"It's better to be lucky than good."
- Lefty Gomez, National Baseball Hall of Fame pitcher for the New York Yankees
The longer I live, the more impressed I am by the big truths that are hidden in plain sight. Who doesn't love the simple bit of brilliance that was made real when someone created a rear hatch on a SUV that opens with a touch to the bumper? Or how about the genius that created the cup holder in the grocery store shopping cart? I tip my cap to the people that could SEE what the truth was.....and that brings me to today's topic....the paradox of skill.
"The power to tax involves the power to destroy."
- Chief Justice John Marshall
"The U.S. Senate is considering a bill that would tax Botox. When Botox users heard this, they were horrified. Well, I think they were horrified. It's difficult to tell."
- Craig Ferguson
By a vote of 227 - 203 in the House and 51 - 48 in the Senate, the Republicans have just passed the most significant new tax legislation in 20-30 years. Before jumping into the details of the new tax plan, I want to ask that everyone reading this first ask the "why" question. Why is the administration doing this at all? The answer is "to lower corporate tax rates" in the hope of creating more jobs and generating more corporate tax revenue. You have to recognize that the highest marginal corporate tax rate in America, practically speaking anyway, is 35%. That is the 4th highest rate in the world (the highest being 55% in the United Arab Emirates). Now, just because we have such a high marginal tax rate does NOT mean that every corporation in America is paying taxes at the level. What is the AVERAGE tax rate of American corporations? According to the Tax Foundation, that rate is 24.71%. A tax rate of ~25% doesn't sound nearly that bad until you realize that the average corporate tax rate in Europe is 18.7%. That 6-point difference in taxes means that American corporations are paying 31% MORE in corporate income taxes than their European counterparts. In China, if you're a technology company, the difference is even greater.
Think about it this way: If you can imagine yourself bypassing your local grocery story and going to Walmart or Target for an item that is 25% less, then you can appreciate the conundrum that corporate CEOs face when managing the relatively uncompetitive "price" of their corporate income tax liability. Few of us are willing to pay more than the lowest price we can find....and none of us want to pay more than a competitive price. US corporate tax rates have been less than competitive for years now.
According to a 2015 Forbes article, corporations have nearly $2.1 trillion in accumulated profits sitting off-shore to avoid US corporate taxes. What the Trump administration is trying to do is to lower the corporate tax rate to create an incentive for those corporations to bring that money back to the US. The administration's view is that it's better to get a lower percentage of something vs. a higher percentage of nothing...in terms of tax revenue. As a result, the new tax plan lowers corporate income tax rates from 35% to 21%. To me, this makes all kinds of sense.
Ok, so what about personal income taxes. Why all the changes here? To make a long story short, the changes in personal taxes are simply the result of the negotiations that made the changes to the corporate rates possible.
What follows is a summary of the big issues as I see them from both a personal and business perspective.
It's a dream job for many a college student - making beer! Of course, some of the brews must taste pretty bad....but still...what a job! And you're telling me that I can get tax credits for doing it? Yes, that's exactly what I'm saying.
While there are no guarantees, commercial property can be a great investment for those in the medical community. Certainly, there are many that put their proverbial toes in the water, but a lot more professionals sit back and wonder "Should I take the plunge?"
After spending many years in commercial property consulting, we have identified four common reasons why those in the medical profession should NOT own commercial property:
Entrepreneur, financial guy, husband and father of two great kids.