[00:00:00] Intro: Forget the civilized path. It’s time to break the chains of debt and dependency, take control of our financial lives and live free. This is the Fiscally Savage podcast.

[00:00:16] Dylan Bain: Hello and welcome to Fiscally Savage. I’m your host, Dylan Bain, and today I want to tell you about a time I was sitting with my grandfather. My grandfather was an amazing man who worked very hard for his family. He put all of his kids through private school, bought a house with his wife, my grandmother, all while working a factory job.

[00:00:34] And one of the things that he was very sensitive to was having to pay taxes. He always felt that he worked extremely hard for his money, and that he always felt that they were just trying to skim off the top. And he would say that to me a lot. Tiger, they’re always just trying to skim off the top. He was one of those guys who, for all of his world experience and everything that he was involved in, had no idea where his tax money went or why, despite driving down those roads, and the schools, and the police force and everything else like that. And he said to me one day, he says, “Tiger, they’re going to raise the sales tax, but that’s going to mean that people are going to finally stop coming to Wisconsin, and they’re going to go to Illinois to buy their stuff.” I thought this was weird.

[00:01:19] First off, I was very young and I didn’t understand what a sales tax was. But the second thing was, would that really make people drive from Wisconsin to Illinois? Now ladies and gentlemen, I tell that story because like I promised on the 4th of July, I’m going to be doing a series on taxes. So this is going to be the first part of that series. And we’re going to be working our way through a lot of different topics over the next several episodes.

[00:01:43] So we’re going to start today by talking about what are the taxes that we pay here in the United States, and trying to bring some understanding of what are they, why are we paying them, what’s the point. At the end of the day, I think this is one of those topics that a lot of people really don’t fully understand. And as a result of that lack of understanding, it breeds a lot of fear, misinformation, and confusion. So my goal here today is really to start helping ground you into some basic knowledge, so that we can have this conversation in a holistic and meaningful way.

[00:02:15] Before I jump into it though, I want to remind you ladies and gentlemen that the title of the podcast will be changing over the next month or so. I’m going to be transitioning everything away from Fiscally Savage. The podcast will be called Intuitive Finance with Dylan Bain. My website will be changing from FiscallySavage.Com to DylanBain.Com as we continue to expand our offerings and expand our coaching practice. So just so that you know that’s coming, if you’re subscribed to the podcast when I change the syndication stuff, it’ll just flow right through you. There’s nothing you need to do. But if you’re not subscribed, please stop what you’re doing right now, unless of course you’re driving. Hit that subscribe button so that you never miss a single episode. All right, let’s get into the taxes.

[00:02:56] I think the topic of taxes is one of these things that’s really scary and confusing.

[00:02:59] And like I said at the top of the show, a lot of it has to do with the fact that we don’t fully understand this. Specifically in the United States, our tax code is incredibly complex and weird, but that’s by design. One of the things that I really am always just shocked when it comes to any type of institution, corporate, social, governmental, whatever, is the idea that these institutions are somehow all powerful. They’re not. They’re run by people. We’re in charge of them. We created them. And so when you look at the US tax code, it’s not gigantically complicated because it has to be. It’s gigantically complicated because we made it to be that way with intent and with a purpose. That is to say, ladies and gentlemen, it’s in the politicians’ and corporations’ best interest if we don’t fully understand how this works.

[00:03:47] And I’ve talked to you all about this a number of different times, particularly with tax preparation. The IRS, for the vast majority of Americans, knows how much you owe. Your company has to report that. The big question in my mind is… why are you having to report for the second time with your tax returns? Well, because there is a middleman who’s inserted themselves in this process. And these, of course, are companies like H&R Block and Intuit who owns TurboTax. Their business model is based upon this idea that the tax code is just too horrendously complicated. The forms are difficult and onerous. And they’re going to, of course, take a little right off the top.

[00:04:25] And that’s one of the things with my grandfather and his conversation of, the government’s going to take everything a little bit off the top. But as I’ve grown to an adult, he’s not wrong. The government does, of course, have its hand in my pocket. I’m a high-income individual. And of course I pay a ton of taxes, but it’s always the middlemen, the little inefficiencies, that always seem to cost me so much more and are far more irritating to me personally, than it is about a tax system that I can hire a professional to get me through.

