In Perspectives

During “tax season”, I spend a lot of time talking with clients and tax preparers about, as you might expect, income taxes.  This often includes strategizing about how to reduce them in the future, or simply helping to collect the volumes of detailed information necessary to prepare a tax return.  Invariably, comments abound about the complexity of the tax code, how frustrating it can be and how we all might feel better about it if the money was used more wisely.  One night, after a particularly heavy day of tax talk, I started wondering how taxation in the United States has evolved and how it compares to that of other countries.  I did a few simple internet searches and came up with the following information that I found interesting.  Therefore, I thought I would share some of it with you.

  1. Every known historical civilization has taxed its citizens.  This includes the Sumerians, the first known civilization, for which detailed records of taxation have been found.
  2. The U.S. income tax traces its origins back to 1861 and the need to finance the Civil War.
  3. The modern U.S. tax system started in 1913 with the passage of the 16th amendment granting Congress the power to collect taxes on personal income.  Initially, people would save all year long to pay a lump sum tax at the end of each year.  With the start of World War II, the federal government needed a more consistent income stream, which gave rise to the practice of withholding taxes from our paychecks.
  4. According to CCH, at the start of the modern tax era in 1913, the federal tax code was 400 pages long.  Today, it includes over 73,000 pages!
  5. According to Laura La Bella’s 2011 book “How Taxation Works”, there are at least 480 tax forms included on the IRS website!
  6. The Bible has approximately 700,000 words; the U.S. Tax Code has around 3,700,000!
  7. The 1040EZ, supposedly the easiest federal income tax forms to file, has over 40 pages of instructions.
  8. I contend that all of the above is more than partly responsible for over 1,000,000 accountants being hired each year in the U.S.
  9. I would also argue that it is the primary reason why Americans spend over $27 billion each year on tax preparation.
  10. According to the 2012 publication “Misconceptions and Realities About Who Pays Taxes”, approximately 40% of U.S. households paid no federal income taxes in 2007.  In 2012, approximately 47% owed no federal income tax, perhaps a result of the recent economic crisis and slow recovery we have all experienced.
  11. On average, Americans worked 103 days in 2009 to pay his or her taxes.
  12. Per Laura La Bella’s book “How Taxation Works”, not including Social Security and Medicare taxes, the wealthiest 1% of Americans earn 19% of total income, but pays 37% of the income taxes collected in America.  The top 10% or earners pay as much as 68% of the income taxes collected.

As hard as it can be to pay taxes in the U.S., especially for those who pay them at the highest marginal rate, it could be worse.  The chart below provides a glimpse of the tax rates being paid by the citizens of several other countries throughout the world.  Some of them may make you “appreciate” paying taxes in the United States.

Country Income Tax Rate Top Rate Starting Income
Aruba 58.95% $171,149
Sweden 56.6% $85,451
Denmark 55.38% $70,633
Netherlands 52% $70,090
Austria 50% $74,442
Belgium 50% $45,037
Japan 50% $228,800
United Kingdom 50% $234,484
Finland 49% $87,222
Ireland 48% $40,696

As the above points demonstrate, the U.S. tax code can be frustratingly complex and amazingly costly.  Unfortunately, this does not seem likely to change anytime soon.  However, I am hoping you can take some solace in knowing that taxes have been around since the beginning of civilization and that others around the world may actually be paying them at a higher rate than you.  So, enjoy the time between now and next tax season, thank your tax preparer and take solace in the fact that you are not a taxpayer in one of the countries listed above!

Source: facts.randomhistory.com/tax-facts.html

Legacy Trust and Your Right to Financial Privacy

At Legacy Trust we have established policies and practices that respect the financial privacy of all individuals who use our trust company. We believe it is critical to comply with the laws and regulations designed to secure your financial privacy. Your relationship with us as our client is very important to us, and we want you to understand our policies and practices about handling your information.

This Policy applies to you – This Policy applies to our relationships with individual clients who inquire about or obtain products or services from us for personal, family and household purposes.

Strict security measures – We take the security of information very seriously. We have established security standards and procedures to prevent access to client information. We maintain physical, electronic and procedural safeguards to guard client information.

Limited employee access – We have established procedures to limit employee access to information to only those employees with a business reason for accessing such information. We educate our employees about the importance of confidentiality and client privacy. We take appropriate disciplinary measures to enforce employee responsibilities regarding client information.

Why we collect information – We collect information about you to:

  • accurately identify you;
  • protect and administer your records, accounts and funds;
  • help us design or improve our products and services;
  • understand your financial needs;
  • save you time when you apply for new products and services; offer you quality products and services; and comply with certain laws and regulations;

We collect information – We collect and maintain your personal information so that we can provide investment management and other services to you. The types and categories of information that we collect and maintain about you include:

  • Information we receive from you to open an account or provide investment advice or other services to you (such as your home address, social security number, telephone, financial information and investment objectives).
  • Information that we generate to service your account or from our transactions with you (such as account statements and other financial information).
  • Information on your transactions with nonaffiliated third parties.

We have established procedures so that the financial information we collect is accurate, current and complete. We are committed to work with you to promptly correct any inaccurate information.

Our selective sharing of information – In order for us to provide investment management and other services to you, we do disclose your personal information in very limited instances, which include:

  • Disclosures to nonaffiliated companies as permitted by law, including those who help us service your account (such as providing account information to brokers and custodians).
  • Other limited disclosures as permitted by law, for example, required reports to government entities.

We do not share your information with third parties for marketing purposes. We do not sell your information.

Former clients – If you end your relationship with us, we will continue to adhere to the privacy policies and practices described in this notice.

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USA PATRIOT Act

Important Information About Procedures For Opening A New Account

To help the government fight the funding of terrorism and money laundering activities, Federal law requires all financial institutions to obtain, verify and record information that identifies each person who opens an account.

What this means for you: When you open an account, we will ask for your name, address, date of birth and other information that will allow us to identify you. We may also ask to see your driver’s license or other identifying documents.

We apologize for any inconvenience this may cause; however, federal law prohibits us from waiving these requirements.

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