America's Tax System is a "Kludge" By Ted Baumann, Offshore and Asset Protection Editor Cape Town, South Africa – In the United States, there is at least some pretense of legality, propriety and public purpose in the way our tax money is raised and spent. That isn't true everywhere.
Case in point: South African President Jacob Zuma spent more than $25 million on "security" upgrades to his personal home in the rural KwaZulu-Natal province. These included a swimming pool — marked under the budget for "fire protection" — and numerous outbuildings for his many wives. The Public Protector found all of it unlawful. So did a Parliamentary investigative committee. And the vast majority of the county's population.
But President Zuma has gotten away with his theft of public money. That's because very few South Africans pay any income taxes. Most pay only Value Added Tax, which is hidden in the price of goods. This lack of transparency and personal tax pain encourages voters to ignore their leaders' behavior.
Not so in the United States. We see the blows coming and feel them keenly … especially as tax time approaches.
A Must-Have for Every American Our government is heading towards two nightmare scenarios that could put a "lock-down" on your money. To find out how you can safely (and legally) protect your wealth from whatever the government may try next, you must read Bob Bauman's recent update to his most important financial book to date. Click here to learn more.
Rube Goldberg Would Love It The U.S. tax system has been aptly described as a "kludge," a programmer's term for software that's been amended and modified so many times that it's lost coherence and no longer performs efficiently or effectively. But because it's the basis for so many other essential systems, a kludge is indispensable and difficult to change without massive disruption and cooperation by a wide variety of actors with differing interests.
The U.S. tax system is the ultimate kludge. It's like one of those old cartoons by Rube Goldberg, where some simple task — say, pouring a cup of coffee — is performed by a multitude of complex maneuvers involving balls rolling down tiny tracks, swinging mechanical arms, pulleys and the odd chicken. It's so complex that even those responsible for its design and implementation, the members of the U.S. Congress, have little idea what's in it. The One Exception There is one major exception to this willful ignorance on the part of our country's leaders. Every Senator and Congressman is keenly aware that every year, a complex set of tax provisions must be renewed by majority votes in both Houses.
These provisions are a grab-bag of individual and corporate exemptions, indulgences and other gifts added to the tax system over the years. They are meant to encourage or discourage various economic behaviors, while rewarding or punishing classes of voters or corporate donors. They include: - Deductions for state and local general and sales taxes
- Mortgage insurance premiums
- "Educator expenses"
- Business tax deductions, such as those for research and development or depreciation of capital investment
These business tax deductions are especially meant for energy companies — many of whom end up paying no tax at all, or even get tax refunds, as a result.
Every part of this unwieldy collection of "tax expenditures," as they are known, has become essential to the functioning of modern American life — at least in the eyes of those who benefit from them. But because of the dysfunction of our political system, neither party is willing to go on record making them permanent, thus creating the need for annual renewal, in a kabuki dance of public feints and backroom negotiations. Brinkmanship at Your Expense As anticipated, the House of Representatives has renewed most of these provisions, which will cumulatively save individual and corporate taxpayers almost $42 trillion over the next 10 years (assuming they are extended every year or made permanent). And as happens every year, some provisions have been amended or dropped, and new ones have been created.
Hooray. But the annual waiting game over the extenders complicates everyone's tax preparations. Will you be able to deduct R&D expenses for your business, making them more worthwhile? Who knows. Can you rely on a tax credit for your local property taxes, or the cost of your children's education? Maybe, maybe not. You Need an Expert This annual silliness reinforces a critical rule every sovereign person should follow: Find and keep a good tax accountant and/or attorney. If the U.S. Congress can't keep track of what's in and out of the tax code, you won't be able to either. You need an expert who does nothing else.
The tax code just changed, whether you know it or not. Those changes could save or cost you thousands of dollars or more. As the annual personal tax battle approaches, make an appointment to see your personal tax champion now, before it's too late. The sooner you can make preparations, the more of your wealth you can protect from Uncle Sam's greedy hands.
Kind regards,
Ted Baumann
Offshore and Asset Protection Editor P.S. Of course, your U.S. tax accountant or attorney is probably going to limit you to U.S.-based options, some of which may — and probably aren't — the most effective means of protecting what's yours. Come out to the Offshore Investment Summit in March, and we'll show you how to best protect your assets from all this silliness in the U.S. Bear in mind, due to limited space we have just about 20 seats left. | 
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