[00:04:53] And the other part about this is that people have this deep-seated fear that the IRS is going to come and get them. I have a good friend of mine who frequently has anxiety attacks of the idea that he’s going to forget to put something in his tax return, and then the IRS is going to come in and beat down his door and he’s going to prison for the rest of his life. And my whole point to him always is, if you barely earn enough to actually qualify to pay taxes in the first place, they’re not going to be coming for you. That’s not how this works. The IRS is not going to waste its time unless, A, you recover a significant amount of money, and B, you really have to screw it up by the numbers to really draw their attention.

[00:05:33] And of course, there’s also the fear of having a bill at the end of the year. And I started out in my accounting life being a tax accountant. And one of the observations I made at that time was that people end up with a bill at the end of the year, mostly because they tried not to pay their taxes throughout the year, which would have solved that problem in the first place.

[00:05:51] And to be clear, ladies and gentlemen, I’m not going to be getting into whether taxes are ethical, moral, right or wrong, because that’s a conversation for a different time. But if you do want to have that conversation, you can find me on Instagram @TheDylanBain or on Threads. We have a brand new platform at also, @TheDylanBain. And hit me up, and let’s have a conversation.

[00:06:12] But for right now, we’re going to be talking about just a general overview of what the taxes are, and then, as in subsequent episodes, we’re going to talk about how do we deal with these and understand them so that they don’t become surprises and headaches for us later. Because at the end of the day, this show is all about trying to help you take control and live free. I want you to be able to live your life without wondering what the IRS is up to.

[00:06:35] So let’s start off with the big one and the one that most people lose a lot of sleep over, and that is the federal income tax. This is what the IRS is collecting. Now, they do a lot of other things, but for the average American, the IRS is the government agency that’s collecting those income taxes. And in the United States, we have something called a progressive tax system. This is not a political tax system, although all taxes are, of course, political. This means that as you earn more, you pay a higher percentage. And I want to just address the elephant in the room, is when a lot of people will say I turned down this raise because people that have a higher tax bracket and bringing home less money.

[00:07:13] If you’re saying that, you believe that, you’re wrong. Because that’s not all how a progressive tax system works. For example, let’s just pull some numbers out of a hat and say it’s 10% from zero to $10,000. Okay, then if the next tax bracket up is 15% and you are now making $12,000, you’re not going to be paying 15% on the entire thing. You’re only paying 15% on everything over the 10 grand. That’s how the progressive tax system works.

[00:07:41] And if you stop and think about it, it makes sense. After all, if you are like I was when I was a teacher, 10% of my income at that period of time was way more onerous and difficult for me to handle than losing 25% of my income now to taxes, even though I’m paying a lot more. Why? Because my can of soup at the grocery store costs me just as much when I’m poor as it does when I’m wealthy. And so there’s a variety of scales and things that go into this when you’re actually thinking about it.

[00:08:10] One of the things about the federal income tax that you should know is that we are all entitled to what’s called the standard deduction. And so if you are single, it’s $14,000, and if you’re married filing jointly, it’s $27,000. Another way to think about this is that’s the free money. So there’s no taxes assessed. So if you’re a single person and you’re making $14,000, your standard deduction zeroes you out, so you would pay no taxes on any of it. And more to the point, then, if you are making $24,000 as a single person, the 14K is going to be the standard deduction, which means you’re only going to pay taxes on the 10K at 10%. So your entire tax burden for the entire year is going to be 1,000 from a federal income tax perspective.

[00:08:53] This is the piece that a lot of people don’t seem to understand, is that these deductions are just a way to monkey with the rates. And part of the reason our rates are as high as they are is because we have so many different deductions that everybody can take. Child deductions, child care tax credits, education deductions, you name it. There’s a ton of them. If we were to eliminate these deductions, we could actually reduce the rates and leave the income more or less the same for the government. And if you don’t believe me, the Simpson-Bowles report from almost 20 years ago at this point made a big to do about that. And it’s worth reading if you’re at all interested or are having trouble sleeping, because I read tax stuff so you don’t have to.

