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Informative Articles

An Annuities Primer
Annuities are long-term investment tools for supplementing retirement income. There are no IRS-imposed annual contribution limits, and annuity earnings grow tax-deferred until the funds are withdrawn or paid out as income. Though popular among...

Funding Your Retirement: The 401K and 403B Way
Saving for your retirement doesn't have to be a nightmare as long as you are aware of your options. For now, we're focusing on 401K and 403B retirement plans. These two plans are essentially the same except that for-profit companies use 401Ks and...

Should You Buy That Second Home?
A summer place in the North Carolina mountains, a winter place in sunny Sarasota, Florida. Wouldn't you like a fabulous retreat in the mountains or near the beach? More and more people are buying second homes for vacation and future...

Small business can outsource too
Small- and medium-sized businesses are increasingly outsourcing new positions to workers overseas, to the consternation of labor unions everywhere. Once considered a measure used only by large companies, outsourcing has now become a cost-effective...

WHY INCORPORATING CAN MEAN AMAZING TAX SAVINGS
According to a new survey carried out by Alliance & Leicester, one in five small business owners view tax as their greatest concern. The Chancellor has announced in his last budget that companies with profits below œ10,000 will not have to pay...

 
How to minimize your taxes on wealth

Taxes on wealth or simply wealth tax is the tax levied on the value of wealth owned by a person. As the term 'wealth' carries with it a broader meaning, generally capital transfer taxes (which include inheritance tax and gift tax), property tax, and capital gains taxes are some times invariably referred to as wealth taxes.

Taxes on wealth were first introduced in Europe, aimed at reducing the growing wealth gap between the rich and the poor. It was meant to raise revenue for addressing pressing social requirements and also to discourage the attitude towards amassing wealth.

Still, in countries across the world, majority of wealth is concentrated at the hands of fairly small number of people. Ideally taxes on wealth cuts down the disparities in wealth rather than the income, which actually is the determinant factor on how the scales are weighed for the next generations. Also, taxes on wealth can bring about vertical as well as horizontal equity, which income tax fails to achieve. For example, neither a wealthy person nor a poor one with no income will pay income tax. But the wealthy ones need to cough up wealth tax while the poor need not.

But, as critics puts down, taxes on wealth can actually cause inefficiency by discouraging wealth producing economic initiatives. Also, the revenue generated by imposing taxes on wealth may not be that productive as the theory suggests. The wealthiest form only a small percentage of the population and by nature they are adept at avoiding taxes while remaining themselves within the contours of law.

Taxes on wealth comes in two forms - the capital transfer taxes that are levied when wealth change hands and the annual wealth taxes. Capital transfer taxes can occur either at death - also called inheritance tax - or via donation (gift tax). Some people tend to believe that Capital Gains tax to be a form of taxes on wealth. But in realty, capital gains tax is the taxation on the income obtained on capital and not a wealth tax on the capital.

Ideally, taxes on wealth should not be severe on the tax payers even if they have lots of wealth. Instead, after the minimum slab of no taxation, the taxes on wealth percentage should increase at increments, depending on the value of wealth in dollars. Such a fairer taxation not only increases the revenue but also goes a long way in bringing down the inequality aspect as well.

But with intelligent investing, one can save a lot that other wise goes as wealth tax. But that requires careful thought and advanced planning. May be a tax professional could help one in this regard.

About the author:

Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.

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