What if You Give a Gift to a Charity…

Gifts to recognized charities would reduce the size of your estate and therefore the taxes that your estate would have to pay.  If you make a charitable gift while you are still paying “earned income” taxes you can report that gift in the year it is made and receive a tax credit for the amount of the gift but not for more than you personally paid in taxes.  The credit will increase your lifetime earnings exemption but will not have an effect on your current “earned income” taxes.

You can make personal gifts whenever you wish up to $12,000 per year per giver and per recipient.[1]  That means, for example, that you and your spouse could give each of your children and each of your grandchildren $24,000 each year and it would have no effect on your “earned income” taxes.[2]  It would reduce, however, your taxable estate that exceeded your “earned income” retirement/estate tax exemption.

The gift tax process that The 33% Solution advocates is similar to the gift tax program of the current system.  It is one of the better parts of that system.

Where Does That Leave Pensions, 401(k)’s, etc…

Pensions, 401(k)’s, and the myriad of other retirement schemes that plague American workers and employers are the result of decades of lobbying for “tax-favored” retirement plans.  When you look at all of these programs closely, it is apparent that “the system” created them and they would not be there if The 33% Solution replaced the mile-high tax code.

The money that these programs currently hold belongs to you and to other individual Americans who put their hard-earned dollars into them.  There is no reason why you should not receive your money back with no strings attached, no penalties, tax-free.  You could then put your money into any money buckets you choose…insurance, annuities, mutual funds, real estate, a tin can in the back yard…and take it out when you want.  This money would be a part of your estate as discussed above.

Tax-amnesty for American Workers’ Money…

Tax-amnesty for American workers’ money seems like a deal that would hurt no one and would help everyone.  The companies that are currently managing your money would continue to have the opportunity to do so.  Your employer would be unburdened from their reporting requirements.  The New IRS would not have to track hundreds of thousands of “plans” but would not lose a penny since The 33% Solution would produce more revenue than the old system did with all of its rules and exceptions to its rules.