List of tax breaks in America

I went through the IRS website and collected this list of things you can write off on your taxes for fun. This is to help poor people only. Rich people move along. We need your money really, really bad.

ALSO I AM NOT A CPA THIS IS NOT LEGAL ADVICE STOP IT!!!!

Moving

 – cost of storage
 – plane ticket
 – moving company
 – baggage fees
Business
 – baggage fees
 – utility bills
 – rent
 – if you get a new laptop
 – percentage of the time you use your laptop and the cost of it
 – office supplies
 – 50% of meals dining out with clients
 – 50% of meals dining out alone when traveling for business
 – entertainment with clients
 – cell phone but only business calls in your phone bill
 – percentage of the size of your house you use for business
 – if you worked fewer hours than last year
 – your website costs
 – tech supplies
 – interest on your credit card
 – interest on loans (car loan, percentage I use it for business like dropping you off at the airport, taking clients out, etc.)
 – accountant fees
 – bank fees
 – education expenses
 – training expenses
 – subscriptions to trade or professional publications
 – tax preparer fees
 – state income tax
 – ordinary expenses related to your trade
 – any transportation (train, bus, airplane, lyft, uber)
 – any lodging (hotels)
 – tips
 – business start up costs
 – research
 – advertising
 – books
 – licenses
 – computer software (even open source)
 – online services
 – subcontractors
 – shipping
 – postage
 – airplane but not the first day of travel
 – conventions
 – consulting fees
 – internet hosting and services
Investment
 – when you reinvest in any kind of fund (dividends)
 – interest
 – pension plan contributions
Other
 – charitable contributions
 – sales tax (electronics, furniture, engagement ring/wedding bands, a wedding, car)
 – advice and fees

The peer reviewed journal Science just came out with a study showing exactly how we can eliminate poverty

OR How to eliminate poverty without forced taxation (which hasn’t eliminated it anyway).

Here’s a cool fact: we now have evidence for the best way to reduce poverty in the world.

The journal Science has done a rigorous meta-analysis of different types of charities and concluded that the scientific evidence is statistically significant and we can eliminate poverty without forced taxation. Here is the pdf without the whole needing to login thing: (Source) Also, here’s a simpler article explaining the study in case you’re not interested in the jargon: (Source)

Cash, livestock, and training.

That’s it. 3 things.

Now let’s delve into what the heck that means.

1. Cash

People in 6 different countries were each given a cash grant of $150. That’s it, $150. 2 years later, households doing the program now had a total of $202, or the equivalent in purchasing power of $500.

How did they do that?

2. Livestock

The subjects were given a choice between sheep, goats, chicken, cattle, etc. A market analyst would sometimes help them make the decision as to which livestock to choose. Which leads me to the training part.

3. Training

The training provided about livestock included: how to manage a business with their livestock, including feeding, how to rear them, vaccines, and treatment of diseases.

Training also included: health education in nutrition, hygiene, clean water, psychosocial counseling, prenatal health, HIV prevention and medicine; traditional and financial education such as investment and savings; emotional support; and staff supervision for running their business.

What doesn’t work

The study found that microloans don’t increase quality of life or incomes significantly, because the people getting the loans cannot afford to pay them back. Especially at the very high interest rates, microcredit lending charities have to charge to stay open. These programs usually take 18 years to break even. (Source)

Just donated livestock alone was not enough to lift people out of poverty alone.

Just cash while a short term solution, it did not help long term.

Services alone was not efficient enough as well.

Cost-benefit analysis

Most charities do not pass the cost-benefit analysis test. Most charities are costly to run and require high amounts of fundraising money to operate. Very often, it costs more to operate than the benefit the charity gives to others.

What am I supposed to do? How could someone like me help with extreme poverty in the world?

I did an exhaustive search of the best charities that do the cash, livestock, and training programs. The best rated one I found that had the best benefits was easily FXB International.

