Liberty Commentary

Fully Taxated, Part III

by Tom Baugh

In the first part of this series, we discussed the reality of the tax code in that it exists to benefit the Ruling Class. The primary means by which the tax code provides this benefit is the obvious one of extracting the wealth necessary to repay public debt to the slave traders. However, as we discussed, the tax code also spares the passive income of the Ruling Class’ compliant servants, while rewarding the lower income levels so that they assist in your enslavement. The only people who actually pay taxes in large amounts are you, the foolishly productive. If you haven’t read that article, please go back and read it now before proceeding: I don’t have space to give the summary justice.

In the second part, we started with a brief dismissal of the UCC gambit. We then discussed the example of Andy and Bob. Andy earns $30,000 per year, but walks away from the tax table with a total of $33,337. On the other hand, Bob earns $100,000 a year, but walks away from the tax table with a total of $84,281. Bob makes more, but Andy keeps all of what he makes, and then some. We also discussed quality of life issues for both, and the likely tradeoffs for each.

This leaves Chuck. As a contractor, Chuck bills about the same (with some exceptions we’ll discuss)that Bob receives as a salaried employee. But, we’ll see how this distinction makes a dramatic difference in Chuck’s quality of life.

I have to again give a disclaimer. What I am about to describe to you is legal to the best of my knowledge and understanding. However, I am not a tax or law professional and you shouldn’t take anything out of this article other than pure entertainment. This disclaimer is necessary so that you will rush to the waiting arms of a Monkey professional to pay them Monkey Bucks for a service which will soon be obsolete as it all goes over the edge.

I now again repeat an essential point from the first article in this series: To thrive in any system, you must first recognize the reality of that system, and then act accordingly in order to manipulate its energy to your own purpose. As I have said before, we too often project our own individual decency and honesty onto the current system, and then delude ourselves into thinking that the actors within it are merely misguided, so thwarting its noble purpose. To thrive in this system and not be perpetually frustrated, or worse, you must accept the premise that our system is not fundamentally noble, but was specifically designed to feed a class of certain very wealthy people. Refuse to accept this fact, and I can’t help you.

As we saw previously, between Bob’s earnings and Andy’s, about $19,000 disappears in federal reserve taxes. Andy is in the gravy zone, and stays there until about $40,000. Even unto $50,000, there is still a certain amount of gravy. This is the earnings zone of cops and teachers, both loyal trustees of the federal reserve / international banker work camp. Above that level, taxes really start to chew into the pocket-books of the productive, and stay disturbingly intense until the $300,000 to $400,000 range. Above that level, that of doctors, lawyers, media personalities and other Knights of the Realm, the concept of income tax no longer applies as other strategies emerge. Those strategies are beyond the scope of this article series.

Consistent with that disclaimer, my concern is not with the traditionally wealthy, but with the bulk of the actively productive. These people have the best chance of surviving the collapse, and thriving post-collapse. These also have the best chance for reconstructing a world in which neither socialism nor corporatism reigns supreme over individualism. A merger attorney, no matter how successful, will probably turn into chicken feed for a Monkey Starver somewhere, shortly after his former vocation is discovered. A typical doctor, deprived of chemicals and machines, neither of which he fully understands but is licensed to administer, will be hardly more valuable post-collapse than a good veterinarian or practical nurse. Enter then Chuck.

Chuck and Bob are practically indistinguishable at first glance. They both do pretty much the same work, whatever that work may be, and gross pretty much the same amount. However, upon closer examination, the differences between the two become apparent. The critical difference is that Bob is an employee, whereas Chuck is a contractor, and bills his time through his own C-corporation. And this difference makes all the difference in the world.

Recall from the first part of this series that the tax code exists to extract value from those capable of causing problems to the Ruling Class, yet reward those who serve the purposes of the Ruling Class. Also recall that brokering the efforts of those who provide value is the path to success in this world (pre-collapse), while the providing of value itself is almost worthless to the provisioners. In our decaying civilization, if you provide value you are a slave. If you broker that value you are a knight. If you are a slave trustee, such as a cop or a schoolteacher, you are given special favor in exchange for your loyal service.

