Cryptocurrencies like Bitcoin, Bitcash, and Ethereum rest on a foundation of "blockchain": a continuously growing public transaction ledger consisting of records called "blocks" that are linked together and secured using cryptography. Blockchain bulls see the new technology revolutionizing all sorts of transactions, like real estate sales and medical records. Skeptics dismiss the whole effort as fool's gold, suitable for speculation but nothing more. (Hedge fund tycoon T. Boone Pickens recently tweeted that, "at [age] 89, anything with the word 'crypt' in it is a real turnoff for me.")
Now, former tech CEO Matt Liston has formed a blockchain-based religion called 0xω, ("Zero ex Omega"). "We're incentivizing mindsharing, and eventually mind upload to use consensus to form a structure of collective consciousness," he says. "And then, we'll elevate an individual interaction with a religious structure as a group participation in a collective consciousness where the structure itself is god." He's even unveiled a computer-generated avatar he hopes to be the church's first sacred object: a narwhal with a doge head, a beret, tattoos, an infinity tail, and an ethereum logo.
We're praying that this is all just an elaborate prank, a ridiculous bit of self-referential trolling from a Silicon Valley tech-bro with too much time on his hands. But in the unlikely event that this guy is actually serious, the new church might someday qualify for the same tax deductions as more-established churches.
The path to enlightenment starts with filing IRS Form 1023, "Application for Recognition of Exemption." There's no guarantee that the IRS will play ball — the Church of Scientology fought for decades to gain recognition, and the Service sees plenty of scammers masquerading as churches. But if the IRS greenlights it with a straight face, donors can deduct up to 60% of their adjusted gross incomes for cash gifts and make 0xω the beneficiary of charitable trusts, foundations, pooled income funds, and donor-advised funds.
Tax deductions extend well beyond cash contributions. The Tax Court has approved medical deductions for Christian Science practitioner fees and Navajo Indian medicine man rituals. Under that same logic, voodoo animal sacrifice is also a deductible medical expense, as long as it's part of a religious ceremony for healing purposes. (Hey, do you want to tell the voodoo queen she can't deduct her chickens?)
The bad news for the faithful is that whatever they drop in the plate is deductible only if they itemize. Last year's Tax Cuts and Jobs Act essentially doubled standard deductions, which should cut the number of taxpayers who itemize from about one out of three to just one out of ten.
And there's another downside for blockchain-based religions. The blockchain records everything! No more exaggerating contributions on Form 1040 when the IRS can go online and verify gifts. For that matter, can you imagine showing up at 0xω's Pearly Gates (with your randomly-generated user ID and password in hand), only to see your lifetime of sins chronicled irrevocably on St. Peter's iCloud? If that's the new church's idea of heaven, we can imagine a lot of folks taking their chances with hell.
Here's one thing blockchain won't ever change — the pain you feel when you waste money on taxes you don't have to pay. So call us today for a plan to pay less, and you'll have more to donate to whatever organization you want to support!
Last month, we wrote that New York money manager AllianceBernstein is moving its headquarters and 1,100 employees from a slick black Manhattan skyscraper to the steaming concrete jungles of Nashville, TN. It's going to be culture shock for the firm's employees, who have to trade their harsh winters and corned beef sandwiches for milder weather and hot fried chicken. But AllianceBernstein promises employees they'll love the financial climate most of all: lower housing costs and no personal income tax. Of course taxes played a big part in that move!
But is that always the case? A recent Los Angeles Times article argues that another corporate relocation "gives the lie to all that guff you've been fed about taxes being a crucial consideration."
Chipotle Mexican Grill launched in 1993 with a single location in a former ice cream store in Denver. The chain now has over 2,000 locations and 45,000 employees. But growth has sputtered in recent years. This is partly due to competitors like Qdoba, Moe's, Rubio's and Baja Fresh. And it's partly due to ingredients like norovirus, salmonella, e coli, and campylobacter jejuni sneaking into the burritos. (Hard to taste the viruses under all those seasonings, right?) Partly because of these incidents, founder Steve Ells resigned as CEO in late 2017.
In February, Chipotle hired former Taco Bell CEO Brian Niccol to run the company. (Most would agree that moving from Taco bell to Chipotle is a step up: Taco Bell describes their food as "Mexican-inspired," rather than authentic, but some critics pan it as merely "food-inspired.") Last month, Chipotle announced they're moving their headquarters and 400 jobs from Denver to Niccol's hometown of Newport Beach, CA. The move should actually mean less highway time for Niccol, who used to waste 20 soul-crushing minutes commuting to god-forsaken Irvine every day.
