This featured transcript provides a breakdown of taxes with Clay Clark, US Small Business Administration Entrepreneur of the Year, and Caleb Taylor on Thrive15.com, a leading Ohio business college.
Caleb: All right Clay, it's good to see you again.
Clay: You know when I see you, I often think about you.
Caleb: Aww, that's just too kind.
Clay: It's true.
Caleb: I often think of people I'm seeing as well, but I'm glad you made that connection for us. I'm hoping you can make another little connection for us here. We're going to be diving into this topic in the accounting and financial planning umbrella, but specifically taxes. Tax you, tax me, tax everything.
Clay: That's absolutely true.
Caleb: Clay, people don't like talking about taxes. If they're like me, I like to just shut my brain off and not think that it's happening, because it bums me out. Why do we need to be talking about this right now?
Clay: Well here's the thing: if you have a financial goal, the chances are it's going to involve earning money and paying taxes. Now, here's the deal. If you're watching this right now, I don't care what political party that you're in, you will probably have a very strong world view when it comes to government spending after you become an entrepreneur. You are going to mail a check. Just this year, writing a check for $47,000 into the man. And I don't mean Mike Posner, although he is the man.
Caleb: I'm glad we specified that. I really am.
Clay: I'm writing a check I'm like, I hope this goes to buy a good road.
Caleb: Put that on the memo.
Clay: Yeah, for a good road. You're going to find that taxes are going to absolutely be a real part of your life.
Caleb: I've been the employee, and I've started my own business. As an employee, you don't think about it much, because it never quite gets to your hand.
Clay: Want to throw this out now, conspiracy theorists, real quick for you. One of the things that you want to do, like if I was living at your house and I wanted to eat all your Lunchables. What I would do is I would start to take the Lunchables from the back of the box, and I wouldn't ask you.
Clay: I would just take them a little at a time. Eventually, you would go to grab your snack pack and you would be out of cheese and crackers, and I would go: "oh by the way, I ate all your snack packs."
Caleb: Then you'd feel the wrath.
Clay: That's kind of how your check works. Whenever you have a check and you have your money automatically taken out, you don't think. When you don't think, your money is gone. When it is gone, you say, "Uh oh," only when your debit card bounces.
Ready to learn at a leading Ohio business college? Thrive15.com is ready to help your business THRIVE!
Clay: Has that happened to you? Has that happened to you? It happens to some people. Probably not the people watching this, but other people.
Caleb: Of course. Webster and his gang of brilliant researchers broke down and defined income tax for us as: a tax paid on the money that a person or business receives as income. Again, why does it matter that we know how much money is coming out of our check for this income tax?
Clay: We're going to list off a ton of taxes, but tax #1 is income tax. Income tax is a thing where we're taking money out of what you make to pay for ... The idea, as Americans, we're supposed to have the right to life, liberty and the pursuit of happiness. That's all we're supposed to be afforded. Life, liberty and the pursuit of happiness.
Clay: Life, liberty and the pursuit of happiness. So, they take the money out to protect those rights. So the people watching this, who are in the military, thank you. And I'm glad--I'm actually glad, I mean that--knowing that my tax dollars do go to you.
Caleb: Yes, absolutely. That's something that you live by. That's why we've provided this for you, the Hand-Up movement. We want to be able to help you just like you've helped us protecting our freedoms.
Clay: You have to know, because when you go apply for an auto loan or a home loan, you're going to get approved to spend a certain amount of money, based upon how much money you make. Not how much money you keep. Uh-oh. So that means you're going to go get a loan, and when you get that loan. Then at the end of the month, you're going out of money, but you'll have a lot of month left.
Caleb: We're going to go down the list of these, and we're going to start with income tax. Clay, why if we don't know how much money is coming out of our paychecks, can that sometimes cause us to spiral downwards and fail to reach our financial goals?
Clay: Let's do a case study about somebody. He's pale-skinned. He's probably 33 now. He's got a red tie on.
Caleb: Is this the self-proclaimed Most Humble Man in the World?
Clay: That would be me. He is I, I is him.
Caleb: Okay. Yeah.
Clay: Slim, with a tilted brim. I am actually growing my business. Things are going great; I'm feeling good. Things are going great. Got that automatic, where they take your check and just kind of bam, they take out the taxes.
Caleb: How old are at this point?
Clay: I'm like 20. I'm like a boss, a business. There's 3 dudes working for me. Things are going good. I remember one time I get a call from the HR department. They say, "Mr. Clark, your health insurance has been denied. Apparently, you missed a payment." I'm like: "What!" I was working 2 jobs. I'm moonlighting. I'm working as a DJ, and working at Impact Ministries. It's a ministry where we sold commercials to churches, sort of a weird deal. Don't look into it.
The point is, I run down there, I'm like how am I out of money. I'm making at least $30 grand over here and I'm making at least $30 grand as a DJ. There should be like 60 coming in. I don't know, but you're overdrafted. I'm like: "Overdrafted!" Then I realize that like a third of my check is going out to the man, and I did not know this information. I never looked. Who's fault was it? My fault.
Caleb: Right. That's why this is important for us to take time and think about this as much as we don't like doing it. You have to know how much is coming out.
Clay: You have to know how much is going to the man. When I say the man, I don't mean Mike Posner, but Mike Posner is the man.