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Tax Plan Proposal For an “Innovation Economy”

After reviewing the tax plans of each of the GOP Presidential Candidates, I decided to try to craft a plan which I think will accomplish five major objectives:

  1. Create an “Innovation Economy”
    1. Economy which rewards Entrepreneurs, Landowners & Businesses who invest in the U.S.
  2. Maximize U.S. economic growth
    1. GDP Growth, Capital Investment Growth, Wage Growth, & New Job Creation
  3. Cut taxes for every single income class
    1. Focusing the largest cuts on those who are most likely to pump it back into the economy
  4. Reduce the size of the Internal Revenue Service
    1. Make it so that every single individual can do taxes on just one form
  5. Incentives for Top Earners to drive extra money into the economy in the most productive way
    1. Make it more profitable to start small businesses, and invest in real estate

I, of course, also have the advantage of not needing to craft a plan that can get me elected, so I am simply trying to build a tax plan that will accomplish those five goals, regardless of how the ideas would play on the campaign trail.

Highlights of the Innovation Economy Tax Plan

Eliminates Corporate Income Tax

Creates a two-tier “Business Transfer Tax” or Value-Added Tax (VAT):  16% and 25%

Enacts a one-time deemed Repatriation tax of 5% on all foreign profits currently deferred

Rental Property, and commercial property, Income would no longer be taxable

Reduces seven Individual Income Tax Brackets down to two:  10% and 25% (Progressive Tax)

Increases Standard Deduction to $25,000

Eliminates all Itemized Deductions and Tax Credits

Eliminates payroll tax

Eliminates Alternative Minimum Tax

Eliminates 3.8% Net Investment Income Tax

Eliminates 0.9% Medicare Surtax

Eliminates Estate Tax



Replace Corporate Income Tax with Two-Tiered Business Transfer Tax (VAT)

In order to boost GDP, Increase wage growth, and drive new incremental job growth, the United States must lower the tax burden on our nation’s businesses.  At the same time, we must discourage businesses from moving operations overseas, and try to drive as much of the enhanced economic benefit back to people within our borders.  For this reason, I am proposing a two-tier tax Business Transfer Tax.  Businesses who adhere to two simple rules, outlined below, will qualify for the 16% Tax Bracket, those who don’t will qualify for the 25% Tax Bracket:

  1. 90% of employees must be based in the United States
  2. 90% of Capital Investment must be spent inside of the United States

Companies would put in an application every three years, which would examine the past three years.  If they have met the requirements for the past three years, they would be pre-approved for the next three years.  If they are determined to have not met the requirements for the past three years, their pre-approval application would be declined.  If they had been pre-approved in the past, and it is determined that they did not meet the requirements over that 3-year span, they would be given a tax bill for the three years worth of tax breaks which they did not earn.

This is a unique proposal, which will drive specific behaviors among businesses in the United States.  This proposal would do a number of things to jumpstart the Innovation Economy inside the USA:

  1. Heavy Capital Investment Industries would benefit
    1. Tooling Companies, and even U.S. Based Software Outsourcing companies
  2. Less Outsourcing across every industry
    1. Companies near the 90% mark will pull back employees, or outsource less in the future
  3. This will create thousands of small businesses
    1. Lower tax rates for entrepreneurs will lead to more new small business start-ups
  4. Top-Earners will turn towards creating businesses to shield taxes
    1. Higher Capital Gains rates for top earners, so they will invest in business start-ups
  5. This move will boost GDP and create a maximum number of Net Incremental Jobs
    1. Important metric increases by incenting companies, & top earners, to invest in America

Enacts a one-time deemed Repatriation tax of 5% on all foreign profits currently deferred

There are $2.1 Trillion dollars of profits currently being held offshore.  If all of those profits came back to the U.S. today, it would result in several hundreds of billions of dollars in tax revenue, and make investment in the U.S. much easier to accomplish for many companies.  Since it is so expensive to repatriate these profits, that will never happen.  This plan is simple, earning $50 – $100 Billion now, and causing a massive influx of dollars into the American Economy, is better than continuing to incent companies to keep their profits overseas by making it cost-prohibitive to bring the dollars back to America.

