Episode 28: Taxes are the best, if you’re a Pharaoh

GRANT: Hey, Mak.

MAK: What’s up G?

GRANT: Do you know what happens when you start early?

MAK: I do G. You go wealthy.

BOTH: It’s time for Money With Mak and G. Finance for you and your family.

MAK: Grant, another season is done. Yay. We got through risk and reward. And we talked about setting up a portfolio.

GRANT: Yep, pretty cool. I completely agree. And now spring is right around the corner. I can smell it. I can’t wait to get out and ride our bikes.

MAK: And hoverboards? Too soon?

GRANT: Funny. And soon we’ll also be able to go swimming and camping and other stuff.

MAK: You do know what comes before that. And it’s a bummer. The next five weeks are torture with dad walking around like a zombie mumbling about taxes.

GRANT: I know every year it’s the same dad gets up in the morning, puts on his robe and slippers, grabs a cup of coffee and shuffles around not making sense.

MAK: There’s always talk about the government and how he pays too much taxes. I don’t understand it all.

GRANT: It is confusing.

MAK: I don’t mind understanding a little more. He says something really important. I don’t know where you pay taxes.

GRANT: Yeah. And what about explaining where all the money goes?

MAK: How much do we pay?

GRANT: Why does he say there’s so many of them?

MAK: Those are all great questions. What do you say?

GRANT: Yep, let’s do it.

BOTH: Dad! Let’s talk about taxes.

DAD: Hey, what are you guys yelling about? Buzz because I have to be careful because I’m in the middle of starting my honey business.

GRANT: Mean like the bees? Is that why you’re wearing the crazy black and yellow outfit buzzing?

MAK: I love honey and ice cream cereal or just on a spoon. So what do you have to do to start your honey business?

DAD: Well, I need a beehive, a queen, some worker bees and drones. The bees will collect pollen and nectar from flowers. And voila. Honey. I need about 20 to 60,000 of them for a good colony.

MAK: Wow. That’s a lot.

GRANT: So is that box thingy a beehive? Are you putting that near our house?

MAK: That does not sound safe? 10s of 1000s of bees could attack and hurt you right?

GRANT: Makenna, don’t you know the bees throughout history have been assigned good luck. I can’t believe that they would attack you if they’re lucky.

DAD: Grant. You’re right. They were seen as good luck. They can be dangerous if you try to hurt the colony because the bees want to protect it. But generally, they aren’t dangerous.

MAK: But mom freaks out whenever she sees a bee.

DAD: Well, she was stung a couple times when she was younger. So I do get it. But bees don’t want to sting you because they’ll die if they do. So totally not cool.

GRANT: Dad, did you know that a bee flies about 90,000 miles and its life which is three times around the world. And it takes 2 million flowers just to make one pound of honey?

DAD: Wow, I didn’t know that. Great info gee, maybe I should have done that pound of honey calculation before buying all this stuff?

MAK: Here’s one for you. Did you know that all the worker bees are females? Doesn’t that figure that the girls are doing all the work?

DAD: Wow. You guys know a lot about bees. Did you know that they use smoke to open the hive. The bees think the hive is burning. So they eat extra honey to prepare for finding a new home. But then they get tired.

MAK: Kind of like you on Thanksgiving.

GRANT: Yeah, Dad, that sounds exactly like you. But you just go to sleep on the floor next to the TV watching football.

MAK: Good one G.

DAD: Well, thanks for that. Maybe we should move on. What did you want to talk about taxes? Huh? You know, it’s my favorite hated subject.

MAK: I’m sorry about that. We don’t really learn about them at school. And at this time of year you start losing your mind, or is it your hair? Maybe if we understood we could help Grant, didn’t we learn about the Boston Tea Party in school?

DAD: That would be a good start to the conversation for sure.

GRANT: Was that about taxes?

DAD: It sure was.

MAK: Grant colonists living in Boston in 1773 got mad about paying taxes.

GRANT: Oh, I remember now can they dress up as Indians and throw the tee off the boats?

DAD: You’re both right on track. And do you know why they did that?

GRANT: Oh, I know this. They didn’t like tea.

MAK: Grant. It’s about taxes.

DAD: Grant, Mak’s right. The colonists came from Great Britain and they loved to love Love, love, love. Love tax on tea was really high and they had no control over how much tax they were going to pay.

GRANT: So are you saying a tax is something you pay? And in this case it was on tea?

DAD: Yep. In the United States, we generally call this type of tax and sales tax, because you pay the tax when a company sells something to you.

MAK: And the colonist who came to the United States to build it up, didn’t get to vote on how much the taxes.

DAD: That’s correct. They were really mad. Grant, what if there was a really high sales tax on video games, which meant that you couldn’t afford to buy games anymore? Because it was too darn expensive?

GRANT: Wait a second, I would be really mad. So they couldn’t afford to buy tea anymore because it costs too much?

DAD: That’s what happened. And then what if you took those video games that you love so much, and threw them in the water?

GRANT: I wouldn’t do that. But if I did, I would have to be crazy mad to throw something away I love.

MAK: You’d probably cry.

GRANT: Well, maybe a little.

DAD: I know I would G. And so they didn’t get to choose how much tax they would pay?

MAK: Who decides?

GRANT: Is it the government?

DAD: It sure is in the US? We elect people to the government. And so these people who get elected represent what we want?

GRANT: Did you just say floor cement?

MAK: Grant, it’s not about cement, it’s a word to represent.

DAD: Good job. Mak, do you understand what it means?

MAK: Does this represent me that these people were elected by people to speak for the people and do what they want?

DAD: You got it. Since they didn’t have a vote, no one represented them. No one spoke for them. And no one said taxes were too high. So the colonists yelled, no taxation without representation.

MAK: That’s not fair.

