What is the Best Tax Policy for Investors?

“Trying to minimize taxes too much is one of the great causes of really dumb mistakes in investing.”

–Charlie Munger

Whenever I speak at the MoneyShows or other investment conferences, I frequently get asked about the tax implications of master limited partnerships, long-term vs. short-term capital gains, etc. Generally speaking, I try not to let taxes affect my investment decisions.

But there are exceptions. If, by waiting a week or two, I can get long-term capital gains on a stock, it’s worth waiting.

In an ideal world, there shouldn’t be any taxes on investments. Taxes on dividends, interest and capital gains are a form of double taxation, since you already paid taxes on the income in the first place.

Hong Kong is the best tax haven for investors — there is no tax on capital gains, interest or dividends. Not surprisingly, it has become one of the fastest-growing nations in the world.

Last month, Senator Rand Paul proposed a 14.5% flat tax to replace the current hodge-podge tax system. Steve Moore, chief economist at the Heritage Foundation, is working closely with Senator Paul on this radical flat tax plan. Senator Paul’s proposal imposes zero tax on capital gains. Not bad!

I’m sure Paul Krugman, the Nobel-Prize-winning economist who favors big government, will have quite a debate with Steve Moore on the flat tax (scheduled Thursday morning, July 9, at FreedomFest).

On Saturday, July 11, we will have a special session on taxes, led by Grover Norquist, president of Americans for Tax Reform and considered by CNN to be “the most powerful man in Washington.” The topic will be, “Flat Tax, Fair Tax, No Tax: The Future of Tax Reform” that you won’t want to miss. Steve Forbes and Steve Moore are on this panel, too.

I am pleased that Senator Marco Rubio, the frontrunner in the Republican race for the presidential nomination, has agreed to address us at FreedomFest. He and Senator Mike Lee (who will be addressing us on Saturday) have co-sponsored a major tax reform bill that has a better chance of passing than Senator Paul’s plan. Among other things, the Rubio-Lee bill:

• reduces the tax brackets to 15% and 35%;
• eliminates the marriage penalty;
• abolishes the dreaded alternative minimum tax;
• eliminates the capital gains tax.

“Most returns can be filed on a postcard!” they state. Their tax reform measure has been endorsed by Steve Forbes, Larry Kudlow and Grover Norquist.

You Blew It! ‘Re-Publicans’ (Tax Collectors) Push Through Largest Tax Increase in Nevada History

Imagine this, the GOP won all the major races last November in the state of Nevada: Governor, Lt. Governor, all five constitutional offices, the State Senate and the State Assembly. “This is the first time the GOP has controlled all of those offices since the 1920s,” said Wayne Allyn Root. “The voters spoke loudly. They wanted smaller government, lower taxes and less spending.”

Moreover, they voted down, 3 to 1, a ballot referendum supporting a business receipts tax.

It looks like Nevada would be a perfect place to hold a conference — FreedomFest!

But then something strange happened: The new Governor Brian Sandoval and the Republican legislature just pushed through the largest tax increase in Nevada history to provide additional money for K-12 public education!

Never mind that spending more money on public education has never proven to improve high school and grade school students.

Here are some highlights of the Republican hall of shame:

• The Republican governor and his supporters raised the business license fee from $200 to $500.
• They raised the payroll tax.
• They imposed a “commerce tax” on gross revenue on companies with more than $4 million in Nevada revenue each year (even if they are non-Nevada corporations). A gross receipts tax is the worst kind of tax, because it imposes a tax even when a company loses money.
• And they raised the tax on cigarettes by $1 a pack (creating more of a black market in cigarettes).

It just goes to show you that you can’t trust Republicans to do the right thing when their leaders abandon their principles.

I say throw the bastards out!

Upcoming Appearances

O Last Call for FreedomFest! July 8-11, 2015, Planet Hollywood, Las Vegas. Our program is now complete (click here to see all the speakers, panels, films and debates scheduled), the exhibit hall is packed with a waiting list, our Planet Hollywood room block is full (but we’ve arranged for you to apply the low $109 rate to the Paris Resort next door)… and we’re getting dozens of new attendees registering every day. There’s still time but act now. Register here.

O I will be attending the San Francisco MoneyShow, July 16-18, at the Marriott Marquis. To register, click here. Mention priority code 038970.

In case you missed it, I encourage you to read my e-letter column from last week on Eagle Daily Investor about whether the American Dream is still alive. I also invite you to comment in the space provided below my commentary.