The state of Ohio has a budget shortfall of 8 billion dollars. (Gasp.) To close this gap, our esteemed elected representatives have signed Senate Bill 5. Busting the unions in the chops will bring prosperity to the masses, they assume.
Remember driver's ed? Never assume.
Just what is a billion, anyway? A public school teacher in the middle of his or her career probably makes about $50,000. Every 2 years, that's $100,000. In 20 years, a teacher can make a cool million.
A minimum wage worker can earn about $20,000 a year, if he or she never gets sick or goes on vacation. The kids qualify for free or reduced lunch. To make a million, this person would have to work for 50 years. Till death do us part.
To make a billion, the teacher would have to work for 20,000 years. The minimum wage person would have to work for 50,000 years.
Let's say a wealthy relative departs the physical realm and leaves you a billion dollars. You want to be cautious with your money, so you decide to put it in a bank savings account. Your first problem is that each bank only guarantees your deposits up to $500,000. So you will have to distribute your money among 2,000 different banks.
Each year, your deposits yield a paltry 2% interest. You have to report this on your tax return as income, even if you use Turbo Tax. Well, 2% of a billion is 20 million dollars. Uh-oh. How can you stop the greedy IRS from getting your hard-earned interest income? After all, you had to visit many states to find 2,000 different banks. Different branches of the same bank don't count.
What might the government do if it took 43% of your 20 million? Why, it might approach solvency, especially if it made a habit of doing this to you and those like you who possess vast wealth. The government might even come up with a scheme to repair decrepit schools and pave crumbling highways, or provide affordable health care to all. But those aren't your responsibilities. Certainly, if people are unhappy with their neighborhood schools and streets, they should just move to a neighborhood with nicer schools and smoother streets. Why should the wealthy be expected to bear more than their share of social burdens?
There is one easy way to avoid paying tax on your interest income. Form a "foundation". Be a philanthropist. But only give to those who share your particular worldview.