The essence of the tax code is that simple to understand. Whatever you do to present yourself as a provider of original value, you will be punished. Whatever you do to present yourself as the broker of a slave or slaves, or as one of the lower-income trustee classes, you will be rewarded. The details are almost immaterial, and merely exist to fill in the forms.

To this end, Chuck is simultaneously a broker of his own slave (himself), and a slave at a low enough level that he seems as if he is a low-income trustee. In this, he is richly rewarded at both ends. The magic that makes this possible is not a UCC incantation, but an appreciation of the bankers’ work farm in which we live and call the Land of the Free. This magic requires incorporation, there is no substitute.

When you incorporate, you create a legal fiction of a person with the State. Slaves aren’t smart enough to incorporate, or aren’t willing to invest the time. Knights of the Realm are, and do. This fictional person can act as your slaveholder, while you cannot. Chuck can treat any number of business expenses as deductions to be paid pre-tax, whereas Bob cannot. Chuck can engage in any number of enterprises, many of which may fail on paper so long as the sum thrives, while these same activities are nondeductible hobbies for Bob.

You cannot shortcut this path with an LLC or an S-corporation or a sole proprietorship. Only a C-corp will do. Many fear forming a C-corp because of the extra paperwork involved. True, there is more paperwork involved, but the nineteen thousand dollar difference between Bob’s and Andy’s taxes says that it is worth it. This extra paperwork isn’t really that hard to handle. This fear of administrative work has been injected into your brain your entire life to make sure you stay a slave so that someone else can benefit from your efforts. To cushion the blow, we’ll talk about some of these details after discussing the benefits of this approach.

But first, let’s talk for a minute about how your financial landscape changes once you incorporate. First, you hire yourself as an employee. Congratulations, you just gained your first slave! You might want to then similarly enslave your wife and kids of earning age, too. Corporate slavery is fun for the whole family as we’ll see in a minute. This is exactly what our hero, Chuck, has done. Bob, or the Al-the-Welder-Plus-Alicia-the-Wicked-Hot-Hairstylist combo-pack, would do well to heed the ways of the Chuck.

Now, when Chuck puts in an hour of time at BigCo next to Bob, ChuckInc, not Chuck himself, gets paid for his time. Assume that Bob and Chuck work the same two thousand hours in a year. Bob’s 1040 says he got paid $100,000, while ChuckInc’s 1120 (with some exceptions) says the same thing. The difference is what SlaveChuck gets paid, and that is, again, all the difference. Hypothetically, if ChuckInc can find $70,000 in business expenses to deduct before paying SlaveChuck the remainder, SlaveChuck looks to the tax code just like Andy. And then walks away with the additional $3337 in his pocket, having also not paid the $15,719 that Sucker Bob is hit with.

The key is that, to the tax code, Chuck looks like Andy, but ChuckInc looks like BigCo. SlaveChuck wins just as Andy does, and ChuckInc wins just as BigCo does. The only loser is Bob. Eventually, though, we run out of Bobs, it all goes over the cliff, and we toss all of this crap on the dung heap of history.

The devil is in the details, of course. How does ChuckInc find $70,000 in business expenses? Well, there are lots of ways, but even if he only finds $10,000 in business expenses, he still walks away $4000 better than Bob, because of that marginal tax rate thing we talked about earlier. The details change from year to year, but the secret is to understand the purpose of the tax code with respect to the interests of the Ruling Class. Always appear to taxate yourself in such a way as to seem a harmless noble servant.