This plan advocates a one-time 5% Repatriation fee, that will be good for a period of two years, so that companies can repatriate their profits in an orderly fashion.  Most companies will take advantage of this, because it is such a steal of a deal from a tax perspective.  The two-year timeframe will allow companies to plan out the additional tax expense, and the plan will result in a huge influx of dollars into the U.S. economy. This influx, in conjunction with the tax incentives for investing in U.S. CapEx, will cause unprecedented GDP and Job Growth at the very beginning of this plan, which will make it easy to surpass current Presidential Plans in the traditional 10-year view that the Tax Foundation takes when analyzing the plans.

Rental Property, and commercial property, Income would no longer be taxable

This is one of the most controversial portions of the plan.  The idea here is that by taking away the Mortgage Interest exemption (explained later), the housing market could suffer.  This part of the plan will eliminate that concern, along with making it easier for ordinary Americans to prosper in Real Estate, while also making taxes simpler (and therefore, be able to shrink the IRS), all while giving the top earners a place to invest their money which will benefit everyone in the American Economy.

Here is how it would work.  There would be no taxes on any income made through rental property, or commercial property ownership.  This, of course, will increase the ownership of rental property across America.  It will also likely lower the average rent paid (through more competition, and less need for higher profits to offset the tax burden).  This, in conjunction with the removal of the Mortgage Interest Tax Deduction, will drive a disparity between the cost of renting a home, and the cost of owning a home.  Some will say that this is just another way to drive a wedge between the lower class, and the upper class, but the actual effect would be that both classes prosper (along with the middle class).  The lower class benefits from lower rents through increased competition, and less need to offset the tax burden.  The middle class benefits because entry-level housing will need to become cheaper to compete with the new lower top tier of rental prices (along with less need to offset the tax burden.  The upper class benefits because they can participate in the rental market by making a tax-free profit, while helping the lower class live cheaper than they do today.  It is literally a win-win-win.

How will this affect the overall economy?  The lower class will have more money to spend (due to lower rent).  They tend to spend their excess dollars, so this will instantly pump back into GDP, which will be good for businesses.  The middle class will benefit the most from the Net Incremental Jobs which will be created through the higher GDP.  The upper class will try to avoid the higher tax rate on Capital Gains, and will dump lots of excess money into real estate, which will cause a real estate boom throughout the country.  This will directly help the middle class, as studies have shown that in suburbs over 100,000 people (where most of the middle class resides), cities still have between 19% and 25% of the land sits vacant.  This is land that the top earners can purchase to expand the city’s population, or invest in commercial real estate to bring new jobs to the city, but will likely result in very strong momentum on both fronts.

Individual Income Tax Brackets

Consolidate the 7 current individual tax brackets into two brackets:  10% and 25%.  Everyone making under $200,000/year would fall into the 10%.  Once you have exceeded the $200,000 income level, you would be taxed at 25% thereafter (so, this would be a progressive tax bracket).  All income will be taxed the same, whether it is payroll income, short term capital gains, or long term capital gains.  This plan will result in an overall tax rate drop for every single one of the 7 current tax brackets, which we will discuss later.

Standard Deduction

Increase the current standard deduction from $6,300/person to $25,000/person.  This increase will affect all taxpayers, but will the largest positive affect in the lowest tax bracket.  This is important, as we have discussed, because these folks are the most likely to pump the money directly back into the economy the quickest.

Itemized Deductions & Tax Credits

All Itemized Deductions and Tax Credits would be eliminated.  It is important to note that this includes the Child Tax Credit, and the Earned Income Tax Credit, the Mortgage Interest Tax Deduction, and the Charitable Giving Tax Deduction, all of which most candidates keep in their tax plans.  These Tax Credits and Deductions, which the candidates have kept in their plans, cost taxpayers nearly $250B/year in lost tax revenue.

Earned Income Tax Credit

With the proposed increase in the standard deduction, the lowest income brackets are already receiving drastic tax decreases, and the EITC would only reduce tax liability for couples earning $50,000 or more (right around where the EITC phases out today anyway).  For this reason, there is no real reason to keep the EITC in place, as we have already brought their Federal Tax Burden down to 0%.

Child Tax Credit

Again, after the Standard Deduction increase, this tax break would affect mostly the middle and upper income tiers, and the argument for this Tax Credit is typically the lower-income individuals/families.  Since we are lowering the tax burden for every income bracket, we should take advantage of that to eliminate all tax credits, so that we may move to a much more simple tax process, and thereby shrink the size of the IRS significantly.  The folks who are losing this benefit would be paying dramatically less taxes than they are today, and will not miss its effects.

