Monday, September 20, 2010

Tax Protesters (Tax Deniers) and the Secret of Wealth.

Tax Deniers are an odd breed.  They subscribe to an almost religious-like belief that the US tax code doesn't apply to them or is illegal.

As I have noted again and again in this blog, making money in the USA is not hard to do.  You only need have a more than a tenuous grip on reality, and act rationally in an irrational market.  Yet, few people do this.

In fact, the great majority of people believe in what they want to hear - that they can eat their way to slimness, deduct their way to wealth, and somehow beat the market or make a million with an effortless "system" that they can buy online for only $299.99.  Order now!

What they don't want to hear is that their financial problems are usually their own fault - due to their own laziness, lack of ambition, willingness to believe almost any sweet lie, and the desire to have it all now and pay later.  No one wants to hear harsh reality - it doesn't sell.  Everyone wants to believe that their problems are someone else's fault.  And it is the height of weak thinking.

Tax deniers are a special breed of this animal.  They will bore you to death with their conspiracy theories and stories about how the U.S. Tax code is all a giant hoax - that you don't really have to pay income tax.  It is a variation of the Friend with the Perpetual Problem, in that they will bend your ear about their tax theories every time you seem them.

And since they are headed for trouble with the IRS in short order, they will eventually become the friend with the perpetual problem - a tax problem - before too long.

The various arguments they make that the tax system either doesn't exist, is voluntary, is illegal, or whatever, are all documented elsewhere.  Needless to say, they are all hogwash.   The idea that you can avoid paying taxes simply by saying "No Thanks" is just idiotic on its face.  The idea that the government somehow "forgot" to vote for our present tax laws, or wrote the law wrong, or forgot to ratify it is idiotic.  If this were the case, why wouldn't Congress simply re-vote on it?  The Conspiracy Theory people never have an answer for that.

It is a classic example of selling people what they want to hear - and people with onerous tax obligations can be sold anything.  It is the Laetrile of the tax burdened.  Just as you can sell phony cancer drugs to the terminally ill, you can sell these "no tax" seminars and books to people who are having tax problems.  In both cases, it is a bit cruel, as these folks do have rays of hope (real cancer treatments, a workout with the IRS) but the phony "cures" end up causing the victim more harm.

And supposedly smart people fall for these scams.  I had a friend who was a Lawyer who fell for this "no tax" nonsense, and ended up in a lot of trouble with both the State and Federal authorities.  It is no laughing matter for a Lawyer for get involved in this sort of thing - you can be disbarred and end up with no livelihood whatsoever.

But even smart people fall for scams of all sorts.  Chelsea Clinton's new father-in-law just got out of jail after bilking his clients for millions of dollars after he fell victim to a Nigerian scam.  We laugh at these scams and say "only a fool would fall for it" - but often clever people fall for it as well.

How does this happen?  Well, people like to hear what they want to hear.  Tell someone they lost weight, or that their new article of clothing looks good on them - you'll have a friend for life.  Tell someone they can make money with no risk and with no effort, and they will hand over their checkbook to you.

Life is hard, to be sure.  And yes, some people make success look easy.  But usually those folks merely give the appearance of easy riches - if you delve into their backgrounds, they had to struggle and sacrifice to get where they are.  Free money, no taxes, wealth without work - they do not exist on this planet.

And yet, there is a sure path to riches that costs little or nothing and involves no risk.  There is a "Secret" to wealth that the great unwashed don't realize, and to some extent is suppressed by the mainstream media, as it is contrary to the interests of their advertisers.

And no, I am not talking about some "wealth visualization" ministry or prosperity theology - where you imagine yourself to be rich and then become rich.  Those are just more scams telling people what they want to hear.

Do you really want to know the trick - the secret - to wealth and happiness?

It is really simple.

Spend a penny less than you make.  Period.

That's it.  If you can live on your income, without borrowing any money from anyone, you can be happy and successful.  And if you save any surplus income, you can invest it and build real wealth.

It takes time, and when you start, you may be chagrined to see that your progress is painfully slow.  Warren Buffet once said "The first Billion is the hardest" and while tongue-in-cheek, his advice could be applied to us lesser mortals.

Saving your first thousand can be painful.  But the second thousand is a lot easier.  And breaking $10,000 might seem to take forever.  But $100,000 comes a lot more quickly.

And anyone can do it.  All it takes is the willpower to say "I want real wealth - money in the bank - not shiny cars, electronic gadgets, granite countertops, cable television, take-out food, delivery pizza, gambling junkets, and all the other crapola that the people with real money want me to squander my income on."

You see, that is how the rich get richer - they invest in industries designed to separate you from your dough.  The wealthy are the ones loaning you the money and making money on your onerous interest payments, because you "had" to have a new car, or a flat-screen TeeVee.

It is hard to do without?  Yea, it is.  Starting out without a car and a place to live is very hard.  Taking the bus everywhere sucks - and takes up all your time.  But if you can save up the money for a secondhand car, you will come out ahead of the person who goes into debt for a new one.

And yet, the poorest among us are the first to sign those loan papers - on the most onerous terms - to buy luxury items like new cars, flashy clothes, shiny objects, rental furniture.  The stores that sell this stuff flourish in the poorest neighborhoods.

But even the middle and upper-middle classes (and even people who think they are "rich") fall for this scam - buying everything on time and borrowing money to purchase  things they really don't need.

And yes, that include me as well.  Over the years, I have squandered a ton of income on things I really didn't need at the time - or things I could have bought much less expensive substitutes for at the time.

It is human nature - the desire for status - and we all do it.  The secret is to fight your own nature, and that is hard - and why so few do it.  If you have no money, it is amazing how you figure out ways to "get by" on less.  But most people, once they start making more, think of ways to get more consumer goods, usually by resorting to financing or other trickery that makes them poorer overall.

The Tax Deniers will bend your ear for hours, telling you that "but for" the crooked and illegal tax system, they would be as rich as Nazis, not having to pay any income tax.  If only the illegal tax system could be exposed as the fraud it is, they would be living the life of Riley!

But the harsh reality is, they can't control their spending, and rather than look inwardly at their own actions, it is intellectual laziness that projects their problems onto the IRS.

Even if you could avoid paying all taxes, if you can't control your spending habits, it doesn't matter.  You'll end up broke and destitute - just with shinier and slightly more expensive toys.

Act rationally in an irrational market and you will succeed.  As the tax deniers illustrate, there is a lot of irrational out there.