How? This all depends on what you do. And that can be practically anything. The key is that when you incorporate, suddenly the pwesidem of ChuckInc can decide to do, not just his primary vocation, but practically anything Chuck wants to do, as a prospective business venture. And then pay for that ambition out of the corporate larder. Within reason, of course, and within the limits of that tax code. The next time you hear about the tax code being so large, you should be rubbing your slave-owning hands with glee wondering what kind of goodies (meaning deductions or tax credits) you might find for yourself in there, at the expense of, well, you-the-slave and the taxpayer. Kind of changes the mental landscape, doesn’t it?

Here are some popular myths which will NOT happen when you incorporate:

Myth #1: Investors will flock to you to throw cash at whatever you imagine. Absurd on the face of it, this notion is the inevitable spoor of the good-kid-made-good lies, but you will be surprised how many idiots will imagine that this is happening to you.

Myth #2: Banks will loan you money so that you can blow it and fold up the company. This only happens to large companies or shells created specifically for creating paper losses which the lending banks then recover, via bailouts, from the rest of us. No, in your case, you will have to personally guarantee loans that your company gets, meaning that you would have to repay anyway.

Myth #3: You stop paying sales tax. This only applies to goods purchased for resale. The rest you still pay sales taxes on. Because of that resale thing, there is a grain of truth in this one, though, as we’ll see later.

Myth #4: You become the big-shot employer who gets to have lots of people catering to your every whim. I’ve tried to weed out people with this and other character flaws before getting to this point, but some may have made it through. Tip: if you, dear reader, are one of prospective big-shot types, you probably aren’t going to make it after the collapse, for reasons I’ve written about elsewhere. No, Chuck has no desire to hire anyone else. He’s in business to take control of his own life and reap the benefit of the tax code, not to become Daddy to monkeys. Mutually contracting with other Chucks out there, though, is beneficial for everyone.

Myth #5: Related to the above, if you did hire someone, you now get to hire people off-the-books in cash. Why in the hell would you do that, and miss out on the deduction for their pay? Hiring someone off-the-books saves them from paying taxes on it, but actually costs you an equivalent amount of money. Ask yourself from what miraculous font this cash would come in the first place. Hiring another contractor’s company effectively provides the same mythical pay-in-cash benefits, though, since you get the deduction and the other guy gets pre-tax income to do exactly what we’re describing here.

As mentioned, the exact details of how Chuck (or the Al/Alicia combo-pack) surfs the tax code depends on his particular vocations and interests. But, we can lay out a few general principles:

Taxated Tip #1: Assuming a 40% marginal tax rate, every dollar your company spends pre-tax would otherwise require you to earn $1.67 to have the same buying power after taxes as an employee. Yes, a 40% marginal tax rate means that your company’s money becomes 67% more valuable. Math is a wonderful thing.

Taxated Tip #2: Don’t go out and buy stuff just because you have 67% more of it now. Monkey starvers try to do more with less. You’re not creating money, you’re keeping more of it by keeping more of it out of the hands of monkeys. There’s a big difference. Just try to buy whatever you would buy normally as a company purchase where possible.

Taxated Tip #3: Be absolutely meticulous in your record-keeping. We’ll talk about ways to do this later. Once you get into the paperwork, you will see that there are very few ways to cheat. The checks and double-checks have been thought out way in advance, so don’t even think about it.

Taxated Tip #4: Never forget that this system exists to benefit the Ruling Class, which includes banks. If it hits a bank statement, including credit cards, money orders or someone else’s checking account, it happened. I’m endlessly amused about discussions involving privacy of banking information. Get real. Instead, structure your transactions and expenses so that you get to innocently point at the tax code later.

Taxated Tip #5: Don’t lose your soul in this. This approach is merely a weapon a monkey starver can use to destroy his enemies. Remember that all this nonsense goes poof on C-Day+1 (or maybe a little sooner than that).