[00:09:33] As for federal income tax, the next type of tax that you typically will see people run into on a federal level, and I’m going to start at the feds and work my way down, are things like capital gains. Capital gains are the ones that will come back and bite people in the butt. So capital gains are taxes on capital appreciation or income. Your federal income tax is, but you can think about it like that’s taxing labor. So labor can be taxed anywhere from 10 to 37%. But capital gains falls under a completely different ball game. So we treat labor and capital radically different in this country.

[00:10:07] So if you’re already rich, your chances are good. You’re going to pay a lot less in taxes because you’re going to be paying it in capital gains rather than an income tax. But like I said, capital gains comes in two different flavors, short-term and long-term. Your short-term taxes are the things that you’ve held for less than 12 months.

[00:10:24] So let’s say you go buy some Tesla stock, you hold on to it for six months. It goes massively up because Elon Musk is a genius, and then you sell it. I know we’re in fantasy land here, but just stick with me. You’re going to pay taxes on the difference between what you sold and what you bought. That difference is what you’re going to pay taxes on. And because it’s less than 12 months, you’re going to pay it as a portion of your income taxes. So we consider that almost like labor.

[00:10:53] But let’s rerun the same scenario in which you are now holding it for 18 months. Elon Musk is still a genius, but it takes you a little bit longer, and now you sell it. Now, because it’s over 12 months, you’ve held that particular investment for that long. Now you’re going to be paying the long-term capital gains, and if you’re single making less than 44k a year, you’re not going to pay anything because this capital gains tax for single people making less than 44,000, and married filing jointly and making less than 90k, and then these are rounded numbers of course, is 0%. So that’s free money to you. Of course, it then goes up to 15 and then ultimately 20% as you continue to go up.

[00:11:33] But note, if you’re at the upper end of the income distribution, you’re going to be paying a marginal tax rate at the very top of 37 cents for every dollar you’re making once you hit that top bracket. But if you were doing this exact same thing, but you were doing it with capital gains, you’re going to top out at 20%, which is why capital has a more favorable tax treatment than, say, the federal does.

[00:11:57] This is why Warren Buffett pays less in taxes than his secretary does. His secretary is labor, he’s on capital gains. Is that fair? I’ll leave that for you to decide. But it is important to understand that we have two different classes of people in this country when it comes to taxes on income, and this is why.

[00:12:16] The last type of federal taxes that a lot of people will have to deal with are things called payroll taxes. This of course is, sometimes it’s FICA, but there’s a lot of different names for it, but essentially it’s the taxes that you’re paying for Social Security and Medicare. And of course, if you’re paying Social Security, remember Social Security is a pay-as-you-go program, so the people who are retired now are taking that money.

[00:12:36] And when you retire, in theory, there should be enough people, if populations don’t collapse, to be able to pay for your social security as well, which might just be a plug that we should be having more children. But I digress. I’ll do an entire episode on that a little bit later. Let’s talk about those payroll taxes.

[00:12:51] Now, payroll taxes are interesting because you only pay half of the taxes due. Your employer, if you’re a W2 employee, they’re paying the other half. So you are going to pay 6.2% for Social Security and 1.45% for Medicare, but your employee is going to pay that a second time. And so what comes out of your paycheck is just shy of 8%, but you’re actually paying roughly 16% when you calculate what your employer puts in on your behalf.

[00:13:21] Now, I’ve done an entire episode on this and I’m not going to beat a dead horse. But I do want to point out one thing, that if you’re self-employed, this is where taxes really come back to bite a lot of self-employed people. Some people call this a self-employment tax. And what that is if you are self-employed, you have to pay both sides. So instead of just paying the 8% that you would normally pay with a W2 situation, if you’re self-employed, you get to pay 16%. So if you’ve ever had somebody who is running a very successful business and they start complaining that they’re paying 50% of their income, this is how they get there. They’ve hit the top of the federal income bracket in a big way. And so they’re paying a lot in taxes on the federal income taxes, but because they’re self employed, then they’re also paying both sides of this. So 37 plus 16 gets you close to that number. That’s where this comes in. But if you’re not self-employed, you don’t have to worry about that necessarily. And if you’re making below the threshold for the 37% you’re not going to be there anyway.