Mortgage Interest Tax Deduction

This is probably the most controversial Tax Deduction omission.  Many Americans would balk at the thought of eliminating this Tax Break.  However, most people think they get a lot more benefit than they do.  Take a family of four, who is in the 15% tax bracket with a $200,000 home, and a 5% loan.  This family only pays $10,000 in Mortgage Interest per year, and their 15% tax bracket means that the entire benefit from this deduction is only $1,500.  Meanwhile, the drastic increase in the Standard Deduction more than offsets any benefit this family will get from the Mortgage Interest Tax Deduction.  In fact, in this plan, the folks at the highest tax brackets would benefit the most from this deduction, and therefore, it is deemed unnecessary.  Some people will argue that removing this deduction will have a negative effect on the housing market.  I would argue that it will bring the housing market to equilibrium, especially in conjunction with the new tax treatment of rental properties, proposed earlier in the plan.

Folks who probably should not be purchasing a house, but do so because they are told the tax credit is worth it, will now make smarter decisions.  Folks who don’t need a mortgage, but take one out to utilize the tax deduction, will now be less leveraged.  Folks who buy a house just a little beyond their means, using the tax deduction as their reason, will now make better budgetary decisions.  In addition, the new tax treatment of rentals will make renting much more affordable, and will shift people from the fence between buying and renting, making it a much easier decision for the majority of families.

After a few years, the market will completely stabilize, and people will be smarter when it comes to home purchases.  The removal of this deduction will likely stabilize the market, making huge ebbs and flows in prices less likely to occur, as Congress will be less likely to use this deduction as a tool in order to drive artificial dollars into the economy.  Also, with the rental property tax exemption, mentioned earlier, the housing market is more likely to surge, than it is to dip.  The balance between renters and homeowners will just shift accordingly, and appropriately.

Charitable Giving Tax Deduction

This is another tax break that people think is bigger than it really is.  Take the same family, except that they are earning more income (making $100,000/year), and tithing 10% of their income.  This family is giving away $10,000/year, and is now in the 25% tax bracket.  They would get a tax benefit of $2,500.  Again, the lofty standard deduction increase would more than make up for any lost income from this tax credit.  Once again, this tax credit primarily benefits the rich.  The argument can be made that charitable giving will go down if this deduction is removed, but I would argue that the economic benefits from this plan will put more money in people’s pockets, and charitable giving will go up as a result.  After all, giving away $10,000 to save $2,500 in taxes is not a fantastic financial move, it is clear that the motivation for giving stretches beyond the tax break.

Eliminate The Estate Tax

This plan is designed to pump as much money into the economy as possible, resulting in more jobs, higher GDP, more corporate investment, and higher wage growth.  All of that should result in people passing away with larger nest eggs than we have seen in previous generations.  The Estate Tax has been a hot button issue for politicians for years, and one which they like to manipulate (or demonize) in order to get votes during election years.  The idea here is simple:  Your debt has already been paid.  This plan already has the wealthy folks paying a lot more than the everyday folks, and has eliminated every way that the rich folks can get out of paying their fair share.  Waiving the Estate Tax gives people a reason to continue to try to build wealth, which is a key component of the Innovation Economy.  Removing this tax keeps incentives in place for people to work harder, and longer, and will ultimately pay for itself in the form of the economy creating more jobs due to the American Spirit of Innovation.  Also, it is just dirty to have someone work hard to save money all their life, and have their kids watch as the government steals their parent’s hard-earned money before the body is even cold.  That should not be the role of Government in the greatest country in the world.


In the end, it is clear that this would be a drastic change from today’s tax code, but it would accomplish the five goals we set out to at the beginning of the argument:

  1. Create an “Innovation Economy”
    1. Economy which rewards Entrepreneurs, Landowners & Businesses who invest in the U.S.
  2. Maximize U.S. economic growth
    1. GDP Growth, Capital Investment Growth, Wage Growth, & New Job Creation
  3. Cut taxes for every single income class
    1. Focusing the largest cuts on those who are most likely to pump it back into the economy
  4. Reduce the size of the Internal Revenue Service
    1. Make it so that every single individual can do taxes on just one form
  5. Incentives for Top Earners to drive extra money into the economy in the most productive way
    1. Make it more profitable to start small businesses, and invest in real estate

Reason To Believe

While the Tax Foundation would have to run this plan through one of its massive analysis tools to determine the economic effects over the next 10 years, I decided to include some reasons to believe.

