Taxes and New Policies

The investors that I have partnered with in our joint ventures have given me the homework assignment (yes, even adults get homework) of reading "Rich Dad Poor Dad" by Robert T. Kiyosaki. I just finished reading the introduction and the next few posts are just some thoughts about what he has to say.

The issue that I have has a copyrighted date of 1997, but what I am reading seems current and would apply to events happening today. This appears to me to be proof that truths about money and investing are eternal for those that know them.

"Money is not taught in schools. Schools focus on scholastic and professional skills, but not on financial skills. This explains how smart bankers, doctors and accountants who earned excellent grades in school may still struggle financially all of their lives. Our staggering national debt is due in large part to highly educated politicians and government officials making financial decisions with little or no training on the subject of money." Page 14

"My two dads had opposing attitudes in thought. One dad thought that the rich should pay more in taxes to take care of those less fortunate. The other said, 'taxes punish those who produce and reward those who don't produce.' " Page 15

"One dad believed in a company taking care of you and your needs. He was always concerned about pay raises, retirement plans, medical benefits, sick leave, vacation days and other perks. He was impressed with two of his uncles who joined the military and earned a retirement and entitlement package for life after twenty years of active service. He lived the idea of medical benefits and PX privileges the military provided its retirees. He also loved the tenure system available through the university. The idea of job protection for life and job benefits seemed more important, at times, than the job. He would often say, 'I've worked hard for the government, and I'm entitled to these benefits.' "
"The other believed in total financial self-reliance. He spoke out against the 'entitlement' mentality and how it was creating weak and financially needy people. He was emphatic about being financially competent." page 16

Okay, I'm not a very political person, but some times I get on my soapbox. It's true that our national debt has risen probably beyond the level that we can ever hope to pay back. The last administrations policies only increased this burden. But the current administrations plans to increase these debts even further without plans to harness or control those debts is scary at best.

My wife owns a tobacco shop. Neither of us smoke and when she said that she wanted to buy this shop, I asked, "why?" It made no since to me. She was doing nails at the time and she said that in times of financial trouble, people stop getting their nails done, but they don't stop drinking or smoking. Nice thought.

Not being smokers, we had no idea that the state of Texas has put a $10 a carton tax on cigarettes, which is $1 a pack, on January 1, 2007. We bought the store in April 2007. The previous owners showed us their sales and they were pretty even for the three years of records that they showed us. After we had been in the shop for a few weeks, I finally figured out how to access the computer records and I estimated that sales had dropped about 24% after the tax went into effect. I then went on the internet and found out that sales across the state of Texas had dropped about 22% because of the cigarette tax.

So when the Obama administration said that they were going to increase the State Children Health Insurance Program (S-CHIP) with an increase in tobacco products, and the increase in taxes to the affluent or rich, she had a fit, to say the least. I was surprised at first, because she doesn't seem to pay attention to the news or even notice what the government is doing.

For those who haven't read my bio, my wife is Vietnamese. She was born and raised in Hai Phuong, just outside of Hanoi. She spent her whole life in a Communist country before coming to America in 2002.

She wanted to know why the government would increase taxes at a time when sales in most businesses were down and many businesses were struggling to stay open. She expected another drop in sales from the tax, but what really surprised me was what was really upsetting her was the government's insistance on increasing benefits to people.

I thought she was upset about the tobacco tax increase, which was concerning me, but it was the increase in taxes to wealthy people that was setting her off. To be honest, we are not wealthy. Not by a long shot. Her tobacco shop is barely breaking even and I figured that this last tax increase would kill us, but we're still making ends meet. Barely.

No, what was bothering her was the government's insistance that the wealthy had a "moral obligation" to take care of those that aren't wealthy and were planning to punish people for trying to improve their lives. She said that if the government just gave people things, why would they go out and work to get those things for themselves?

If you know that the government is going to tax you for making money, why make more money? Just make enough to pay your bills. Why open more businesses and create more jobs when the government is just going to punish you for it?

It must be from growing up in a Communist country, but she had a pretty good perspective on the situation. She said that when governments take from the rich and give to the poor, everyone gets lazy and stops working. The rich don't want to be punished, so they stop producing. The poor have no reason to work because the government will take care of them and usually takes away their benefits for making money over a certain threshold.

Okay, that's a long way to explain that Robert Kiyosaki nailed it when he said, "Taxes punish those who produce and reward those who don't produce." This statement could be applied to today's financial situation just as much as it was over ten years ago when he wrote it. Granted, ten years isn't that long, but we've gone through a market collapse of tech stocks in 2000 and the current mortgage crisis and the government is trying to play Robin Hood in the middle of it all. As I said, I usually don't get involved in politics, but it seems to me that the government should reign in the budget and focus on decreasing the debt, putting the country on a better financial footing before taking on all this new debt that can only lead to more taxes.

And when you are totally reliant on the government for every need, you have people standing in a swamp after a hurricane yelling at the TV cameras, "Where FEMA?"

Okay, I'll get off the soapbox before someone shows up with a rope. I don't know about you, but it makes me want to say the heck with it and go back to bed. Maybe my wife is right about people getting lazier...........


"Rich Dad Poor Dad: What the Rich Teach Their Kids About Money - That the Poor and the Middle Class Do Not!" by Robert T. Kiyosaki