[00:14:20] Take myself, my wife and I do very well for ourselves, and we come nowhere close to 37%. Our effective tax rate is typically around somewhere from 14 to 12. And that’s pretty typical for most people, particularly if you have kids and other deductions.

[00:14:34] Okay, so let’s move away from the federal side. So remember, federal sides are basically federal income tax, capital gains, and payroll taxes.

[00:14:40] Oh, I really should go back to capital gains for just one quick second. So just allow me to talk about this. We talked a little while ago about 401Ks, 403Bs, and IRAs, these tax-advantaged investment vehicles. We could throw HSAs, health savings accounts, into these as well. But when we sell those stocks, they go into that account, into that vehicle. And if we withdraw from the vehicle, depending on whether it’s a Roth or a traditional, will dictate whether or not it’s considered income or not. Even though you’re selling a stock, It’s not capital gains if it’s coming out of a retirement vehicle, it’s income. And that’s really important to understand. And we’ll talk more about that here in a while.

[00:15:20] Okay, let’s move on. Now that we’ve covered the federal stuff, let’s start talking about the states. Because the states that you live in will really impact your situation. And it’s worth noting at this point, and I’m going to start talking a little bit in the political sphere, specifically with how states funded themselves. Because as you know, there’s some states that have very different taxes than other states. California versus Texas is a great example, and as I pointed out last week, when you start looking at the state income tax, Texas doesn’t have a state income tax, whereas California has a very sharply progressive taxation system for income.

[00:15:55] But if you’re making less than 500K a year and you move from California to Texas, chances are good, all else being equal, that you’re going to pay more in taxes all in, in Texas than you would in California, if your total income is less than a half a million dollars. And why? That’s because of all the other taxes that you’re going to run into. So let’s start off with the state income taxes.

[00:16:18] The vast majority of states in the union are on a progressive system, although it doesn’t go up to 37%. California, which is the highest, is about half that. Most states will top out around 5%. And it’s important to understand that distinction in terms of, having a progressive tax system, is just one piece of the puzzle. States fund themselves through a variety of different measures. And there are some states where they have a flat income tax. Colorado, where I live currently, is an example of this. But Illinois, Indiana, Kentucky, Massachusetts, Michigan, North Carolina, Pennsylvania, and Utah all fall under the flat tax states. That is to say they set it at one level and everyone pays the same rate, no matter how much you make.

[00:16:58] So here in Colorado, it’s around six and a quarter. So whether I’m making 1$0,000 or I’m making 10 million dollars, my tax rates for kind of the state of Colorado on an income tax level will be 6.2%. And it’s worth noting that there’s a number of states in the union that do not have a state income tax.

[00:17:18] But the question that you have to ask yourself whenever you see that is, okay, that’s great. How do they then fund themselves? Considering the states still have expenses. Police, firefighters, schools, roads, other corporate civic infrastructure, all of those things still have to be paid for.

[00:17:38] So let’s take Alaska, for example. Alaska has no state income tax, and most notably, also doesn’t have a sales tax, so they’re not collecting it that way. So how does Alaska fund itself? The one thing, first thing to note is that Alaska gets a ton of federal money. So the federal government is kicking in about 30% of their budget. But the rest of it’s really coming through oil revenue that they also then kick back to residents in the state of Alaska, kind of like a little socialist program they have up there in Alaska, where the state leases the oil land, the oil gets sold, they collect the taxes on the oil, and then they redistribute that wealth to the people in Alaska. So it seems like a really great deal, unless, of course, oil prices were to drop off the side of a cliff.

[00:18:19] Florida and Nevada also have no state income taxes, and so what are they doing? Florida, it’s all tourism, so they’re making it up in sales taxes, but they’re also making it up in fees and stuff that they assess on hotels for people who come down to Miami for the beaches or to Orlando for Disney World and all that other stuff. This is why Ron DeSantis picking a fight with Disney is weird considering how dependent Florida is on those fees to fund itself, and Nevada, of course, has Las Vegas, and they’re pulling the same game. They’re taxing the casinos, which are creating the vast majority of the wealth that’s going into the state coffers that have redistributed through the services that the state then provides.

