Editor’s Note: Last Monday, Chief Income Strategist Marc Lichtenfeld shared five tips for how to position your portfolio for rising taxes.
Now our good friend Andy Snyder – the founder of Manward Press – also has an urgent message for readers.
Read on for details on the tax hike that Andy considers inevitable.
– Mable Buchanan, Managing Editor
We’re doing something we’ve never done before.
We’re going to ask a certain group of readers to stop reading right here. Because of the nature of the content, they’re not welcome to read what’s below.
So here’s the deal… If you’re an elected official or you make decisions on tax issues, stop reading here.
We don’t want to give you any fresh ideas.
For the rest of you, sorry… but the news isn’t great.
Your taxes are going to go up. There’s no way around it.
That means if you like the life you have and don’t want to go backward financially… you need to either make more money or find ways not to pay the new taxes (good luck).
Now you know why we kicked ’em out.
The Cost of Living… With Rising Taxes
We had a call with an analyst from Bloomberg recently. His job is to study the cities, towns and states that make up this nation and compare what he sees with the textbooks.
He used the A-word… just once. But we caught it.
“Austerity,” he said. We’ll soon see local governments pushing fresh austerity measures.
It’s a half-cocked term we heard used often in 2009… and all throughout Europe’s debt crisis.
We hate it.
We hear it anytime a government gets caught making promises it can’t keep.
To most folks, austerity means government cutbacks.
But most folks aren’t politicians. To politicians, austerity means raising your cost of living.
It’s not just obvious things, like boosting income tax or property tax. They’re too obvious. No, it’s pesky new fees… it’s surcharges… and it’s taxes on the folks upstream from the end user.
San Francisco just passed a tax on companies with what it deems “overpaid” CEOs. Companies within city limits will now have to pay as much as 0.6% of total sales or up to 2.4% of payroll expenses if the boss makes too much.
“I do think it will encourage other cities, states and maybe even the federal government to adopt similar proposals,” said San Francisco Supervisor Matt Haney, the fellow behind the bill. “I think for this to be truly effective in changing economic outcomes more broadly, it needs to be done at higher levels of government as well.”
Hmm… Will the top talent work for less, or will they just add to the urban exodus and set up shop in a friendlier town?
It doesn’t matter. Some folks now want to tax telecommuters too.
A New Tax
The work-from-home crowd is not paying its fair share, they say.
They’re not fueling up their gas-guzzling SUVs. They aren’t buying lunch out… or buying new clothes to impress the secretary. They aren’t riding mass transit. And, darn it, they’re not even paying tickets from all those red-light cameras.
So how much do the wonks think you should pay for the “privilege” of staying home?
Oh my… we fear you’d ask. We couldn’t type the words and still sleep soundly tonight, so here they are straight from the source.
“If we assume the average salary of a person who chooses to work from home in the U.S. is $55,000, a tax of 5% works out to just over $10 per working day,” said Luke Templeman, the strategist at Deutsche Bank pitching this trash.
He continued, “That is roughly the amount an office worker might spend on commuting, lunch and laundry, etc. A tax at this rate, then, will leave them no worse off than if they had chosen to go into the office.”
It will leave them “no worse off.”
Do you see that?
That’s what it comes down to? We’re no longer finding ways to help folks get ahead… We’re taxing them the second they start to make a move forward.
And for many folks, it’s devastating.
But it’s only going to get worse.
The numbers from across the country are dire… and getting ugly.
We’ve written about how one nearby city is selling what it calls “grandma’s jewelry” just to get by. And when we peer across the nation, we see more of the same.
Personal income taxes represent 4 out of every 10 tax dollars. As of June, that revenue was down 10% from a year ago. By now, it’s even lower.
For states that were barely hanging on before this mess, a 10% dip might as well be 100%.
But it gets worse.
Many states depend on a gasoline tax to keep their infrastructures running… Revenue from gasoline taxes is down 30% and showing no signs of getting back to where it was anytime soon.
Lots of cities depend on tourism taxes. If you’ve stayed at a hotel in the last decade, you know what we mean. The taxes are outrageous.
In all, the hotel industry puts about $40 billion of tax revenues into local coffers. This year, those funds have been cut in half.
In many states, gambling was legalized as a last-ditch way to fund the government’s spending addiction. That plan failed this year. The industry paid out $10 billion in taxes in 2019. But in 2020, revenue is down by nearly 80%.
The state of Nevada lost $2 million per day in tax revenue when the state’s casinos were closed.
We could go on and on.
Liquor fees are down. The taxes from restaurants have plunged. When the economy stops… so do tax receipts.
A Spending Problem
What’s vital to understand is that government expenses don’t dip. In fact, in most places, they’ve surged.
In other words, just when so many citizens now depend on the government’s safety net the most… the government is broke.
We’re peering at the boulder field that lies below the slippery slope we’ve mused so much about.
From here, taxes will go up. They must.
That means your cost of living will rise… perhaps substantially. It won’t be reflected in your next Social Security cost-of-living adjustment. It won’t get measured by the bean counters’ inflation gauges. And most politicians will lie about just how bad it is.
But if you don’t want your lifestyle to change… if you want to do the same things you do now… then you have two options – find a way around the taxes (again, good luck) or make more money.
We’ll tap the final nail into the coffin with this recent line from the man in charge of Americans’ money… Jay Powell.
Even after the unemployment rate goes down and there’s a vaccine, there’s going to be a probably substantial group of workers who are going to need support as they’re finding their way in the post-pandemic economy, because it’s going to be different in some fundamental ways.
Somebody is going to have to foot that bill… and it’s not coming out of government excess (an oxymoron if there ever was one).
We are convinced this imminent demand for more tax dollars is why Powell and his Federal Reserve will allow the stock market to run far higher and far hotter than it ever has before.
Dow 100K will come as a result of all of this.
The Fed will support the run-up… pump it up… and talk it up as much and as often as it takes.
We suggest you hold your nose and take advantage of it.
You will need the money.
The government is going broke… and it will come knocking.