Why I Believe Taxes Will Be Higher in the Future.

posted in: Uncategorized | 0

The highest marginal federal tax rate in history was 94% in 1944. Today it is 37%.

Before you put money into a 401(k), SEP or traditional IRA, make sure you understand that you’re deferring the taxes and you’ll have to pay them later. Nobody wants to pay taxes now but, if you believe taxes will be higher in the future, you may want to pay them now while they’re on sale.

The federal budget for 2021 is $4.829 Trillion (the amount of money the government is going to spend). The government only expects to generate $3.863 Trillion in taxes. This means that Congress has approved the government to spend $966 Billion more than they will generate in taxes in 2021. Stop for a moment to think about this. The government is going to add another $1 Trillion to our debt.

Click DEBT CLOCK to see what our current debt is then ask yourself how long we can continue to increase debt. (Notice the US total unfunded debt interest is $76 Trillion and the US unfunded liabilities are $128 TRILLION) 

Nearly half of the budget is allocated to the following three sectors:

  1. Social Security is the biggest expense, budgeted at $1.151 Trillion
  2. Medicare at $722 Billion
  3. Medicaid (Medi-Cal in California) at $448 Billion.

View Post

Social Security costs are currently 100% covered by payroll taxes and interest on investments. Until 2010, there was more money coming into the Social Security Trust Fund than was being paid out to Social Security recipients. Due to investments, the Trust Fund is still running a surplus. However, the Trust Fund’s Board estimates that this surplus will be depleted by 2032. Social Security revenue from payroll taxes and interest earned that year will only cover 77% of the benefits promised to retirees. If there’s a 23% deficit to pay out Social Security payments, the solution is to RAISE TAXES.

Medicare is already underfunded because taxes withheld for the program don’t pay for all benefits. Congress must use tax dollars to pay for a portion of it. If taxes don’t pay for Medicare benefits, the solution is to RAISE TAXES.

Medicaid is 100% funded by the general fund, also known as “America’s Checkbook.” This account is used to finance daily activities and long-term operations of the government.

How to fix it

Different proposals are being developed to restore solvency.

The options are:

  1. Decrease benefits paid out.
  3. Increase the debt.

Since the debt is already unsustainable, policymakers are forced to choose between a tax increase or a benefit decrease. Cutting benefits is political suicide so raising taxes might be the only realistic option.

Taxes are already scheduled to increase in 2026 which means taxes are on sale now.

Understand that if you’re putting money into a 401(k), 403 (b), traditional IRA or SEP IRA, you’re postponing the taxes.

If you believe taxes will be higher in the future, pay them now while they’re on sale and let your money grow, tax-exempt, via a private retirement plan that we can help almost anyone set up.

Leave a Reply

Your email address will not be published. Required fields are marked *