Aiding The Death of Income Taxes Is Neither Immoral Nor Unpatriotic

Therefore, the only real question is whether you have the capital to invest, or whether you allow that capital to be blocked and perhaps ultimately taken away by politicians. Only by placing your money in a sound offshore platform can you guarantee that compound interest will be allowed to work for the benefit of your country and not against it. A wealthy Englishman offers this compelling example of what is at stake.

British tax law, which is far more enlightened than U.S. law, does not impose income tax on British citizens not normally resident in the United Kingdom. This enables British citizens to accumulate wealth more easily than Americans. What is the difference over a lifetime in having investments compound offshore free of tax rather than onshore, where the British government would take 40% of any profit? It is enormous. Taking the actual return achieved over the past decade on his portfolio -- an annual 20% gain -- about what George Soros has averaged since the 1960s -- the Englishman found the startling result.

The untaxed portfolio was 1200% larger than the taxed portfolio. It was the difference between having $8 million after 40 years and $100 million.

When you think about that, it raises a frightening question of who will own the world's wealth in 30-40 years. The answer is that little of it will be owned by Americans. Because European, Latin American, and Asian investors, particularly the Chinese, overwhelming compound their profits in offshore centers where they are not taxed, most of the world's money will inevitably gravitate into their hands. Investors in low-tax or no-tax jurisdictions will control the wealth and make the investment decisions that will determine the economic destiny of the next century. If those investors are mostly European, Chinese, or Latin American, the only result to be expected is that Americans will be shut out of the economic future -- just as other people without capital are shut out today.

If taking your money offshore allows you to achieve even a slightly higher rate of return -- thus allowing compound interest to work more for you than against you, you could be helping to secure a better future for future generations of your countrymen -- perhaps including your own children and grandchildren. The lower the after-tax return you realize on your investments today, the weaker America's competitive position tomorrow.

Asset protection through the use of international financial strategies and diversification requires considerable initiative, alertness, determination, and dedication. Not that it doesn't pay. Sad to say, the net gain from each hour dedicated to protecting your wealth is almost certain to be higher than the net gain from an hour of productive employment. Thanks to "progressive" taxation, this goes double for someone in a high federal tax bracket, especially for residents of high tax states like New York and California. There is also a psychological dimension that must not be neglected. Most people derive a "clean" feeling from making a living through their work, but feel that there is something "dirty" about "scheming" to reduce their taxes.

Heavy taxes, whether used to provide luxury for a ruling elite or to support welfare schemes, always have the effect of penalizing individual initiative and productivity, reducing investment capital and thus the resources required for economic growth, reducing the standard of living, and forcing individuals to hide things, both activities and incomes, from the government and from one another. Heavy taxation is, therefore, a danger to the future of the high-tax countries.

Internationalizing assets assumes at the outset that the investor has assets that are available for investment. It also assumes that a viable means of doing so exists in the contemporary scheme of world business; and ideally, a plan exists that includes short- and long-range investment goals.

The morality of taxation changes with the times. Prior to World War I, when taxes were comparatively low, though certainly not popular, most workers and small businessmen were exempt from the controversy by virtue of low incomes. During times of national emergency, particularly during and directly following World War II, tax avoidance was frowned upon even by those who were looking at larger tax liabilities each year. But as progressive tax rates brought taxes higher and higher each year in highly industrialized and populated nations, the attitudes of taxpayers underwent a gradual, but definitive change.

Today, even the individual worker for whom the tax system is supposedly designed, can see that a tax system in which higher income brackets produce progressively higher tax rates restrains, even prohibits, individual initiative and productivity.

Many people feel not only duty-bound but morally obligated to use the legal tax avoidance measures available to them. Whether the tax loss to the nation is through using domestic tax shelter strategies, or through the use of an international financial center, the avoidance principle is exactly the same. From a purely pragmatic viewpoint, legal tax avoidance by an investor may be simply a means of economic survival for himself and his family.

The "losers" in this business of tax avoidance are presumed to be the heavily industrialized, heavily populated, and heavily taxed countries of the world. If two nations could personify this description, they would be the United States and Great Britain. Yet the attitudes of these governments toward tax avoidance is ambivalent to say the least. The United States, for example, actually established itself as a tax haven for foreigners by not imposing a withholding tax on interest paid to foreigners on their U.S. bank deposits, and allowing foreigners to buy, hold, and sell U.S. securities without incurring a capital gains liability.

There are, of course, economic reasons to justify these tax rulings (a reversal of the ruling on interest paid on bank deposits would remove billions of dollars from U.S. banks.) This being the case, we can say that there is no external threat to tax avoidance from free world nations. The United States, the United Kingdom, and Switzerland are all involved in the business of providing a haven for foreign investors to protect their assets. The citizens of each frequently use the other for international diversification, and none is likely to try to put another out of business.

