LEARN TO EARN
School teaches you to focus on your weaknesses. But you are no longer in school. This is life and life is all about maximizing your talents and to hell with your weaknesses. When water flows downhill, it flows around the obstacles, not over them.
The best way to optimize your earnings capabilities is to start your own business. But not everyone is an entrepreneur.
At Million Man, we will help you start your own business or find your dream job. The objective is to maximize your earnings potential.
TAX: A Compelling Reason to Start Your Own Business
Boning up on tax law may sound as exciting as a root canal and a fully invasive colonoscopy. However, if you are earning 100 in income, you are probably paying close to 40 in taxes. That alone should pique your interest. Taxes are more slippery than a snake in a barrel of motor oil. Many cannot differentiate between tax avoidance and tax evasion.
Tax avoidance is the use of legal allowances and deductions to reduce your taxable income. Tax evasion is the unlawful understatement of your income and or overstatement of your expenses to reduce your taxable income. In understanding the tax code of any country, you must understand the behavior it is promoting. When it comes to tax, the intentions are clear.
The backbone of every economy are the entities that employ people. As of 2019, 99 percent of the 30 million firms in the United States were small businesses. These small businesses employed the majority of the workforce. A key indication of the strength of an economy is the level of unemployment. Unemployment in the United States has hit 10 percent on two occasions since World War II, in the 1980s and after the financial crisis of 2008. Not all countries employ the same methodology in counting unemployment. In Mexico in 2020, unemployment was around 3.5 percent which was in line with the United States. That sounds a little odd. In Mexico, any person that has worked at least 1 hour per week (slightly more than the French) are counted as employed. Regardless of how you count it, job creation is a priority of any government.
There are two ways for the government to stimulate the job market. One is to hire more people in the government (the public sector) and the other is to promote entrepreneurs to hire more people in the private sector. Governments want to promote private sector growth and job creation. Taxes are the most powerful arrows in the government’s quiver to achieve this. In 2017, Amazon announced plans to build new headquarters for 50,000 people. They would spend $5 billion on the new construction. More than 200 cities in Canada, Mexico, and the United States offered tax breaks, expedited construction approvals, and other incentives. The most creative incentive came from Tucson, Arizona. They sent a 21-foot saguaro cactus to Amazon. Notwithstanding the oversized gesture of a giant prickly desert plant, Amazon opted for Crystal City, Arlington, Virginia. Amazon was offered performance-based incentives worth $573 million, and a bonsai tree.
Tax codes offer a plethora of tax deductions to corporations. This motivates entrepreneurs to channel money back into their businesses instead of handing it over to the government. These incentives range from research and development expenses to stock compensation schemes, salaries, depreciation, and loan interest. Employed individuals, on the other hand, are faced with a shorter list of deductions. They are on the wrong side of the tax code. If the government is providing all of these incentives to companies, they need to fill the gap somewhere. Who better than Joe Schmuck who is punching in at 9 am and out at 5 pm? Financial freedom is obtained by being on the correct side of the tax code and exploiting these legal tax deductions.