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How to Get Rich Investing in Stocks by Riding the Electron Wave

U.S. Taxes Set to Sky Rocket, Protect Your Wealth by Going Global

Politics / Taxes Sep 01, 2010 - 01:19 AM GMT

By: Casey_Research

Politics

Best Financial Markets Analysis ArticleChris Wood, Editor, Casey Research write: Here at Casey Research, we really don't enjoy being a buzz-kill. It's just that we think it's more important for investors to be well informed about the reality in which we find ourselves today than it is to be happy-go-lucky all the time.


The good news is that when the stuff hits the fan, as it has for going on two years now, it opens up a number of unexpected opportunities for profit. Even in the hairiest situations, there are ways to protect yourself.

Having said that, let's start with the bad news...

If you live in the U.S., your taxes are about to get much, much, higher. And I'm not talking about the Bush tax cuts set to expire at the end of this year. I'm talking about a structural deficiency in the tax base that will force the spendthrift federal government to demand much more from the productive members of society, no matter who's in charge of Congress and the White House.

Here are the facts.

Summary of Federal Government Receipts and Outlays Fiscal Years 2009 and 2010 by Month ($ Millions)
  Receipts Outlays Surplus/(Deficit)
Fiscal Year 2009
October $164,827 $320,360 ($155,533)
November $144,769 $269,970 ($125,201)
December $237,785 $289,540 ($51,755)
January $226,090 $289,547 ($63,457)
February $87,312 $281,171 ($193,859)
March $128,924 $320,513 ($191,589)
April $266,205 $287,112 ($20,907)
May $117,217 $306,868 ($189,651)
June $215,339 $309,671 ($94,332)
July $151,480 $332,160 ($180,680)
August $145,529 $249,083 ($103,554)
September $218,880 $264,087 ($45,207)
Total Fiscal Year 2009 $2,104,357 $3,520,082 ($1,415,725)
Fiscal Year 2010
October $135,294 $311,657 ($176,363)
November $133,564 $253,851 ($120,287)
December $218,918 $310,328 ($91,410)
January $205,239 $247,873 ($42,634)
February $107,520 $328,429 ($220,909)
March $153,358 $218,745 ($65,387)
April $245,260 $327,950 ($82,690)
May $146,794 $282,721 ($135,927)
June $251,048 $319,470 ($68,422)
Fiscal Year-to-Date 2010 $1,596,995 $2,601,024 ($1,004,029)
Source: Department of the Treasury Financial Management Service

 

For a bit of a refresher and to update where we are, in the table above I broke down federal government receipts and outlays (revenue and expense) by month for fiscal year 2009 and year-to-date 2010.

As you can see in the table, we're through three-fourths of fiscal year 2010 and the deficit is already over $1 trillion. At this point last year, the deficit was also just above $1 trillion. So you can bet we're on track for a total deficit of between $1.4 and $1.5 trillion this year.

Just like last year, the huge deficit figure will be widely reported, even in the mainstream media. But a related piece of vital information will be glossed over (if reported at all).

This piece of information is the most crucial to why your taxes are set to skyrocket - and nobody is even bothering to mention it.

You see, the "outlays" column above comprises two types of spending: discretionary and mandatory. Mandatory spending, expenditures that must go into the U.S. budget, includes things like Social Security, Medicare, Medicaid, income security programs, and some others. And according to the Congressional Budget Office, mandatory spending reached $2.1 trillion in fiscal year 2009. What's more, it increased more than 30% from the year before.

Now look back up at the table above. Notice anything?

Total receipts for 2009 were also $2.1 trillion. In 2009, for the first time ever, mandatory spending just about equaled total tax receipts.

That means that basically every single penny the federal government received in taxes last year (including individual income taxes, corporate income taxes, social insurance and retirement receipts, excise taxes, estate and gift taxes, customs duties, and miscellaneous receipts) was already spent on something mandatory before it came in.

It's also worth mentioning that while mandatory spending grew by 30% last year, tax receipts fell by 16%. So under the current tax structure, a gap will begin to grow where mandatory spending pulls away from total tax receipts.

What this all means is that your tax burden is sure to rise, significantly, over the coming years. That's the government's only choice at this point. You think it will cut discretionary expenses by any meaningful amount? Not hardly, it's too politically damaging. And forget about legislation to cut mandatory spending until the system goes completely bust. In the meantime, both parties will try to kick the can further down the road by extracting as much as possible from you in taxes.

Now, here's the good news...

Unlike the government, you do have a choice. You can "go global" and protect yourself by internationalizing your wealth through all the legal means available, making yourself a target that's not easy to hit.

For the past several months, we’ve had some of our best people working on a special report with the purpose of providing you everything you need to know to internationalize your assets and yourself. And it’s finally finished. You can read all the details here, incl. the 5 best ways of going global… at this point, this is not “Whenever you get around to it” advice anymore – the time to act is now, before new laws and regulations kick in that prevent you from getting your money out of the country.

© 2010 Copyright Casey Research - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Rick
01 Sep 10, 12:19
Lost Capital (Or Welcome To Uruguay)

The worst thing that one could possibly do right now is to attempt to move his assets (gold, silver, cash, etc.)off shore. I shall explain why in a moment. Moreover, let me just say that I have already reviewed previous postings from several sites that suggested "safe (asset) havens" in Uruguay, Brazil, Austria, Canada, United Kingdom and the like.

The somber reality is that as bad as things will become in the United States, other countries will fare far worse. Moreover, those countries are currently facing (or will face) crippling deficits as well and they will soon be compelled to mandate Draconian austerity measures accompanied by massive tax jolts. Ding dong?

And as difficult as it may be to move capital abroad, it could prove to be an impossible feat to repatriate those assets. Moreover, any monies earned by American nationals abroad is now fully taxable under the revised Internal Revenue Service tax code. Ding dong?

The best course of action is to simply purchase government inflation protected securities such as the U.S. Series I Savings Bonds and perhaps TIPS. It's better to be 'burned' by holding these types of securities than 'raped' and 'scourged' with double whammy tax bludgeons on capital that might forever remain: "expatriated". Ding dong?


SC
02 Sep 10, 04:03
Nearly

You mention some some very valid points. Moving assets simply isn't has simple has some people try to make it.

But,you're not quite right either.

Like many things in life the issue of to move ,or not to move assets is not simply balck or white. It is a question of gradation. That is , how much ,where to , for how long.

I believe countries such as India ,Turkey, Egyppt and Brazil offer potential. All of these countries have favourable population demographics. They are countries with growing ,young populations that are at this point are not yet overwhelmed by significant amounts of personal debt. In a word they have more room to grow. A dollar investment there does actually yield positive velocity turning it into more than a dollar. The US and Europe simply lack that ability and have done for years hence why it has taken increasingly large amounts printed money to generate anything remotely like growth.

So, in summary I agree in part. make sure you get a hold onto an inflation linked asset like Tips for the money you wish to keep in dollars ,BUT do not dismiss the real growth opportunities elsewhere albeit expect big bumps and if you don't have the stomach to ride them then don't get on.


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