Is a 60% Tax Rate In Your Future?


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There has been a lot of talk about what changes we can expect as tax provisions expire over the next few years and a new administration takes the White House.

It looks like there is one consensus: raise individual income tax rates and cut corporate tax rates.

The IRS just released the results of its study on the consequences of the 2004 American Jobs Creation Act. For one year, American corporations had one year to bring back overseas income at a very low 5.25%. Normally the rate would have been 35%.

More than 800 US Corps brought back $362 billion. Now, granted they got a great tax break – 5.25% instead of 35% But think about it 5.25% of $362 billion is still a lot of money and without the little window there would have been no tax, and no capital investment back into the US.

Now fast forward today. Across the world, many of our competing nations have slashed their corporate rate to 10%. The US now has the second highest rate in the world. And the US is one of the few countries that taxes income when it is repatriated.

This hurts the US’s competitiveness in the world market and guess what, we’re seeing the evidence of that in things like the declining dollar.

Corporate tax rates MUST be cut if the US is going to remain competitive. (Can anyone else see the opportunity here for small business owners?)

Now, how is the government going to pay for that? Tax the middle class who are stuck with W-2 jobs. In fact, the current proposal will mean a blended tax rate of more than 60% for California and New York residents. Ouch.

What should you do? Start a business. Start it quick. It’s the only way you’ll get the tax loopholes in the very near future.



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