The plan was based off of Ted Cruz’s Flat Tax proposal, then altered from there.  I am going to try to value some puts/takes to see how the final financials would play out.

  1. Eliminating all Tax Credits and Tax Deductions: +$250B/year positive vs. Ted Cruz’s Plan
    1. Adding up the approx. costs of EITC, Mortgage, Child Tax Credit, Charitable Deductions
  2. 2ndIncome Tax Bracket of 25% (5,000 HH in the U.S.): +$175B/year positive vs. Ted Cruz’s Plan
    1. + $125B/year for higher income earners (top 3% of HH in the country)
    2. + $50B/year for higher Capital Gains Tax Rates for higher earners
  3. Higher 25% Business Transfer Tax Income Tier: + $300B/year positive vs. Ted Cruz’s Plan
  4. Lower 16% Business Transfer Tax Income Tier: $0B/year equal vs. Ted Cruz’s Plan
  5. Repeal Estate Tax: $0B/year equal vs. Ted Cruz’s Plan
  6. No Rental Income Taxes: – $25B/year negative vs. Ted Cruz’s Plan
  7. 5% Repatriation Tax: 1-time + $50B Was not factored into the Tax Foundation’s analysis
  8. Increase the Standard Deduction: – $700B/year negative vs. Ted Cruz’s Plan

In total, using these rough calculations, this plan would cost approximately the same as Ted Cruz’s plan, which was estimated to create 4.2M jobs, but still costs around $700B over the next ten years.  However, the enhanced Repatriation benefit (which was not even valued in the Tax Foundation’s analysis of the Cruz plan), the US-Investment based lower Business Transfer Tax incentive, the Rental Income Tax Repeal, and the higher Standard Deduction will all drive economic growth at the very beginning of this plan, and should make up more than the $700B deficit over the next ten years.  As with any tax plan, this would need to be implemented in conjunction with spending cuts to offset any potential cost of the plan, if it were found not to be overall neutral.

This is the type of innovative tax plan that will allow us to boost Innovation, drive U.S. Economic Growth, reduce the size of the IRS, and lower taxes across the board for every citizen.  It would be hard to implement, but the benefits would be felt for years to come.



$50,000 of income and $315,000 in Credit Card debt – What are you thinking???

Government spending

Government spending (Photo credit: 401(K) 2013)

I think that we can all agree that if we had a friend who only made $50,000 each year, but had $315,000 in credit card debt, we would be worried about that person’s mental health…

If they asked you for help, would you recommend that they work 6 jobs so that they can continue spending the same amount of money and never get out of debt?  Or would you recommend that they take on one extra job while drastically reducing their spending while trying to pay off their credit cards?

Of course, you would likely do the latter.  When you have a spending problem, it is okay to want more income, but controlling your spending is an absolute must in order to get your house back in order.

If the United States Government was a person, they would be this person!

Unfortunately, our government has chosen neither of the options outlined above.  They have basically taken on a few extra hours at work (in the form of more taxes) while deciding to spend even more than ever before (in the form of ObamaCare).

The Democrats have decided that they do not want to cut spending, because they think they can raise enough taxes to get out of this mess.  Here is the truth, they could raise everyone’s taxes by 25% right this second, and use that money solely to pay off the debt, and it would still take 15 years to get back to even.  That doesn’t even count the Trillions of dollars they are adding to the debt each year.

Conclusion:  The debt is too big to tackle by raising revenue without cutting spending.

The Republicans believe that we can stop cut spending, without raising taxes, and get this mess under control.  Here is the truth, in order to make this work, the government would have to cut 90% of its spending for the next 20 years in order to achieve this goal.

Conclusion:  The debt is too big to tackle by cutting spending without raising revenue.

The sooner we can all agree to these simple facts, the sooner we can help our dysfunctional friend get back on their feet.

We do not need conservatives, we do not need liberals, we just need people who know how to do math.  Anyone out there fit that description?

If so…Please, Please, Please run for congress!