The arguments that apply to taxation apply even more strongly to asset preservation through international diversification. Much of the growth in China today is being funded by Chinese investors in Hong Kong who got their capital out of China during the communist takeover, and are now providing the funds to restore capitalism to their country.

Preservation of wealth often involves a timely decision to move capital from one place, or one form, to another. Many times capital would have been lost, if it had not been wisely redeployed as circumstances changed. Capital is always under political threat when it is in a minority. The periods of greatest risk are times of public disorder when many are impoverished, or losing income, and only a few are wise enough or lucky enough to preserve their wealth.

In 1931, Britain went off the gold standard. At that time, investments in gold coins could be bought for 100 pounds which would now sell for 50,000 pounds, while government bonds could have been bought for 100 pounds which would now sell for 30 pounds. Yet in 1931, government bonds were thought a safer investment than gold coins, and were the only investments allowed for most trustees.

This shows how families can very rapidly be reduced from prosperity to poverty. The difference between two investments in one lifetime could easily amount to one investment rising 12 times as fast as inflation while the other falls to no more than one percent of its original purchasing power. Take the experience of what happened in one generation in Britain as a likely model for what lies ahead for North America.

A government wrestling with economic decline is almost driven by the logic of the political system to destroy capital. Allowing it to destroy yours is not a rational path to prosperity or security. To whatever extent the politicians succeed in overtaxing your wealth, they are likely to waste the money in counter-productive income redistribution. The more you feed the crocodile, the bigger it grows. As more and more people realize this, they find ways to escape the income tax system, which in turn contributes more to the death of income taxes.

The one clear answer is self-protection. But how? The rest of this report will show that there are ways -- perhaps none of them perfect -- but just as legal and prudent as less imaginative ways of protecting your capital.

The "Option Strategy"

But this is as far as most publications take the subject, and that is missing one of the great values of such investments. Tax-deferral creates an option to become tax-free in the future, a decision which may never be taken -- but the option on the decision costs nothing. At any point in the future, if an American citizen decides to renounce their U.S. citizenship, the accumulated profits of the business or the annuity can be withdrawn totally tax-free. (This option strategy only works with a foreign annuity -- a U.S. annuity would be taxed on distribution to a non-resident alien.)

This "option strategy" also works for inheritance taxes. With proper tax planning, one can create a large estate, and if one renounces U.S. citizenship shortly before death, that entire estate can pass tax free to ones heirs. Thus a person is able to maintain and use their U.S. citizenship for a lifetime, and then take the option of renunciation of citizenship when it is no longer relevant -- perhaps when living in an overseas retirement haven.

Privacy and Data Encryption

Such a world does exist. The only question is whether the government will succeed in getting its electronic tentacles into it.

This private world exists thanks to technological advances in data encryption, the electronic coding of data. Encryption is an electronic procedure that digitally encodes (converts into unintelligible gibberish) and decodes (converts back to readable language).

Today any reasonably powerful desktop computer can encrypt and decrypt messages which the most powerful supercomputers in the world, working together, could not decrypt. Programs to do this are very inexpensive, and already available to anyone.

Most encryption programs take advantage of a mathematically sophisticated encryption technology that requires two different keys, both of which are necessary to decrypt the message. The sender needs only one to send a message. The receiver decodes the message with the second key -- which never needs to leave his computer, where it can be protected by passwords. Although the mathematics are daunting, the program makes the process simple and straightforward.

Examples of everyday uses are a writer who sends chapters of his new book to his publisher; collaborators on an invention working at a distance and needing to keep others from claim- jumping a discovery; paying bills or ordering from mail-order catalogs by sending encrypted credit card numbers over the telephone; an accountant who scrambles backup tapes so that clients needn't worry about lost confidentiality if the tapes are lost or stolen; and attorneys communicating with clients and other attorneys via encrypted documents.

At the same time, the costs of international communications and transportation have declined to the point where even the average individual can afford to internationalize. And countries around the world are competing for that business. You can take advantage of what these countries have to offer to safeguard your freedom and privacy using exactly the same techniques as giant multinational companies.

Encrypted messages can move across international borders without interference, by telephone, by radio, or by courier. A "message" means anything that can be digitized -- a sequence of words, music, a digitized picture, a forbidden magazine or book, etc. Here's just one way to hide a message in plain sight:

Music is now available on digital audio tape (DAT) in a cassette just a little fatter than an ordinary audio cassette. One DAT cassette can completely cloak about 600 books (80 megabytes) of information interleaved with the music, securely encrypted on the digital tape in such a way that this library's existence on the tape would be invisible even to powerful computers. These 600 books of information could be made to disappear into an ordinary digital tape of Beethoven.

