We’ve fought against the notion of big government in our country since the 1970’s. Now, it’s suddenly in vogue again with our President calling for government to be big in this time of crisis. And how will we balance the soaring budget deficit? Tax the other guy. Unless, of course, you happen to make over $250,000 per year, or invest, or sell anything, or have a mortgage in an expensive area of the country or a dozen other items that can trip you up with this new proposed change. Good news, it won’t hit until 2011. But what can you do NOW to get ready? (And no, I’m not talking about filling the basement with canned food and MREs)
At this point the proposed tax changes are just that – proposed. So, you need to look at what others are saying and what changes we might expect once everyone gets together. Here are some of the things you can likely expect:
1 – FINALLY! The issue of Social Security/Medicare is finally being addressed. I’m not crazy about the solution, though. Cutting back payments to providers right at the time that we’re providing insurance to more people is likely going to give us lower standards of care. That’s not because the providers don’t care, it’s because the system will be overstressed and the providers are going to be paid less, right at the time that we make them work harder.
Solutions? There will likely be even more “concierge” medical services. Save your money. You probably will want to take advantage of this as well. Or better than save your money, find a way to make more money, so you can get the better care.
But this still doesn’t address the Social Security underfunding question. The government right now owes over $52 TRILLION in promises to Social Security and Medicare recipients. Cutting provider pay by $318 Billion is just a tiny drop in the bucket.
There is no way to make this math work without increased Social Security payments in and reduced Social Security payments out.
STRATEGY: Turn your active income into passive income as soon as possible. In this case, we’re talking about the IRS definition of passive income. It does not mean using an S Corporation (expect S Corp distributions to be taxed soon). It does not mean setting up systems so you don’t have to work as hard (active income is a definition, not how hard you work.) It DOES mean changing the character of the income you make. Create royalties, IP payments and use other strategies as outlined as part of the Before You File course.