This is not about political parties, this is about a person who is riddled in debt looking themselves in the mirror and deciding that today is the day to stop living a lie.  Today is the day when they cut back on what they can live without.  Today is the day when they decide to spend more of their time working hard to make some more money so they can pay off some of their debt.  Today is the day to make a plan, execute a plan, and endure some tough years on their way to achieving the American Dream.

If they don’t, the American dream as we know it will not be available to any one of us in the future…

Socratic Method & The US Federal Income Tax

Cropped image of a Socrates bust for use in ph...

Cropped image of a Socrates bust for use in philosophy-related templates etc. Bust carved by by Victor Wager from a model by Paul Montford, University of Western Australia, Crawley, Western Australia. (Photo credit: Wikipedia)

John:  “Rich people should pay more in taxes and poor people should pay less.”

Socrates:  “How much more should the rich people pay?”

John:  “They should pay their fair share, since they are making so much more than us.”

Socrates:  “Define their fair share for me.”

John:  “Well, if someone makes ten times as much as me, they should pay ten times as much in taxes.”

Socrates:  “How much money do you make John?”

John:  “My wife and I make $45,000 a year.”

Socrates:  “So, if you two paid $10,000 in taxes, someone who makes $450,000 a year should pay $100,000 in taxes?”

John:  “Yes, that sounds about right.”

Socrates:  “Okay, so what I am hearing you say is that people should pay their fair share?”

John:  “Exactly!  I honestly don’t know how anyone could really argue against that point!”

Socrates:  “So, someone who makes $45,000 should not be allowed to pay zero in taxes?”

John:  “Of course not!  Following our logic, they would be paying way less than their fair share.”

Socrates:  “So, if a group of people make 45% of the total income, they should not have to pay over 70% of the taxes?”

John:  “Obviously not.  Following our logic, they would be paying way more than their fair share.

Socrates:  “So, if there was a tax code that forced people who make up 45% of the total income pay over 70% of the taxes AND allows 47% of income-earners to pay zero taxes, that would not be a fair system?”

John:  “Of course not!  That would be way too far in the other direction, you are trying to make me look like a Radical Communist!”

Socrates:  “So, in that system, you would actually want the rich to pay less and the poor to pay more?”

John:  “I guess, if that system was actually in place, I would be arguing for the rich to pay less and the poor to pay more.”

Socrates:  “But John, the system I just described is the current system in the United States.  I thought you said the rich don’t pay enough today?”

John:  “Well…uh…I…hmmm…”

Socrates:  “True wisdom comes to each of us as we realize how little we understand about life, ourselves, and the world around us.”

I am the future 1% – Why do you hate me?

This is an essay from someone who is destined to be in the 1% before long.  This group, the 1%, has been vilified in the media, eviscerated by Liberal groups, and demonized through political rhetoric during the Obama years.  Are these people really the devil?  Or is it possible that they are exactly the kind of hardworking, down-to-earth, creative-thinking people who we need to pull our country out of the hole that we have dug ourselves?


–          I am the future 1% – This is my story

–          I’m 5 foot 2 – Studies indicate I will make $237K less than the avg. 6 foot tall man in my lifetime

–          I started working at 14 at a fast food restaurant – I rode my bike to work every day

–          I did not make over $5/hour until I had gotten three raises and an assistant manager promotion

–          I worked full-time in High School while competing in sports and making the honor roll

–          I never did drugs, partied, or drank in High School


–          I am the future 1% – Should I have enjoyed High School more?  Worked less?  Partied harder?

–          I got a promotion to manager at the age of 18, after working at the same place for 4+ years

–          I didn’t get into my preferred college – I went to another school, quit for 1 yr before returning

–          I was arrested for drinking underage during college – I decided not to let it define who I was


–          I am the future 1% – Should I have given up when adversity struck for the first time?

–          I worked full-time and slowly finished college in 6 years after much prodding from my parents

–          I took a 100% commission job at a Fortune 500 company, fought hard for every meal for a year

–          I was arrested again – I decided to make myself a better person instead of spiraling downward



–          I am the future 1% – Should I have given up when everything seemed to be going against me?

–          I got promoted after a year of outstanding work – putting in more hours than anyone else

–          I moved to another Fortune 500 company, this time as a Bank Manager

–          I bought a house at the height of the housing boom – I am currently still $50K underwater on it

–          I took out over 80K in loans so I could quit my job and go back to school for my MBA


–          I am the future 1% – Should I have saved my money, settled down, and stopped progressing?

