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A basic understanding of tax incentives
Today's blog will not be long. I intend to give a different perspective of taxes you can use to your advantage. Please talk to a great accountant about the ideas I am presenting. That means that many readers will need to talk to a different accountant than they are currently using. Remember that, as in every field and profession, there are very few competent accountants compared to the many who simply do their job in a very basic way.
Not all taxes are like death
Most have heard the phrase "taxes and death are the two constants in life", but I would like to challenge the idea that we are helpless in how much the government taxes us. Not long ago Warren Buffet made the comment that he pays less in taxes than his administrative assistant (percentage-wise). This seems unfair to most people, but not to those who understand why the government gives tax breaks.
So, why does the government seem to help those who are already wealthy?
You'll need to step into the government's shoes for a minute in order to understand the coming perspective. Government's are terribly inefficient and discovered a very long time ago (at least in some ways) that the economy will grow better when they aren't involved in the minutiae. If the government tries to stimulate the economy it is faced with a choice: Should we develop business and run them ourselves, or should we give incentives to others for the development of business. Governments our slow moving ships, but businesses tend to move and change directions quickly. Governments understand that the economic advantages of giving tax incentives to a company far outweighs the actual incentives themselves; individual companies will find more creative ways to grow a business quickly than the government can.
Government controls economic development by incentivizing the sector of the economy that needs stimulation. If investing in the energy sector will help the economy, they will give tax benefits to companies that grow the energy sector. If having more housing for families will keep home prices a little lower and encourage families to move to Canada, it is beneficial to give tax breaks to companies who will build condominiums. If a province wants to have more head offices move in, they can offer tax incentives for large corporations.
A question for the reader
Why wouldn't a government give tax benefits to companies in Canada? Everything is a balancing act and a country, province, or city needs income from the wealthy as well as the middle class, but economies grow faster when capitalism is freer to govern itself in some ways.
Instead of envying the wealthy in our great country why don't you make the choice, today, to take control of your own tax situation and start paying less! In a future blog I will discuss the differences between an internal locus of control versus an external locus of control, but for now I will simply state that it isn't the fault of others that you pay more in taxes. With education you can receive free of charge (ok, not completely free... you will need to spend the money for an internet connection and must make the choice to spend some some time learning) you can make significant changes for the better to your personal tax situation. The secret is in learning what the government wants.
Did you know that the majority of the tax code is focused on ways to save on taxes rather than ways you need to pay? Talk to a great accountant to learn more. In a future blog I will interview an accountant who will help make some of these concepts clear and offer the perspective of someone who deals with taxes on a minute by minute basis.
If you would like to learn more about investing in real estate please contact me at the email address listed at the beginning of this article or go to my website at: www.akerahomes.com/investing-in-real-estate.html
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