And here is why I like them so much:

  1. They only help the poorest of poor families in the world.
  2. Their model was developed with input by Harvard University experts.
  3. Their program is based on eliminating the five drivers of poverty: nutrition, health, education, housing, and income.
  4. They’ve already lifted 83,500 people out of poverty; the size of small city.
  5. They have a proven track record that 86% of the people they help STAY out of poverty 4 years later.
  6. They’ve been around for 27 years.
  7. They have great transparency for where their money goes.
  8. Only 12% of the money goes to overhead. That means for every $1 you donate, .88 cents goes to the actual person you’re helping.
  9. It only costs $140 per year to help lift one person out of poverty, for a 3 year program.

So, if you have $140 lying around that you weren’t going to spend in a better place. Here is their donation page: https://fxb.org/donate/

How to pay your bills

Here’s another interesting one on interest rates, just for fun:

long-term-interest-rates-us

It looks like interest rates have always been volatile.

To me, if I were an investor, whether that be someone playing the stock market, OR someone with just a savings account, I would keep an eye on interest rates all the time.

I’d keep my money in savings when interest rates were higher than the historical average and in the stock market when it’s below the average interest rate historically. It’s hard to say from this graph but I’m guessing its around 8%? It’s really hard to say because it’s so all over the place.

But…

I would also keep a constant eye on the inflation rate. If the inflation rate is above the interest rate, it would make no sense to save, because my savings would be eaten away by inflation over time, and I should play the stock market. (Source) I should put my money in the stock market because I can get more of a return, on average, around 10%, as a conservative estimate, if I invest there. However, this would only be a good idea if inflation was below 10%. (Source)

If the inflation rate was below the interest rate, I would save my money in account with an interest rate higher than inflation. That way my money would grow in value over time.

At least until the next downturn. That’s why I think it’s important to pay attention to the annual rates of both inflation and interest.

If we take a more up close look, it seems like the current inflation rate is about 2% if you use the current government measurement of inflation rate and 8% if you look at the 1980-based inflation rate measurement, also done by the government.

Inflation

This is controversial because some people say the 1980 measure is more accurate and that the government changed the way it measures inflation in the 90’s, and again in the 00’s, to make the inflation rate look better than it really is in reality.

I like to take the average of the measurements and use that as my yardstick. So my guess is it’s about 5%.

Which sucks because I’ve never seen a savings account, in all my research, that is any higher than 2%, and that was a hard find. I did find, however, that credit unions offer way higher interest rates on savings accounts than commercial banks. (Here’s some credit union checking account APYs that are good) Regardless, 5% inflation is higher than 2% interest, so it makes more sense for me to invest.

Which is exactly what the government wants you to do.

When you invest, the economy grows, when you don’t invest, the economy contracts. GDP is a numbers game and the higher your GDP growth looks, the better the world thinks your economy is doing, the more money you get coming in, the wealthier everybody gets. Everybody wins.

Except savers. Which, some people say that’s where REAL capital should come from. Some say credit and inflation is debt you are paying back on imaginary money that never existed.

My thinking is that people who are saving their money are doing it for things like putting a down payment on a house or going on a vacation. Short term things. I don’t think they are saving their pennies so they can invest in a company they think is going to be big later. That’s why I think savings is not the best way to get capital. I also, however, think that getting capital from credit solely is too risky and why we keep having huge credit bubbles that burst. (The financial crisis of 2007-08, the dot com bubble, etc.)

Here’s some credit bubbles. When there’s a lot of inflation, these get pretty big.

CreditBubbles

Now, since we’ve discovered that it makes more sense for me to invest than save, how do I know that? Well, historically, over a long time horizon, adjusted for inflation, and including all financial crashes and booms, I’m likely to earn 10% return on my investments in the stock market. If the inflation rate is 5%, and my return is 10%, I’m really earning 5% on my investment. Which is better than the -3% I would make on putting my money in a 2% interest earning savings account. If I saved right now, I would actually lose 3% of the value of my money over time.

