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A Dollar Saved Is Two Dollars EarnedPosted by Roth-IRA-401k on: 2006-01-24 09:36:24 in category:
Inflation Income & Bonds [ Print | Permalink / 0 Comment(s) ] A Dollar Saved Is Two Dollars Earned William Cate A Dollar Saved Is Two Dollars Earned By William Cate Two hundred and twenty-five years ago, Ben Franklin advised that "A Penny Saved Was a Penny Earned." He didn't foresee State and Federal income taxes. He didn't foresee State sales taxes. He expected the Government to comply with the Constitutional requirement that all U.S. Currency be gold or silver. A Constitutional requirement because the Founding Fathers had seen the economic results of issuing the "Continental Dollar," during the Revolutionary War. This was American history that was somehow missed by the U.S. Government in the 20th Century. Paper currency is the core reason for annual inflation. Governments increase the money supply and depress the value of the previously issued money. The practice works in the short run. However, it hurts businesses and savors in the long haul. When a consumer saves a dollar on a product or service they earn two dollars. The reason is that it takes two dollars in earnings to have one dollar in spendable income. The other dollar goes to State & Federal Income Tax and to State Sales Tax. Bargain hunters aren't taxed on their savings. Shopping around for the best price on anything is one way to increase your spendable income. Shopping around means that the bargain hunter must be willing to shop at as many stores as possible. Bargain hunter savings are legally not taxable. The bargain hunting principle applies to business and investing. Owning a local business is like shopping in only one store. There are no bargains. You must pay local and national taxes. Owning a business with a potential international market for your goods or services makes you a potential bargain hunter. You can shop your tax obligations beyond your national border. Here are two examples of the principle of corporations shopping their tax jurisdiction. Let's assume that you are a Canadian company with a global market for your goods or services. If your corporate headquarters is in Canada, you will be paying about 50% in Provincial and Federal corporate taxes on your pretax profits. However, if you move your Corporate headquarters to Barbados, a tropical paradise in the Caribbean, you will pay eight percent taxes on your pretax profits. The reason is Canada and Barbados have a Double Taxation Treaty in which if you pay the taxes on corporate income in Barbados, you aren't required to pay the corporate taxes on that income in Canada. Let's assume that you are a British company with a global market for your goods or services. If your corporate headquarters is in London, you will be paying over 50% in British corporate taxes on your pretax profits. However, if you move your Corporate headquarters to Cyprus in the Mediterranean, you will pay twenty percent taxes on your pretax profits. The reason is Britain and Cyprus are members of the European Union. If you pay the taxes on corporate profits in Cyprus, you aren't required to pay the corporate taxes on that income in Britain. There are hundreds of ways multinational corporations can be legal bargain hunters. Any company with a global market for their goods or services that fails to take advantage of legal tax bargain hunting is paying too much in taxes. It's increasing its odds of failure. There are the costs of restructuring your corporation to take advantage of lower tax obligations, but the first year's tax savings usually offset those costs. In fact, if you are a careful corporate bargain hunter, you can reduce your staffing costs by enough money to offset your corporate restructuring costs within one year. All the giants of American industry have taken this path. If your company qualifies, you should follow their example. Investors can be tax bargain hunters as well. Americans should put the maximum allowed amount in tax deferral programs, like the 401k. Plus, your employer contributes some of the money to this saving plan. It's certainly possible to invest overseas without incurring a national tax obligation. Even during the height of the Cultural Revolution in the People's Republic of China, tens of millions of dollars flowed into the Hong Kong banks from the mainland. It's estimate that middle-class investors seeking to preserve their wealth in uncertain times own over 90% of the money held in banks in low tax jurisdictions. For most middle-aged members of the middle-class in the 21st Century the axiom is: "Be a global bargain hunter or die broke." The current economic bubble is certain to burst in the next few years. The Global Village has greater financial risks for corporations and individuals. There is very little effective regulation. However, few governments seem very committed to protecting their corporations and citizens from the hordes of swindlers that exist everywhere. The Global Village offers far greater rewards to those who enter it cautiously. Isn't it time that you or your company seriously considers the risks and rewards of operating globally? If you fail to globalize, your family won't survive into the 22nd Century. About the author: He is the Managing Director of Beowulf Investments [http://home.earthlink.net/~beowulfinvestments/]. He's the Executive Director of the Global Village Investment Club [http://home.earthlink.net/~beowulfinvestments/globalvillageinves tmentclubwelcome/] Venture Capital & Equity Finance Consulting [http://home.earthlink.net/~beowulfinvestments/williamcateventure capitalampequityfinanceconsultant/] You can email Mr. Cat Recommended Websites Open Community Website http://www.business-business.biz http://www.investment-investment.us http://www.retirement-retirement.com Recommended Websites Your custom Retirement Planning. http://www.retirement-plan.us For planning an IRA Rollover this is the website to review. http://www.ira-rollover.us Professional asset allocation and the wonders it can do. http://www.asset-allocation.us Money Managers selected to fit your needs. http://www.money-managers.us Manager with strong national performance rankings. http://www.durig http://www.roth-ira.us |
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