So here's where it gets perplexing. Colorado's personal income tax is a flat 4.63%, which seems like a fair price to pay for those 300 days of sunshine per year that civic boosters promise residents. But California has the highest state tax rate in the country — a genuine millionaire's tax of 13.3% on income over the two-comma mark. The recent Tax Cuts and Jobs Act of 2017 makes that top rate even harsher by limiting federal deductions for state taxes to $10,000.
Logic suggests that any rational business would move the other way. And thousands of companies have fled California, citing taxes and regulations. But California's job growth since 2011 has "easily outstripped" the rest of the country, and the Golden State's economy is growing faster than low-tax states like Texas and Florida.
In 2016, Stanford sociologist Cristobal Young looked at tax returns showing million-dollar incomes over a 13-year period. His study showed that millionaire tax flight is occurring, but "only at the margins of statistical and socioeconomic significance."
What do you think? Would high state taxes be enough to make you move? Or do the quality of your life and breadth of opportunity mean more than mere taxes? Either way, we're here to help you pay less. So call us when you're ready for a plan, and see where your wasted taxes have kept you from visiting!
Back in the early 80s, a group of Democratic legislators decided to room together to cut the cost of staying in Washington for the three nights or so per week that Congress is in session. The motley crew included Representative George Miller of California (owner of the blue-gray house in Southeast DC), Senators Dick Durbin and Chuck Schumer, future Defense Secretary and CIA chief Leon Panetta, and others. We can only imagine whose phone numbers they posted on the refrigerator in a house like that. Pizza delivery? Of course! Liquor guy? Oh yeah. Exterminator? Maybe not a bad idea . . . .
Visitors to the house could be forgiven for thinking they had mistakenly wandered onto the set of Animal House. The stove didn't work, so the group lived mainly on Frosted Mini-Wheats. Durbin stopped making his bed when Bill Clinton was President. Schumer slept on a mattress in the living room, and his wife was so disgusted by the place she refused to stay with him. Still, the unconventional arrangement inspired news stories and even a TV series — Amazon's Alpha House, starring John Goodman as one of four Republican Senators sharing a much cleaner house.
In 2014, Representative Miller retired after 40 years in Congress and sold the tenement fixer-upper. It seems ironic, then, that as Washington has become the most affluent city in America and home prices have climbed even higher, Congress gave up a tax break designed to make it easier to find a place to stay. From 1953 until 2017, lawmakers could deduct up to $3,000 per year for living expenses while they were away from their homes — but with last year's Tax Cuts and Jobs Act, they gave up that deduction for themselves.
Writing off $3,000 may have been a sweet perk back in 1953, when Elizabeth II became Queen, Ian Fleming published his first James Bond novel, and Marilyn Monroe starred in Gentlemen Prefer Blondes. The average taxpayer earned $4,000 that year. The average car cost $1,650. And the gas to power the car cost just 20 cents a gallon. (Of course, there was no Facebook. Life is full of tradeoffs, right?)
Today, of course, $3,000 is a rounding error for most congresscritters. Their base salary is $174,000, which is enough by itself to put them in the top 3% or so of earners. But the average Representative's net worth hovers around $1 million, and the average Senator is worth $3.2 million. Plenty are rich enough to essentially "buy" their seats. Longtime members can cash in for that much in a single year with cushy lobbying jobs after they leave — former Representative Billy Tauzin raked in over $19 million lobbying for drug companies in the five years after he gave up his seat.
Of course, those averages, by definition, include the 50% who are below average. Dozens of mostly-younger members sleep on futons or pull-out couches in their offices while they're in DC. (They shower at the gym.) That group includes House Speaker Paul Ryan (net worth: $7.8 million), who earns an extra $49,500 as Speaker. Bunking at work can make far more sense than dropping a couple grand a month for an apartment when they're only in town for 80 or 90 nights per year. (Durbin and Schumer paid about $800 for their squalid little spaces in Miller's hovel.)
You may live by yourself in one of those fashionable new "tiny houses" or with a whole extended family in a mansion. Fortunately, you don't have to score political points by giving up tax deductions. So why would you? Call us when you're ready for a plan to pay less, and let's see how much home you can buy with it!
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John Leidy, EA
DIY Books Coach
It was the third day of the very first income tax course when I realized that it will become my mission to help people understand their taxes better to be able to make better decisions and STOP wasting money on taxes they should not have to pay.