–          I received a Manager offer from another Fortune 500 company after business school

–          I got married to the love of my life and bought another house in a small town

–          I turned around two struggling business units, and quickly got promoted to Senior Manager

–          I am the future 1% – Should I have just enjoyed the ride and collected a paycheck?

–          I welcomed my first child into our family, and named him after my Grandfather

–          My wife runs a small business while raising our son full-time – She is absolutely amazing

–          Our current Net Worth is still below zero, though we are starting to catch up

–          I am currently in the top 13th income percentile at age 32…


–          I am the future 1% – Should I feel bad about what I have accomplished?

–          Would you rather I fell apart after the arrests and became a burden on society?

–          Would you rather I didn’t graduate college?


–          I am the future 1% – Should I feel bad about working hard to get ahead?

–          Would you rather I didn’t make an $80K bet on myself and my abilities?

–          Would you rather I coasted along in mediocrity without ever offering my employers value?


–          I am the future 1% – Why do you hate me?

Could a provision in the Fiscal Cliff deal help you retire with more money?


Money (Photo credit: 401(K) 2013)

I will, for the moment, stay away from the politics of the Fiscal Cliff deal and focus solely on one unexpected upside that arose from the recently negotiated bill – The Roth 401(k) provision.


The new Fiscal Cliff bill allows employees to make a one-time, large transfer from a traditional 401(k) to a Roth 401(k).  This could be a huge advantage to certain people during retirement, and it is something that we all should be evaluating whether or not to take advantage of in the wake of the contentious Fiscal Cliff debate.

Warning To All Readers

This article is not meant for your enjoyment, it is hard to write about financial things and make it fun.  However, if you invest the next five boring minutes into reading and evaluating this article, you may save yourself hundreds of thousands of dollars during retirement.

Traditional 401(k) vs. Roth 401(k)

For those of you who are not familiar, your 401(k) are pre-tax dollars, which means you don’t pay taxes on them now, but you do pay taxes on them during retirement.  A Roth 401(k) allows you to invest after-tax dollars.  This means that you don’t get the tax benefits now, but you will get to withdraw the money tax-free during retirement, which can be an enormous advantage in your later years.

Who Should Take Advantage Of This?

The first step is to find out if your company offers a Roth 401(k) option.  Almost 50% of companies offer one, though only around 5% of employees take advantage in this phenomenal savings tool.  After you confirm that your company does offer a Roth 401(k), you need to determine if you fall into one of these three groups:

1)      Younger workers with cash on hand

2)       People who are in lower tax brackets and have extra cash on hand

3)      People with cash on hand who believe their tax rate will be higher in retirement than it is today

You may have caught on to the “cash on hand” requirement in each group.  The reason that is important is that you will be required to pay the taxes on the converted amount this year, which means this option is only right for people who have some savings that can be used to pay for those extra 2013 tax dollars.

Major Upside To Converting To a Roth 401(k)

In almost every scenario, the Roth 401(k) makes more sense in the long-run.  The only scenario where it typically will not work out is if you are in a very high tax bracket today, and an extremely low tax bracket during retirement.  Take a look at this example:

Jimmy is 35 years old, he is in the 28% tax bracket, and he puts 10K/year into his 401(k) each year.

Scenario 1)  Jimmy is in the 15% tax bracket today, and will retire in the 25% tax bracket at 65

Outcome:  The Roth 401(k) option will net Jimmy $368,500 more during Retirement

Scenario 2) Jimmy is in the 25% tax bracket today, and will retire in the 25% tax bracket at 65

Outcome:  The Roth 401(k) option will net Jimmy $257,740 more during Retirement


Scenario 3)  Jimmy is in the 25% tax bracket today, and will retire in the 15% tax bracket at 65

Outcome:  The Traditional 401(k) option will net Jimmy$15,560 more during Retirement

As you can see, the only scenario where Jimmy comes out worse-off after choosing the Roth 401(k) is if he is in a high tax bracket today, and he retires in a low tax-bracket.  The truth is that most people who are ready for retirement will retire in a similar tax bracket as they are in right now, because they will become used to living off of that same amount of money.  In addition, taxes are historically low at this point, and with our National Debt rising with no end in sight, it is almost impossible to foresee a scenario where our tax rates will be lower in 30 years than they are right now (I promise that will be my only political comment in this article).