[00:18:58] In the case of Tennessee and Washington, it’s a little bit of a different situation. Tennessee is working — Tennessee doesn’t have a state income tax either, but they’re really trying to fund themselves through sales taxes. So if you were to go to Tennessee, you’re going to pay one of the highest sales taxes in the entire nation.

[00:19:15] Washington’s in the same boat. They don’t have a sales tax at all, but they have a much more progressive income tax system than a lot of other states do.

[00:19:24] Wyoming and Texas, they also don’t have state income taxes, but they’re both working on fossil fuel extraction. Texas, Oklahoma, Wyoming, Alaska are all the states in the unions that really tax their natural resources, particularly for coal and oil and gas in order to be able to fund themselves. Those states’ financial fortunes will rise and fall on the flow to the market for very specific things. This is not very different than countries like Saudi Arabia, who are completely 100% dependent on their oil revenues. No income taxes sound great, but also understand that you’re now exposing yourself to a much more volatile system than you might otherwise in another state. That’s for you to decide whether or not you want to let it ride like that. For my money, it’s irrelevant to me.

[00:20:12] Let’s talk about sales taxes, because this is the other thing. So the average American in the United States pays about 2% of their income in sales tax on an annual basis. And that varies wildly. If you are like I was when I was a teacher, at the very bottom of the income distribution, your sales tax burden is going to be significantly higher than if you are at the upper end where I’m at now. I pay a lot more as a percentage of my income when I’m a teacher on sales tax than I do when I’m a wealthy accountant. So it’s these differences in scale that really matter.

[00:20:44] But like I said, you have a state like South Dakota which doesn’t have an income tax, but 65% of their state budget is entirely wrapped up in sales tax. So now they’re completely dependent on the economy, and they’re collecting the taxes on a regressive basis. So the poorer you are, the higher the percentage of your income you’re gonna be paying in sales tax versus somebody who is more wealthy. Texas, Florida, Nevada, and Tennessee are all in the top six, most heavily reliant sales tax states. And you’ll notice that South Dakota, Texas, Florida, Nevada, and Tennessee all don’t have a state income tax.

[00:21:26] So that’s right, ladies and gentlemen. How they’re funding themselves comes from a resource extraction, tourism, or something like that versus a state income tax. This is the trade off that they’re making. And like I said, there’s a number of states in the union that don’t even have a sales tax. Alaska, Oregon, Montana, Delaware, and New Hampshire all fall into that category.

[00:21:46] But you also see, Alaska notwithstanding, much higher state income taxes that are being assessed or higher federal aid that’s coming into the state, so when you’re paying your federal income taxes, that money is being redistributed to a lot of these states that don’t have a very big tax base.

[00:22:06] But sales taxes also can be a huge part of your spending, depending on where you’re at. California’s got a huge sales tax. California, Indiana, Mississippi, Rhode Island, Tennessee are all above 7%. They’re at the very top, so you’re not going to find anything higher than that.

[00:22:22] But the question, at the top of the show from my grandfather, was do people really just run across state lines in order to avoid certain sales taxes? Let me give you two examples. Number one, let’s stick with my grandpa here for a second. Wisconsin sales tax is 5%, Illinois is 6.25%. Now, I grew up in Kenosha, Wisconsin, which is right on the border. If you go directly north of Chicago along Lake Michigan, as soon as you cross into Wisconsin, you’ve crossed into my hometown. And if you are going up I-94, heading north — I guess it’s technically west on I-94, but at that point, you’re driving directly north. When you cross into the state, you’re going to see a whole bunch of stuff. You’re going to see a fireworks place, because it’s legal to sell fireworks in Wisconsin. You’re going to see a Mars Cheese Castle, because of course you are. And then you’re also going to see the Factory Outlet mall. And you’re going to see a CarMax. And you’re going to see all these shopping places. And that’s because they put those there strategically, right along the highway, hoping to draw people from Illinois who want to avoid 1.25% in sales tax to buy a car in Wisconsin, to buy clothes at the Factory Outlet Mall, and whatnot.