DAD: I agree. Can you guys say that?

BOTH: No taxation without representation.

GRANT: So they were getting tags, but they did what they wanted to represent what they wanted?

DAD: You got it.

GRANT: So that sales tax, you buy some tea for $1. And then you would have to pay 50 cents for tax. So the total is $1.50.

MAK: And you pay the state the company you buy from?

DAD: Yep. Mak’s example is really high at 50% tax, but the tea tax was high at that time. But now depending on where you live, you may pay nothing for sales tax, or you may pay over 10 cents for every dollar you spend.

MAK: So if I bought a chocolate bar from Target for $1, I would pay target $1 if there’s no sales tax. And $1.10. If there’s lots of sales tax.

DAD: That’s true. It’s all combined. You got it. Exactly. And sometimes you actually have to pay a candy tax too. So beware, taxes have been around for over 5000 years.

GRANT: Sorry, Mak. Dad, if they’ve been around so long. Was it that when the pharaohs in Egypt were alive, that tax was probably used to build pyramids.

DAD: That’s awesome. You’re both absolutely right. The tax for the Egyptians was called an income tax. It’s different from a sales tax.

MAK: So they would have to tax you on how much money you made, because that would be your income.

GRANT: That’s different. So how would they pay? Did they pay with money?

DAD: At that time, a lot of the taxes paid with grain grain could be eaten, just like rice, or they would make bread feed animals, make oil to cook or they could use it to make alcohol just to name a few.

MAK: Sounds like grain was very valuable, like money. Did they pay with other things too?

GRANT: What would that be?

DAD: Sometimes you paid with your time by doing work or joining the army. Two, three, these taxes help the people the Pharaoh built buildings. Green was saved for bad times, and the army protected the people.

MAK: Sounds like some pretty smart people. And we got the pyramids out of it. Dad,

GRANT: It sounds like there may be a lot of taxes. Are there any weird ones?

DAD: Actually, there was around the year 70? Yes. 70. A Roman Emperor named this passing implemented attacks on urine.

GRANT: Dad, isn’t urine pee?

MAK: Are you serious?

DAD: Totally serious. They would collect it from public bathrooms and people would buy it to use it. For what now? You’re gonna think this is super gross. Well, they would use it for a couple of things. But one use was to make your teeth really white.

GRANT: How would they get it on their teeth?

MAK: Wait, are you saying they would brush their teeth with it? I told you okay, I need a drink of regular water to get that imaginary tea set in my mouth.

GRANT: Taxes sound weird, but we’ll have to save some other weird taxes for later. I don’t think I can take it anymore.

DAD: Sounds good to me because there are a lot of them out there.

GRANT: So for right now, we talked about sales tax and income tax, but I’m assuming urine tax was based on selling it. Yuck. Are there others?

DAD: Sure there is a tax if you own your home, that’s a real estate tax. And there is a payroll tax that’s different from your income tax, but it comes out of your income. Oh, man, it gets confusing, huh?

GRANT: Okay. I’m starting to get why you pull your hair out.

MAK: Oh, are there any other taxes?

DAD: Absolutely. Many, many, many here are taxes on alcohol, which is beer like a Corona wine, vodka, gin and others, then there is a tax on the gas that you put in your car. It keeps going. We don’t have time to cover them all today.

MAK: So before I move on, why do we have taxes? What does it pay for?

GRANT: Is it like the Egyptians?

DAD: That’s a very insightful Grant. It’s used for a lot of stuff. It can go toward building stuff that we use, like roads, or it goes towards paying for schools and teachers. It’s saved to help people when they’re old.

MAK: Where they’re Egyptians typical? Sounds like they were ahead of their time.

DAD: They were 1000s of years ago, many taxes were collected just to pay for war. Someone would want to take someone else’s land or wanted to fight them for something that happened years before.

GRANT: That doesn’t sound as good as Egyptians.

DAD: I agree. And many taxes at that time were paid with animals. And those were the animals they were raising for their own food. Can you imagine paying a gas tax with a chicken or a cow?

GRANT: Definitely make it difficult to drive around and it would smell for us the car like a bathroom?

MAK: I can totally see mom trying to put a counter minivan.

DAD: I Agree, it would be funny. Did you know our big tax day is April 15, which is for income tax. And we’re gonna cover that on our next podcast.

GRANT: Okay, then we’ll know better why we have to buy your head to cover your bald spots for March and April. Sounds good.

MAK: Hey, Dad, I’m running to the mall with some friends. I probably need to pay some sales tax. You got a $10 bill?

GRANT: Mak, you know Dad never carries $10 bills?

MAK: Oh, I forgot.

DAD: Here are two five for your Mac and two fives for you, Grant, I’ll take it out of your allowance. I’ll tell you next time why I don’t carry or like $10 bills.

GRANT: Sounds like there’s a story.

MAK: I agree.

BOTH: Thanks dad.

DAD: Taxes are everywhere. You may not even know all the different ones you pay. Once a year as an American you get the chance to file your income tax return or what we call form 1040. For a guy used to preparing taxes, it always makes me a little jumpy. Going in, I have pulled out my hair on occasion during tax time. Oh, now taxes have a history of over 5000 years. From income to sales to real estate taxes. They’ve changed and will continue to change. They can be used to modify your behavior. The tax on cigarettes was supposed to help discourage using them or taxes are used to financially support state and local governments, whatever their initiatives. Understanding taxes a little bit can really help you make better decisions about your financial situation. For example, some people will move to lower income tax states after they retire and none of the more you may invest in something that has less tax on it when it grows. As we continue to increase our financial understanding. We’ll find out taxes can have a significant effect on your overall wealth. So make sure to listen to the rest of the season. This stuff can be really interesting. Who would have ever thought about a urine tax? Yeah, they remember to like, share and comment on our podcast.