That’s how I pay my bills.

It works with debt too

I pay off the debt (my student loans) that’s compounding more interest than the inflation rate and hold off paying the debt that is less than the inflation rate. (Source)

For example.

Say I have a student loan with an interest rate of 11.75% (I do) and a student loan with 3% interest (I do). The inflation rate right now is about 5%.

Which one makes more sense to pay off first?

11.75% student loan debt interest MINUS 5% inflation = 6.75% student loan interest.

The real interest rate I’m paying is 6.75%, so I better pay that sucker off as fast as possible, even though inflation is 5%.

Now for the second loan.

3% student loan debt interest MINUS 5% inflation rate = -2% student loan debt interest

Sweet.

My student loan real interest rate is -2%, which means inflation is eating away at my debt by 2% annually. Which means if I pay off my other loan first, and hold off on paying this one, the debt will become smaller and smaller over time and become easier to pay off with my inflated dollars.

This is another example of what I mean.

Say my loan is for $10,000 (haha that would be GREAT). Say I went to school in 1980 and I just decided to make the minimum payment on it until 2016. In 2016 dollars, $10,000 is a lot of money. At least it is to me. And in 1980, let’s pretend that that’s still a lot of money for the example’s sake. Now say I wait until 2016 to pay it off. When using an inflation calculator, suddenly my debt is worth only $3,460, which I can pay off much easier than $10,000.

But. Pretend inflation goes down.

My loan is still for $10,000, but in 2016. And inflation goes down, or we experience deflation in the negative numbers. Something like that. Then, in 2036, after the deflation, my loan is now worth $13,500! That’s MORE debt I owe than when I first got the loan!

That’s why it’s risky, but you could pay down your debt when inflation is below your interest rate, and you would be better off investing your money, and paying off your debt with the invested money in the future.

For example.

You could take the $200/month you would have paid down your debt with that has a 3% interest rate and put it in an investment portfolio. Then, as long as the inflation rate stays above 3% for 20 years, you take your 10% returned investment money, and pay off your loan with it. So in actuality, even though you just paid down your loan, you still earned 10%-3% = 7% long term.

Economics is pretty cool, huh?

 

The fucking economy

This is how you get more government social programs and safety nets:

1. Raise taxes, which will reduce growth in the economy because people  won’t have enough hours, which leads to not enough wages to go spend and create more jobs and it would reduce the number of jobs because people will have less money to pay them.

Here is a diagram showing how tax is dispersed and deadweight loss of efficiency arises.

TaxDeadweight

2. Cut spending on important programs, especially social security, medicaid, and/or medicare because they by far take up the vast majority of the budget and we already can’t pay for it without loans from china and japan AND taxes.

Here’s a goddamn graph. We’re completely reliant now on government spending.

BushTaxCut

Largest federal spending we can’t afford anymore:

HousingSpending

 

And tax revenue that’s not enough to pay the bills

USTaxShortfall

Income taxes and taxes on businesses make up the majority of the revenue. Corporate taxes may seem low but the U.S. corporate tax is the highest out of all the developed nations.

TaxRevenue

3. Inflating the currency by printing more so there’s more money in the marketplace, which pays the bills, and makes us look like we can pay our bills, but it really just makes the money less valuable, which really hurts poor people the most, because they go to buy food, and $1 can buy a loaf of bread instead of a loaf of bread and milk like they could have before the printing of the money.

With inflation, we can go into debt FOREVER!!!

USInflation

Consumer Price Index broken down

CPIFood

But the world banks and the people who make the biggest investments are firm believers always having moderate amounts of inflation and I’m more middle of the road.

I’m not for or against inflation and/or deflation. I think it’s best when it’s balanced. When $1 = $1 instead of $1 being able to buy $2 worth of food or $1 being able to buy .25 cents of food.

The 1960’s. The golden age of wealth, the closest to not to much inflation, not too little, and the baby boomers having it pretty sweet.