[00:23:31] So the question you need to be asking yourself is, does it work? Do people actually go from Illinois up to Wisconsin? And the answer is, kinda. It’s not as big of an impact as you’d think, but it’s not zero. There are plenty of people who do this. But the bigger place where you actually see this are things that have vice taxes. So people from Illinois will come up and buy booze in Wisconsin all the time because our booze taxes and the money we spend on booze for beer, alcohol, and wine are rock bottom compared to the rest of the United States. So people will come up to Wisconsin, buy a bunch of booze, and go back into Illinois.

[00:24:06] But the reverse can be true in a lot of different places, depending on what your sin taxes are. Let’s take, for example, here in Colorado. If you have somebody in your family who is a really heavy smoker, and we’re talking a pack a day, every three months it might be worth your while to take $2,000 and go up to Wyoming, where there aren’t cigarette taxes, and buy all the cigarettes right then and there. And I know a number of people who are in that boat here in Colorado. So like I said, it’s not a huge impact, but it’s not zero.

[00:24:37] And when you’re looking at states and where to move from, like I said before, take Texas. A lot of people say if I moved to Texas from California, I’m going to be able to enjoy no income tax. That’s going to be huge, but your sales tax is going to be very high. And so you’re might end up spending more of your income, which brings me to the last version of taxes that a lot of people run into. And that is property taxes.

[00:24:59] Property taxes are what is assessed on the land on which a building sits. So whenever you’re buying real estate, you never buy the building, you buy the land the building sits on. The building is considered an improvement. So when you buy the land and there’s nothing on it, you’re going to be paying a lower amount than if you improve the land, thus making the land more valuable by putting something like a house on.

[00:25:20] And as your property values rise, so then will be the assessment on your property tax. Take me for example, I had the wonderful fortune of closing down my house on March 1st, 2020 right before COVID hit and I paid $420,000 for it. And then watch that property value skyrocket to almost $650,000 over the course of the next two years. I didn’t have any particular insight, I just got real lucky and that was great. But my property tax assessment went up by about 200 grand. And so I will be paying higher taxes because my real estate has gotten more expensive as time has gone on.

[00:25:56] This is the other side of the real estate boom that people don’t like to talk about, but in Colorado, they just did their biannual tax assessment for property taxes and people are losing their minds. They really love the increase in the value, but now they don’t like to pay the property taxes on it. And this is something that you’re going to see across the nation.

[00:26:17] Texas is probably the poster child for this. So my statement, that is, if you’re making less than a half a million dollars. In California, you’re going to pay less all in on taxes than you would in Texas. This is where this comes from. Because you’re going to pay no income taxes in Texas and you’re going to pay a lot of income taxes in California, but your property tax assessments are going to be exactly the opposite. Texas gets a ton of the money that they use to operate from property taxes. Like I said, their sales tax revenue is about 60% of their budget. But the rest of it’s made up in property taxes and oil revenues. And if you went to Texas and you sold your nice California house and you bought this big, nice place in Texas. Guess what? You just signed up for a very large property tax bill.

[00:27:06] And now I can pick on Texas, but let’s be real. New England, as a region of the country, so that’s like New York and then towards Maine, they have the highest property taxes in the entire United States. That entire region, as always, the most heavily property taxed regions in the entire United States. Leading the charge that isn’t in New England, of course, is Texas, but Mississippi, Nebraska, Illinois, and my current state of Colorado, all fall under that umbrella.

[00:27:33] So there you have it, ladies and gentlemen. We’re looking at, you have federal income taxes, capital gains, payroll taxes. Those are at the federal level. And then you have your, at the state level, your state income taxes, the sales taxes, and the property taxes.

[00:27:45] And the big concern that everyone always has is, how do I understand this? We all want to make good decisions. So how do we make a good tax decision? Because I’ve been told that the taxes are this massively huge deciding factor when it comes to life decisions from what kind of car I’m going to buy to where I’m going to do my shopping to where I want to live.

