1 – Why are taxes an important part of your financial plan?
Taxes are important in our financial planning because we can start saving and put aside
money that we might need to pay. There are many people that are found needing to pay
and do not have money to do so. Also, it can help with the decisions we make towards
spending and saving.
2 – Tax evasion is illegal, but tax avoidance is not. Please explain this. Have you ever
made any financial decisions in order to legally avoid paying taxes? Please discuss.
Tax evasion is considered illegal because the use of illegal activities is used to reduce
taxes. For example, falsifying records and not paying taxes. Whereas tax avoidance is
the use of legitimate methods to reduce taxes. The things I have done to avoid paying
taxes is use education credit and I have a 401k (retirement) account.
3 – Billionaire Warren Buffett has said that he has a lower tax rate than his
secretary. How can that be? Please explain. Feel free to do a Google search on this
topic.
Regarding the article on Entrepreneur by Tom Wheelwright, there are different things
that Buffet does to pay a lower tax rate than his secretary. One example is that his
income comes from dividends and capital gains. This income is taxed at a lower rate
than ordinary income. Also, Buffet’s secretary pays a higher tax rate because it is
relative to their income.