Major Downside To Converting To a Roth 401(k)

If you convert your Traditional 401(k) dollars into a Roth 401(k), you are responsible for the taxes during that year.  For example, if you have $50,000 saved up in your 401(k), here is what it could look like:

Scenario 1:  Tim is in the 15% tax bracket and converts $50,000.  Tim owes $7,500 in taxes in 2013.

Scenario 2:  Sally is in the 25% tax bracket and converts $50,000.  Sally owes $12,500 in taxes in 2013.


The math is not nearly as simple as I made it in this article, but it is directionally-correct.  For the most part, converting your Traditional 401(k) to a Roth 401(k) will benefit you in the long run.  It is always a huge decision to part with cash on hand now in order to avoid paying more taxes later, but these are the types of decisions that financially successful people make every single day.  If you are interested in executing one of these conversions, please do your own research, do your own math, and make your own decisions.  Financial decisions are never easy, but when an opportunity presents itself that could save you hundreds of thousands of dollars throughout your lifetime, you owe it to yourself to spend some time looking into it.  Please feel free to reach out to me with any questions or comments.  Good Luck!

It Is Time For America To Relearn The ABC’s – Always Be Cutting!


Tax (Photo credit: 401(K) 2013)

In the wake of a $16 Trillion dollar debt that is growing every day, a congress who refuses to say no to spending, and a tide of politicians who want to increase taxes so that they can justify going even deeper into debt….it is time for a change!

Americans need to embrace a new view of government…a much smaller view.

Politicians need to revolutionize how they look at our government, and it all starts by re-learning the ABC’s.

A – Always

B – Be

C – Cutting

We need to take this mantra to the Federal Government, every State Government, all the way down to our Local Governments.

We need to CUT the size of Government!

We need to CUT taxes!

We need to CUT the debt!

We need to CUT spending!

We need to CUT needless regulations!

We need to CUT Foreign Aid during our recession!

If we replace our elected officials with legislators with this mindset, we will soon see this tide of irresponsibility begin to turn.

Balancing our budget will no longer be considered “extreme” politics.

Our paychecks will start going towards helping our families, rather than paying China back for the interest on our National Debt.

Government will be relegated to serving and protecting the people, rather than participating in the race to bring home the bacon to their own states.

Businesses will be free to use their hard-earned money to drive new innovation, new products, at better costs….rather than using that same money to comply with regulations that add no value to the consumer or the economy.

If you believe in this message, please share it with EVERY single one of your friends and family.  This is that important.  America is at a key crossroads in our history.  We can either relearn our ABC’s, or we will very soon find out that it is too late to turn this ship around.

SHARE this article TODAY!

Time to Turn Michigan’s POUT upside down!

Michigan State Capitol with a statue of Austin...

Michigan State Capitol with a statue of Austin Blair in the foreground. (Photo credit: Wikipedia)

Buried in the State Budget Solutions 2011 Rankings, there were some scary facts for the State of Michigan:

P erformance – We were ranked 50th in the country

O utlook – We were ranked 25th in the country

U nemployment Loans – We were ranked 27th in the country

T otal Debt Including Pensions – We were ranked 42nd in the country

This is not a healthy ranking for the State of Michigan, but how do we go about turning this POUT upside down?  Here are some ideas:

Target 480 Plan – Recruit Fortune 500 Companies To Come To Michigan

Triple Zero Plan – Repeal the Gas Tax, The Corporate Tax, and The State Property Tax

Implement A Right-To-Work Legislation – Either Federal Legislation, or state-specific legislation

Repeal The Gas Tax – Preferably the Federal & State Gas Tax

Michigan Politics: Triple Zero Plan


budget (Photo credit: 401(K) 2013)

In order for Michigan to turn itself around, we need an aggressive strategy to drive more money into the economy on a daily basis.  The first step should be to outline a series of tax reductions that will help every single person in the state, regardless of their situation.  The Triple Zero plan outlines how eliminating the Gas Tax, the Business Income Tax, and the State Property Tax would drastically help boost the economy from day 1.