[00:28:05] And the answer to that question, ladies and gentlemen, of whether or not it is, it’s not. Taxes typically fall very low. People who are obsessed with taxes typically will find their quality of life to be radically different in particularly the ways they really care about. From a corporate level, let me just take two examples.

[00:28:24] Toyota moved its US headquarters out of California and went to Texas. And people just sung the praises of this big move. When they were interviewing the CEO for Toyota USA, they asked, what was the major factor for going from California to Texas and why was it Texas? And he laughed and he said on our top 10 of the biggest reasons we moved here, Texas wasn’t, it was actually at number 16. So why did they move to Texas? And he chuckled and laughed and said, “Because the land was cheaper.” I wanted to expand the campus and I couldn’t do that, so I’m going to pay higher property taxes, but it’s offset by the fact that I can put so many more people into my new campus. So it was land prices that made the difference for Toyota.

[00:29:12] But give me another example. General Electric. Huge blue chip stock. Gigantic company, titan in the market. Even after what happened with GE after Jack Welch’s tenure. They were going to move out of Connecticut. Again, high property taxes, high income taxes, and everybody was expecting GE to follow Toyota to Texas.

[00:29:32] But they didn’t, they went to Boston, Massachusetts. And everybody stopped for a second while they’re, hold on a second. That’s a terrible tax decision. Your executives are gonna be paying so much more in Massachusetts than they would in Connecticut, and the land is even more expensive. Why would you even do that? GE’s response was, “Because we’re closest to the best schools in the nation for the things we’re concerned about.” Harvard, MIT, Boston College, Boston University, they’re all there. And so they moved because they wanted to be closer to the talent to be able to recruit people more easily.

[00:30:04] These are two examples from the corporate world where they made decisions, and taxes were part of the decision, but not the biggest one in the entire world.

[00:30:13] And of course, this belief that the taxes are the biggest deciding factors leads people to do all sorts of weird things. Offer sweetheart deals to companies notorious for screwing over municipalities that do that for them like Foxconn and RISD in Wisconsin, just down the street from where my parents live.

[00:30:31] It’s really important to understand that taxes are a part of your financial picture, but if you’re losing a lot of sleep over them, I would submit to you, ladies and gentlemen, that maybe we should take a step back and start asking what is it that we’re actually afraid of? If we’re afraid of getting audited, what is the actual probability that we’ll be selected for an audit? Because remember, the vast majority of people in the United States do not get audited. Is it that we’re intimidated by the asymmetric knowledge? If that’s the case, we can hire a CPA. But if we’re spending our time not living our life and instead trying to find some clever way to get our own taxes, I would argue that our priorities are in the wrong place. And I say this as somebody who’s worked in the tax industry.

[00:31:14] As always, ladies and gentlemen, before I close out the show, I do need to remind you that while I am a CPA, nothing I have said here or will say in the future should ever be considered tax advice. I’m not that kind of CPA. I’m an auditor, not a tax guy anymore. And so this is not tax advice, #ThisIsNotTaxAdvice, but I am going to do my best to try to educate you, to give you some free value and some understanding.

[00:31:39] Because just like when I had the conversation with my grandfather, it had never occurred to me that taxes were something that would weigh on our mind. I was too young at the time, and as I’ve grown up, I’ve continued to think about that conversation and ask myself if I’m making good decisions from a tax perspective. I found that education is key to being able to make good decisions, but also to understand that I might be making mountains out of molehills.

[00:32:04] And so when I create tax strategies for myself, I partner with a good CPA, and then I move on with my life, and let that person worry about it for me. It’s all about living our life, taking control, living free. To be able to focus on the things that matter, like our relationships, and I want that for each and every one of you too.

[00:32:28] Outro: Thanks for listening. If you like what we do here, please hit that subscribe button, leave us a rating and review, and share the content with somebody who would benefit from the message. You can follow us on Instagram, Facebook, and Twitter, all @FiscallySavage, and head over to FiscallySavage.com to get our free tools, suggested reading, and everything else you need to take control of your financial life and live free.