you’re comparing them to. Take a look at the accompanying chart, which shows tax revenue as a percent of total national income for four countries—France, Sweden, the United Kingdom and the U.S.—since 1868. The chart ends in 2008, and is taken from research by tax policy analyst Thomas Piketty.
As the tax filing deadline approaches, Money Magazine has offered some interesting statistics on our annual ritual. In the early months, the IRS says that roughly 83% of all returns have resulted in refunds, with an average refund of $2,893 per return. In all, roughly eight out of ten filers qualify for a refund, and this year’s refund is in line with previous year averages.
Meanwhile, the IRS website notes that in the past few years, roughly 47% of Americans were below the threshold where they had to pay income taxes—which is where the famous “47 percenters” phrase came from in the Romney presidential campaign. However virtually all of those Americans paid FICA taxes. In all, 185.5 million income tax returns were filed last year, but only 34,000 estate tax returns and just 335,000 gift tax returns. The government collected $1.64 trillion in individual income taxes, compared with $353 billion in business income taxes. In aggregate, Californians paid the most taxes, at $369 billion, well ahead of Texas ($265 billion) and New York ($251 billion). At the other end of the spectrum, the citizens of Vermont paid $4.3 billion and people and companies living in Wyoming paid $4.9 billion,
Finally, there’s an interesting comparison. The King James Bible totals around 700,000 words, whereas the U.S. Federal Tax Code numbers 3.7 million words.
About the Author: Bob Veres has been a commentator, author and consultant in the financial services industry for more than 20 years. Over his 20-year career in the financial services world, Mr. Veres has worked as editor of Financial Planning magazine; as a contributing editor to the Journal of Financial Planning; as a columnist and editor-at-large of Dow Jones Investment Advisor magazine; and as editor of Morningstar’s advisor web site: MorningstarAdvisor.com.
Mr. Veres has been named one of the most influential people in the financial planning profession by Investment Advisor magazine and Financial Planning magazine, was granted the NAPFA Special Achievement Award by the National Association of Personal Financial Advisors, and most recently the Heart of Financial Planning Distinguished Service Award from the Denver-based Financial Planning Association.