Tax Shield Video 4 – The Expanded Worldwide Planning Video Series
International Tax Planning
Introduction
Welcome. As advisors, we concentrate on the ‘shield’ aspect of the term Tax Shield. A Tax Shield is a main principle of Expanded Worldwide Planning, or EWP for short. We will now speak about the ‘tax’ aspect of our subject. What is the history of this thing we wish to shield? Here is a very brief history of taxation, mostly in the U.S. context.
We begin in the ancient world. There is recorded a system of taxation in Egypt around 3000 BC. Oddly enough, the United States was tax-free for much of its early history. This changed at the time of the Civil War, when large debts were incurred to fund the war against the South. In 1913, the 16th Amendment to the Constitution was introduced to pave the way to an income tax.
World War I led to three Revenue Acts that raised tax rates and lowered the exemption levels. The number of people paying taxes in the U.S. increased to 5%.
By 1940, the need for the U.S. to prepare for war and support its allies led to more aggressive taxation. People with incomes of $500 faced a 23% tax and the rates climbed up to 94%. The average annual income at this time was $1,000. By 1945 43 million Americans paid taxes and the yearly receipts were in excess of $45 billion. Today annual tax revenue in the U.S. is approximately $3.7 trillion dollars
In this video we find George Allbirght debating with himself on whether he should proceed with the conservation easement offered by the company, Conservation for Nature. A telephone call from his old college acquaintance Jay Edwards forces a definite decision from George.
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George had spent the last evening researching conservation easements, and concluded that they were a good thing. He had also reviewed his tax situation, and realized that the tax deductions that they offered would reduce his tax bill significantly. Perhaps he should work with Conservation for Nature? He had plenty of land, and they had the years of experience. A good combination, he thought.
Later in the morning, Jack telephoned. He spent nearly an hour telling George that the promoters at Conservation for Nature were crooks, and that George should definitely stay clear of them.
Now George was perplexed. He trusted Jack; they had been good friends ever since their time in Detroit. Jack was giving him very concrete reasons why he should not do business with this company. He decided to reevaluate.
A few minutes after his call with Jack, his cell phone buzzed noisily. He jumped up suddenly. He had survived serving in Afghanistan, that is where he learned to fly a helicopter, but loud, sudden noises were still a problem for him.
“Hello, George?”
“Yes?” George said in a wary tone.
“I am calling you back from Conservation for Nature. I heard in the office that you were interested….”
The voice was no longer polished and sophisticated. The caller was drunk, and George knew who it was. An old college friend of his, they used to go out drinking together. Jay could barely articulate his words.
He knew Jay well. Jay still owed him money. Jay was the kind of guy who would sleep with his best friend’s wife.
Jay was desperately trying to launch into his well rehearsed sales pitch about the company he was doing appraisals—Conservation for Nature, but was hardly intelligible. That was enough for George.
“Good bye, Jay. Don’t ever call me again.”
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Conclusion
In our next video, George is again aboard his state-of-the-art helicopter cruising over his 5,000 acre property. George was safe in the knowledge that he must find a simple and straightforward solution to his tax problem.
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Disclaimer
The opinions expressed in this video are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual on any financial structure, investment, or insurance product.
by Michael Malloy, CLU TEP RFC.
CEO, Founder @EWP Financial
