Taxes, Tariffs, and the Future of Finance

Taxes, Tariffs, and the Changing World Order — it sounds like the title of a thriller novel, right? But here we are, once again, gearing up for that annual rite of passage known as Tax Day on April 15. It’s that time of year when everyone scrambles to gather their documents, crunch numbers, and wonder (once again) how we ended up in a system that makes April one of the most stressful months of the year.

But here’s a fun fact to kick things off: Did you know income tax wasn’t always the government’s primary source of revenue? It wasn’t until 1913 that the U.S. Constitution was amended to allow for federal income tax. Before that, the government relied on tariffs and other revenue streams. While the system has evolved alongside our transition from an agrarian society to an industrial and now technological one, we must ask: Does the current tax system make sense for the future?

That’s where things get interesting. As our workforce changes, especially with automation, AI, and robotics reducing the number of employed workers, a big question arises: Can we continue to rely on income tax as our primary means of funding the government? The imbalance between national revenues and expenditures is already a challenge and will only become more complicated.

And while we don’t know exactly what will happen, one thing is certain: Change is inevitable.

Historically, tax structures have changed dramatically over time. Compare today’s relatively simple tax brackets to the pre-Reagan era, when we had dozens of tax rates at various income levels. Could we see another shift like that? Possibly. But even bigger ideas are on the table — like national sales taxes or a value-added tax (VAT) system similar to what Europe implemented.

But then we have the elephant in the room: trillions of dollars sitting in retirement accounts that the government hasn’t taxed yet. That’s why I’m recommending Roth conversions to many of my clients, as well as other strategies to prepare for possible changes. After all, at some point, the government will look at that untaxed money as a potential source of revenue.

How do we plan for the unknown?

Nobody has a crystal ball, but we do know being proactive is always better than being caught off guard. That’s where you come in. You can help your clients have a comprehensive and strong financial strategy that protects them from the inevitable changes down the line.

For those of you that have retiree and pre-retiree clients, this is especially important. Anyone that has savings and investments as their primary source of income needs to ensure their financial plan is flexible enough to withstand potential tax changes.

As we move forward, we must recognize that the tax landscape will continue to evolve. Whether through adjustments to income tax brackets, shifts toward consumption-based taxation, or new regulations impacting retirement accounts, we should expect change and prepare accordingly.

So, I encourage you to have these conversations with your clients. The conversations that other so-called ‘advisors’ are afraid to have.

As we approach another Tax Day, take a step back and consider the bigger picture. What changes are coming? What’s the best way to protect yourself and your clients? And most importantly, are you prepared for what the future may bring?

Because in a world where “the winds of change are blowing,” the best thing we can do is be ready to adjust our sails.