With the current atmosphere in Washington, it might be a good time to recognize that some federal, state and local taxes are partially or substantially voluntary, and/or deferrable depending on personal choices.
For example, capital gains tax liabilities are currently triggered by the sale of an asset at a profit. Any liability can be entirely or partially offset by the sale of another asset at a loss. Moreover, under current tax law, assets held at death get a stepped basis. Without going into a lot of details, which are better discussed with your advisor(s), incurring a capital gains tax can often be avoided or deferred.
Other avoidable taxes are the ones incurred by purchasing a lottery ticket or visiting a casino, either online or in person. If you don’t play, you don’t pay.
Substantially all consumption taxes, sales taxes, value added taxes and other taxes based on purchases, while not completely avoidable, can be materially reduced by personal decisions.
State and local taxes, if they become too onerous, can be reduced by relocating yourself and/or your business to a tax friendlier state.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA®