I don’t want to pay higher taxes than what the law mandates. In fact, a large part of my day is spent helping people plan for the Federal and State Estate Tax and I love my job. I am not sure why I get so excited about helping people plan to lower their tax bills. If I had to guess it is based on my political ideology. I have this constant gut feeling that a large portion of my federal tax dollars are wasted on ridiculous government projects or the crazy amount of agencies that currently exist instead of supporting those that should be supported (armed forces and veterans are the easiest examples of those that get put on the back burner when it comes to the bureaucracy).
Discovering a Life-Changing Quote by Judge Learned Hand in a Tax Case
I distinctly remember where I was when I read one of my favorite non-political quotes of all time. I was sitting at a desk/cubby tucked away in a random ancillary library at my law school and I must have read the short quote 3 or 4 times before finally formulating the thought, “Woah, this is exactly how I feel.” The quote was written by Judge Learned Hand (one of the best names for a judge ever) in a tax case titled Helvering v. Gregory (1934),
Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes and public duty to pay more than the law demands.
Whether I Make $46,000, $460,000, or $4,600,000 per Year Planning for Taxes Is Important
Currently, I take advantage of only very simple ways to reduce my taxes like contributing to my 401(k), and my IRA, categorizing and tracking my expenses for my corporation, moving more and more income towards lower dividend rates, etc. However, there seems to be this feeling that once you start making what we’ll refer to as REAL MONEY you shouldn’t take advantage of those legal loopholes. I call that class warfare and is just deplorable in my opinion.
If I can help a business owner defer a hundred thousand in income taxes by using a deferred benefit pension plan that does not make him or her bad person. If I help a high-net-worth individual save millions in federal estate taxes why should he vilify? He has no patriotic duty to pay more taxes than what is mandated regardless of how many zeroes are on his 706 or 1040 form.
As long as someone is playing by the rules (i.e. the law) at the time then taking advantage of every single loophole morally tolerable to that tax filer should be encouraged and should not have any negative stigma associated with such an act. If someone wants to pay more in terms of the federal income tax they can easily make a donation to fund the treasury.