Are your clients paying more than their fair share of taxes?

The chances are high that they feel they are.

And the statistics suggest they might be right.

What Level of Taxation is Fair?
The US Government claims that “taxes are the price we pay for a civilized society.” That claim is based, more or less, on the idea that taxes are to used to pay for goods and services that benefit everyone. A classic example is police, and another is national defense.

But today, such expenditures for the common good account for a small fraction of US government spending. By some estimates, 80% or more of the US federal government expenditures are “transfer” payments. A “transfer” payment is money that is taken by taxes from one person and paid to another.

The US defense budget, as large as it is, as a percentage of federal spending is smaller than it has been at any time since before WWII.

Top 10% of Earners Pay 71% of the Income Taxes
To be in the top 10% of income earners in the US requires income of about $132,000 a year. That includes two income couples. So, for example, two people, who each earn just over the national average, will together be in the top 10%.

Chances are that many of your clients are in this top 10%, and for that are among those  paying the 71% of income taxes paid.

So if your clients believe they pay too much in taxes, chances are, they are right.

What Can You Do About It?
For the taxpayers in the highest tax brackets, tax rates can easily exceed 50% in many states.

But there are steps you, and your clients, can take that can reduce the severity of the tax bite. Four tools that you should be familiar with are:

• Section 642 Income Trusts
• Section 664 Tax Exempt Trusts
• Donor Advised Funds (Deferred Actual “F”ilantrophy funds)
• Private Foundations

To learn more, you may check out our page on year-end tax savings. If you are interested, you may also schedule a meeting with Sterling Advisor Solutions.