The Golden Rule

He who has the gold makes the rules.

That is the golden rule when it comes to money. It is a fact that capital income is taxed at a lower rate than earned income. For example, Federal level taxation for 2003 is as follows...
Capital gains and dividends - 15.0%
Resident Municipal bond interest - non-taxable
US Treasury bond interest - Ordinary federal rates, non-taxable at the state level
Pension and IRA account earnings - tax deferred

Compare the above to personal service income:
Combined Federal income and self-employment tax (FICA) for moderate incomes - 30.3%
State income taxes - in most cases 4% to 8%
Above median income - the combined rate can be over 40%

Add to this various consumption taxes - sales, real estate, fuel and other excise taxes - levied on the very same income that is expended for earnings generation, and the situation becomes even more daunting.

Therefore, it is imperative that every effort is made to shelter personal earnings from taxation wherever possible. Lowering tax liability is key to the swift and efficient formation of capital - namely, savings. Equally important is the effort made to maintain control and surveillance of the capital formation process.

Ultimately, each person's financial objective should be to transition from a system of earned income to one of capital income. This is a matter of urgency - there is a limit to the amount of time in which to accomplish this.

At John C. Saunders, CPA P.C., we approach personal and corporate finance by assessing transactions that affect income and taxation, and recommending strategies to avoid needless leakage of capital before expenditures are made. Forewarned is forearmed.

Thus, we include tax planning and strategy, financial consulting, and other services in a rigorous approach to finance. We incorporate pension strategy, the use of family business entities, installation of employee benefit plans, tax-favored investments, and other tools - all to increase the formation of your capital base.