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Showing posts from January, 2006

The Taxorporation

As a business owner, I am privy to knowing tax law and loopholes. In my best understanding of taxation, though, I’ve found that its sole purpose is to encourage spending. Governments can’t continuously distribute cash to the masses, so it relies upon taxation to encourage its citizens to spend their cash and thereby reduce their tax burden. That’s a clever use of taxes by the government, for sure, but something else is going on with taxation in the modern world.

The Romans levied taxes on their citizenry as a “tribute” to being Roman, and to pay for their protection by the Roman Guard. During the time of Romans, and the medieval era, there were no nifty accounting systems that allowed us to track where money was exchanged. Sure, the Incans and Chinese were tying knots on ropes as their financial records, but there was no historical archive or traceability. That meant levying taxes on the individual at a fixed rate, based upon their assets. Good thing we don’t do that anymore otherwise …

Consulting 101

Many of my friends are asking me how to become a consultant. The conversation always starts out as “so how much do I charge?” To that, of course, I always answer “whatever you think that you are worth.” That answer usually gets me a troubled look and a little giggle. It wasn’t until recently that I finally got smart and decided to come up with a formula to determine a consultant’s hourly rate.

First you start with your current salary. If you divide that by 2000, which is the number of hours you work in a typical year, sans the 80 hours of vacation that you take each year. Also, 2000 is easier to use in division than 2080, so learn to deal with approximations and get on with consulting.

Now that you have a starting hourly rate, let’s talk about costs. First there are taxes for everyone. No matter what country you call home, you have to pay taxes. Remember that the figure you already computed is a pre-tax dollar amount, so don’t start adding in taxes to that rate. What you do need to inco…