1)      Eliminate the Gas Tax

  1. Gasoline prices are one of the main drivers of the economy.  Typically, when the economy slows down, gas prices fall. Unfortunately, during the Great Recession, this has not been the case.  By eliminating the Gas Tax, people would instantly pay almost 40 cents less for every gallon that they purchase. This money is small enough on a weekly basis that it would get recycled right back into the economy, providing boosts to local businesses.  The elimination of this tax would help every single person who owns a car, as well as all municipalities who run public transportation programs.

2)      Eliminate the Business Tax

  1. Businesses do not invest during recessions.  Consumer Confidence is down, they don’t know when the economy will turn around, and they typically are having trouble keeping up with their bills.  They don’t invest in jobs, they don’t invest in innovation, and they raise prices of their products/services.  By eliminating the Business Tax entirely, you will give businesses the additional money they need to keep prices steady, hire more people, and invest in the innovation that will help bring about the next economic boom.  Eliminating this tax would help every single business in the state, as well as help drive new businesses to want to leave other states and settle in Michigan.

3)      Eliminate the State Property Tax

  1. Michigan has been one of the hardest hit states in Foreclosures and underwater mortgages.  Yet, the state still charges a hidden property tax (above and beyond what your local municipality charges).  This state will never recover without at least a partial recovery of the housing sector.  By eliminating this tax, you would be putting money back into the homeowner’s hands, lowering the foreclosure rate, and driving Michigan Home Prices upward.

Due to the fact that states have to balance their budgets, we need to decrease spending in order to decrease taxes.  The good news is that the three taxes I have outlined for elimination only make up 14% of the states revenue.  This means that the state will have to cut their budget by 14%, something that almost every single business has had to do during the Great Recession.  By eliminating programs, wasteful spending, and over-regulation, Michigan can eliminate over 14% of its expenditures and make room for these three tax cuts which will drive money back into the economy, increase job openings, raise home prices, and help Michigan emerge from this recession as a stronger, leaner state.

Please share this article with your friends and family in Michigan to help spread awareness on how the Triple Zero plan can help lead us back to prosperity.

Follow me @ToddHagopian for more creative ideas on how we can help turn Michigan around, and share this blog post with your friends and family.  Thanks!

What Does The Federal Government Know About Financial Literacy?


Does anyone else find it ironic that a government with a $14 Trillion Debt runs 20 different agencies with 56 different programs dedicated to financial literacy?


There is nothing responsible about the way this government runs its finances, yet we let them spend millions of dollars every single year “educating” others on Financial Literacy?


Does anyone else think that is absolutely crazy?


If you would like some wasteful spending examples, please visit my post outlining some of the most hilarious ones…


If you would like to read about how responsible the government is at owning land and using it effectively, please read this article on our nation’s biggest landowner (the Federal Government)…


If you would like to read about the history of the income tax, and how liberal politicians like to lie about it, please read this article which explains that America has spent more than half of its history with no income tax at all…


History of The Income Tax – A Mindset Change Is Needed

During income tax debates, you will likely hear some Liberal politician spouting off about how income tax rates on the rich used to be much higher, and how Americans have “historically low” income tax rates at the moment. When dirty politicians make statements like this, they are counting on the fact that most Americans will not go back and research the history of the income tax.  This article is to give you a little background when you are making your lower tax arguments against your Liberal counterparts.

Most Americans do not realize that the United States of America survived over 80 years before the very first income tax was enacted…and that tax went solely to paying for the civil war.  The income tax was then repealed after the war.

In 1894, a Liberal Congress again tried to tax income as a way to pay its bills…but the Supreme Court ruled that it was unconstitutional.

It was not until 1913 (less than 100 years ago) that the United States enacted the 16th amendment, which made taxes on income constitutional.  Even then, the rules were so generous that less than 1% of people actually paid income tax.

So, the next time a Liberal tries to use the argument that income taxes used to be much higher, remind them that before the New Deal, Social Security, Medicare, and Welfare programs that the Democrats love, America survived over 130 years (more than half of our entire history) without an income tax (except for a few years to pay for the civil war).

The next time an irresponsible politician uses the income taxes are “historically low” argument, make sure you let every know the truth about the history of the income tax.  These income tax levels are HISTORICALLY HIGH!  For more than half of our country’s history, there was no income tax at all!

And perhaps most importantly…

The next time a Liberal argues against balancing the budget, tell them that income taxes are not the way to do it.  Cutting spending is the only responsible way to balance the budget.  Please share this article with your friends!

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