Personal Income Tax Shortfall Hits States
How Can Income Tax Returns Hurt Your Retirement?
I recently read a Wall Street Journal article titled Income Tax Yo-Yo Hits States. After reading it, I wanted you to know what I learned. Let me tell you folks…it’s a mess out there. Technically we’re out of the recession, but in a real practical sense, we’re not. And you can lay the majority of the blame at the feet of governments.
Last year was the last year for the Bush Tax cuts. Those tax cuts included cuts on long term capital gains. Ok, before you get bored and tune out, listen to what I’m saying. If you buy a stock and keep it for at least a year before selling it, you pay 15%, maybe less, on the gain instead of what your regular tax bracket is. Since most high income earners are in a much higher tax bracket, the long term capital gains tax is a real benefit.
Last year that benefit came to an end and this year the long term capital gains tax went way up. So there was an incentive to liquidate holdings in 2013 to keep from paying a higher tax this year. This was further enhanced by the fact that the stock market did very well last year. Thus, when all the selling took place to liquidate these assets, a whole lot of personal income tax came flowing into the state governments. So being the irresponsible politicians that most of them are, they didn’t readjust their projections enough for this year. Tax revenues have fallen drastically for many states and now they’re in trouble.
Dwindling Personal Income Tax Revenue Affecting Many States
It’s bad in New Jersey where officials are trying desperately to come up with cuts somewhere. Otherwise they will have to delay payments to pension funds. And there in lies the rub. As I have warned time and time again, if you have an old pension fund, call right away to see if they will let you roll it over to your personal IRA.
But Victor, that’s a government pension. I have a private pension plan. Well, it’s still not safe. Everything government does affects private business. Governments soak the rich and the rich pass it on to us through their businesses. You see, in California the top 1% of wage owners paid 50.2% of the state income tax in 2012. In 2011, it was 41.1% of the tax. It’s worse now. That’s happening in other states.
Governor Christie in New Jersey blamed his state’s shortfall in part on botched projections that failed to fully account for the drop in revenue from capital gains and personal income tax. Now Moody’s has downgraded New Jersey’s general obligation debt by one notch, citing the state’s budget troubles. Same thing happened to the U.S. under Obama. So much for Gov. Christie as president.
Kansas had a 50% drop in tax revenues over this time last year. Pennsylvania is down $425 million. Connecticut is down $462 million, and the list goes on. Do you see what’s going on folks. Our government officials are making horrible decisions because they spend and spend, but won’t save money for a rainy day. If they get a windfall like last year, they just blow it all. So your money gets cut back.
What’s The Bottom Line
Bottom line is this. We must, more than ever, be responsible with our money. Which means getting out of debt as soon as possible. I know I keep coming back to this. But this is what my whole website it about. Unfortunately people are slow to listen. If you look at what’s happening in this country on a daily basis, you will see why it’s so important to create a get-out-of-debt plan. Pay off credit card debt and all your other debt. That will safeguard you from what government does.
So if your taxes go up, you don’t sweat it. If your healthcare costs increase, you’re good to go. Inflation shoots up, no problem. I’m ready. You can say this if your financial house is in order. Now there’s no excuse because with Infinite Banking, you can get out of debt and create wealth at the same time by creating your own private bank. You become the banker. Then you can stay out of debt for life by doing business with YOUR bank. The Infinite Banking Concept is your ticket to financial well-being, one of the Four Cornerstones of Total Well-being.
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