Within that framework, and as a preview to make some of the details in the next part make sense, let’s follow Chuck around for a while. Because of the nature of the audience, I’m going to use gun shows as an example. Chuck can do practically anything for a primary vocation, but, like many of us, has interests outside of that. Let’s consider a few possibilities of how Chuck might leverage his gun show interests into business opportunities (read as “more deductions”):

Chuck likes to hit a gun show once a month or so. Fortunately, ChuckInc thinks setting a table up at a gun show is a dandy way to market its services. It doesn’t really matter what Chuck does for a living, there is someone there walking around who might be just the right prospect for the next gig. So, ChuckInc pays the $75 table fee and prints up some flyers, then has a base of operations from which to wander the show and talk to people. Now, without an FFL (consider getting one) ChuckInc can’t buy or sell guns, but it can buy or sell just about everything else. Remember that passive income stuff from the first part? Buying and selling things outside your primary business activity gets special tax consideration.

If that gun show is more than 50 miles away from his house, ChuckInc also pays SlaveChuck a per-diem rate for meals, entertainment and expenses. If it is an overnight trip, SlaveChuck also gets a nice per-diem lodging rate, tax-free. Bring the wife and (working-age) kids? Well, as these hapless souls are employee slaves too, they also get per-diems.

Oh, did I tell you that Chuck was also an author? Whatever his interest area, he can put up a blog somewhere, write some articles, and post them at various websites. Computer, internet service, and just about everything that eventually gets mentioned in an article becomes a business expense. Business is funny like that, you never know what is going to be a hit. Just make sure that, overall, you show a net profit, or else the IRS will want to classify it as a hobby.

Chuck has his eye on a new smart phone, so he writes a blog article about how it is important for his survivalist buddies to get smart on smart phones. Maybe he decides to write some simple little app that does secure data transfer and needs to visit his pal in Florida who knows how to do this stuff. Smart phone and trip just became a business expense. Chuck and the family of Chucklet slaves might even want to put in some fishing or beach time while he’s there. After all, once you start running your own business you tend to get too busy for real vacations. Just remember that in this Internet age business prospects are literally everywhere.

Since ChuckInc already has a gun show table set up, maybe it starts selling some related products. One great way to prove to the IRS that you are a business is to be a distributor for related products. Shirts, books, holsters, just about anything you care to name looks great on your table, and establishes you as a going concern. If you want to get started, I know a couple of authors who can set you up with inventory right now. Some of them will even do limited amounts on consignment (meaning you pay post-sale). Yep, I’m shameless, but you’re reading this for a reason. I might be writing it for that same reason.

Chuck has really been thinking hard about preparedness, and needs to write about food storage. To prepare the article (which might, after all, sell some books or shirts), he gets a few month’s supply of food and subjects it to different storage conditions for a year. You guessed it, business expense. That new chainsaw also makes great article fodder. How did it hold up after a year? Inquiring minds want to know. So he brings it to the show and talks about it. Some old lady might want him to cut some wood for her. You never know.

That beater truck that ChuckInc just bought is really essential for carrying customer material around. All of those parts that went into it are deductible expenses, and each year, sadly, depreciation cuts into what would otherwise be company profit. Also, all of that gun show gas, and the gas used for driving it back and forth to client or prospect sites, is deductible. Just be careful to follow the rules about employer-provided vehicles. They are strict, but simple and easy to follow, and are way easier to handle than trying to track mileage for personal vehicle reimbursements.

Clearly, I could go on and on (and often do) but I think you might be seeing the picture by now. Making the effort to create and maintain that corporation suddenly opens the door to practically limitless opportunities to create tax deductions for what Chuck (or Bob or Al/Alicia) might have done anyway, and shoves SlaveChuck closer to the Andy tax-gravy zone. In the next part of this series, we’ll talk about some practical ways to keep that effort to a minimum, and discuss some business and tax terms you really need to understand. For entertainment only, of course.

Tom Baugh is the author of Starving the Monkeys: Fight Back Smarter. He is also a former Marine, patented inventor, entrepreneur, professional irritant and a homeschooling parent.