DAT records music in 16 bit bytes, but that precision is beyond the perception. The 16th bit of the signal is too small to be detected by the human ear. A long message can be substituted, in encrypted form, in the positions of all the 16th bits of music. Anyone playing the tape would hear Beethoven in the exact digital quality they would hear on a purchased Beethoven tape.

Anyone examining the tape with a computer would see only digital music. Only by matching an untampered tape bit by bit on a computer could someone detect the difference. Even then, the random-looking differences would appear to be noise acquired while duplicating a digital tape through an analog CD player, as is normally done. This "noise" would have to be decrypted (not likely) to prove that it was something other than noise.

This means that it's already totally hopeless to stop the flow of bits across borders. Because anyone carrying a single music cassette bought in a store could be carrying the entire computerized files of the Stealth Bomber, and it would be completely and totally imperceptible. And as more of our information systems become digital (replacing analog), when we have satellites beaming digital television signals, and digitized faxes being sent over fiber-optic cables, we will probably be able to interleave and conceal real messages in perfectly innocent looking faxes and other communications in the same way.

Another benefit of encryption technology is that it provides verification of identity, while staying anonymous. You may correspond in complete privacy with a "name" and never know who it is, but you can verify that it is the same party that you have dealt with before, and none other.

Privacy of electronic communications leads to an ability to do business from anywhere in the world, with anybody in the world.

In an information economy, transfer of product can occur in privacy through barter. Anonymous vendor "A" can negotiate by electronic mail with anonymous buyer "B" to trade information (a research report or a computer program, for example) for other information of value. Neither party reports the transaction for tax purposes, and neither can identify the other. Depending upon the citizenship and residence of the parties, such tax avoidance may be a criminal offense. But it will occur, contributing to the government's inability to collect income and other taxes.

The illegal uses of data encryption are likely to be insignificant by comparison to the legal uses. Secure transfer of work product from an offshore consultant or computer programmer will increase the ability to work from anywhere, without fear of one's output being intercepted and copied by data pirates.

It is technically feasible to use these techniques to create a totally secret banking system, with account owners identities being unknown even to the bank. Credits could be transferred between accounts from anywhere in the world through encrypted communications. In a world where governments are increasingly subscribing to treaties limiting banking secrecy, and requiring identification of depositors, it is unlikely that this technical possibility will actually occur in the near future. But unlikely is not impossible -- and the time may come when some government permits such a service, or when entrepreneurs sneak it in the back door by calling it a barter exchange instead of a bank. Since everything is electronic, such a service could even be operated from a ship, an orbiting space station, or The Moon. It is only thirty years since the first Moon landing -- who knows what the next thirty years might bring. The data haven may eventually supplement the tax haven.

Meanwhile, data encryption is available to anybody for whatever use they wish to make of it.

With the government making proposals to outlaw the sale of encryption programs, this is something you might want to buy now and put away even if you have no immediate use for it.

Like the old saw about not being able to see the forest for the trees, it's easy for those who work with computers every day to forget how profoundly the technology has changed the world we live in. Every day more than $1.9 trillion changes hands electronically in the financial markets.

There are two major developments in recent economic history. The first was President Nixon's decision in 1971 to give up the gold standard for the U.S. dollar. The second was the rise of the market for financial derivatives, conceptual deals that are based on future events, such as fluctuations in the interest rate.

When these events combined with the maturity of the electronic banking network, it meant money lost any real value. Money was no longer connected to anything tangible, such as gold, and existed solely as volatile electronic impulses.

Derivatives embody this concept. Though worth billions on paper, they represent neither real products nor the value of these products. Even commodities futures, which would seem tied to the real world of corn and pork bellies, are more wager than investment.

These trends, combined with the creation of the post-War global economy, have cut adrift the financial markets to trade in abstract concepts over electronic networks, with the result being ongoing volatility.

We are talking as much about the death of money as the death of income taxes.

That death of money brings us back to the idea of the electronic exchange, and anonymous encrypted transactions. A stock or commodities exchange functions without the need for cash going in or out of the marketplace, so an offshore exchange dealing in stocks, commodities, financial derivatives, or other replacements for money begins to become possible. The anonymous part may be difficult to achieve in the current political and legal climate, but the anonymity of transactions becomes less relevant if the transactions are being done by traders, financial institutions, and brokers who are based in tax havens and don't have to stay anonymous because they don't have to pay taxes anyway.