1960sinflation

3. But the economy will save us! GDP growth will go up forever!!!

RealGDPgrowth

(Source)

Oh.

Hey wait a minute… 

If GDP growth has become smaller since 1960, and the average these days seems to be 4%… and the average inflation rate is 3.22%… that means… 4%-3.22% = .88%… THE ECONOMY IS ONLY REALLY GROWING AT .88% PER YEAR OH MY GOD SOMEBODY TELL THE PRESIDENT!

GDP growth WOULD increase tax revenue due to an increase of income. Too bad our inflation rate is too high for that to happen.

Trade offs

So you see, this is why I think there are trade offs and pros and cons to both inflation and deflation.

I don’t know of a time in history that it was ever popular to have a balanced rate of inflation.

What’s so bad about deflation, Federal Reserve, World Bank and IMF?

With deflation, the currency is more valuable and can buy more things and it encourages savings which people do because their money will be more valuable tomorrow than it is today, so it’s a good idea to keep it in a bank account earning even more valuable with interest. People produce higher quality things, not plastic made in China, though they’re working on it.

Have you ever seen a coat that was made in the 60s? They would last forever. People would go to get alterations to tailor them to their bodies, and they knew how to sew when holes eventually did get in them, because it was more cost effective to learn to sew at home and repair things, than just throw it away and get a new one, because it’s so cheap and then when THAT gets a hole in it, throw that away because it’s essentially worthless.

I think capital is best when it comes from BOTH savings and credit and a little of both. Savings shrinks the growth of the economy though. People spend less money because they’re saving their money so they can do things like earn interest and start a business or have retirement money for their future.

Interest rates and real GDP growth looks a whole lot like supply and demand. (IS stands for Investment-Savings and LM stands for Liquidity Preference-Money Supply) In my ideal economic fantasy world, these things meet at equilibrium.

InvestmentSavings

So wages do get lower because people are hoarding their money and there are less jobs to go around because the money isn’t being spent on hiring new people. But prices go down so poor people can afford more food. And in a contraction of credit, jobs in inefficient sectors are going to more efficient sectors. (Horse and buggy, anyone?)

It’s like inflation is giving people a sugar cube when they have cancer and telling them it will help. Sure, sugar tastes good, but the bitter medicine (deflation), actually helps cure the disease. The governments of the world like to feed us sugar cubes and tell us it’s medicine, when really we need the bitter medicine.

Imagine I got a loan to have a horse and buggy business. They didn’t sell well because of an auto saturated economy. Now, there’s a bust in the natural business cycle, and the credit is drying up. People are becoming wiser that horse and buggy is the wave of the past. So people stop buying and they save their pennies for a more expensive but more practical car. The horse and buggy operation either chooses to foreclose, or they go into the automobile industry to stay afloat.

Pros and cons

There are pros and cons to inflation AND deflation and anyone who tells you there’s not is drinking the kool-aid (which is most people probably).

With inflation, the currency is less valuable, poor people’s wages do go up, but it just looks like they’re getting wealthier because the money is worth less and you have to spend it fast because it’s not going to be as valuable tomorrow. So it looks like the economy is growing and everybody’s happy.

But poor people can buy less “stuff” like food, and their bills are higher, and wages are worth less.

DollarValueFed

The above shows how the inflationary policies of the Federal Reserve have decreased the value of the dollar down to pennies. That’s from decades of inflation.

But inflation does encourage people to invest because they have a larger quantity of money so they spend it on opening a business and lenders are more willing to lend to people with lower credit scores because they are making a shit ton off the interest of people’s credit cards and loans and shit. It does encourage debt though, which is why we live in a debt-based economy.

4. Borrow and get in debt.

Here’s who owns all our debt

LoansFromChina

(Source)

Basically we live on inflation, debt, and ponzi schemes like medicaid, medicare, social security, banks, and the financial industry in general and we’re all fucked and there’s nothing the 3 of us reading this can do about it. I love you.