At an even simpler level, data encryption already makes possible a more flexible and portable economy. Salesmen on the road now frequently work with laptop (or even palmtop) computers that they use to prepare and transmit orders. Some still stop at the nearest telephone to plug in the computer, but more and more of them are using computers with built-in cellular telephone or other wireless connections, allowing them to have instantaneous transmission to and from their headquarters. Most frequently these orders are processed directly into the company's computer system, and processed for shipment without any human intervention. Encryption becomes necessary to protect the integrity of the information -- one wouldn't want a competitor following a salesman around picking up copies of the orders on his car radio, or stealing the laptop out of the car during lunch and being able to read all the records.

The criminal element seems to have grasped this technology more quickly than the legitimate business world. On the street corners of any big city one can find drug dealers equipped with pagers, pocket telephones and computers. They started with pagers, then realized they could get free of telephone wires completely by using pocket telephones so that their exact locations could not be determined. Now many of them have graduated to computers with wireless transmission to forward the orders. The dealer takes the customer's order and the cash, and relays it to an associate who then delivers the drugs after checking the surrounding area. The dealer is never holding the actual drugs.

From these illegal beginnings, legitimate business also becomes more portable. But as the need for a fixed location diminishes, so does the ability of the tax collector to assess income tax. The business becomes so invisible that there is nothing to grasp.

Data Encryption and Portability Provide Business Insurance

What goes wrong is that most companies are unable to fulfill their business missions with only a data center up and running. After the disaster they had their big computers working well at their pre-arranged locations, their raw data was intact, but they lacked the capability to conduct business. Those same palmtop computers that the traveling salesmen use could have saved many of these businesses. The entire business operation becomes portable, operated by the employees from whereever they are, regardless of conditions.

The Federal Express commercials on the theme of the customer's ability to immediately obtain the status of a delivery order are a demonstration of the power of such a system. FedEx drivers are working with handheld computers communicating through wireless channels, so that each delivery is recorded on the company's computer at the moment of delivery.

From order entry to customer support, purchasing through production, and receiving to shipping, information technology provides companies with new and better ways to operate. It is an integral part of corporate operations and plays a key role in achieving and maintaining the competitive advantage -- and it needs data encryption to function securely.

As legitimate business follows the example of the drug dealers, the business becomes flexible, portable, and nearly indestructible, because no disaster can affect all of the components of the business.

And as this flexibility evolves, the ability to tax the business becomes much less. The corporate headquarters might be in the Cayman Islands, with the sales representatives in twenty different countries, the product manufactured in a duty-free zone in Singapore, and shipped around the world. There's nothing left to tax, because there is no longer a physical place of business.

On April 19, 1994, AT&T and Xerox announced an alliance which could make book publishing a portable business. The companies will combine Xerox's document management capabilities, such as the ability to access optical storage devices, and AT&T's computing and telecommunications expertise to allow customers to create and distribute high-volume, lengthy documents on-demand worldwide.

Xerox plans to distribute its new DocuTech Publishing Series software using AT&T's wide-area network and advanced communications devices to allow document information to be integrated, scanned, digitized, printed, and delivered anywhere in the world. In practical terms, one could have a publishing company in the Bahamas, accept customer orders on a U.S. 800 number (so the customer would not even have to know where the publishing company was located), and the book or special report would be printed and shipped from the nearest Xerox document center to the customer. True world business -- and taxable where? Having your computer send a document to a Xerox printing center doesn't give you a taxable location.

Sports betting firms are already operating from the Dominican Republic and Venezuela, using U.S. 800 numbers and charging the bets to the customer's credit card.

The Smart Money Is On A Cashless Society

The encryption becomes important to protect the integrity of the system, prevent counterfeiting, and limit the value of a stolen card to a thief.

From these simple uses of the check card, the next steps may occur faster than most people realize. Junior is away at college, and makes the traditional call home for money. Mom isn't worried about not having any cash because she transfers the money from her bank account to his bank account using her super- smart plastic card and a hand-held device.

International use of these check cards is as simple as the international use of credit cards. Already one can use a card through automatic teller machine systems in dozens of countries to obtain cash or make purchases, with the amount being automatically converted into the appropriate currency. And because the settlements between banks are on a wholesale basis for the total transactions of the day, the cost of exchange is far more favorable to the customer than going into a currency exchange to convert banknotes from one currency to another.

In Swindon, England, National Westminster Bank is testing a smart card called Mondex. Working with Midland Bank and British Telecom, NatWest has made Mondex exactly equivalent to cash, as it does not need a PIN (personal identification number). Among the points the bank will want to test are whether the cards are safe against computer chip fraudsters and how much people will use them, particularly for low-cost transactions in small shops.

The banks are eager to develop the use of plastic money because of the huge savings in manpower and security if cash transactions become the exception rather than the norm. But there's a long way to go before piggy banks change from oval to rectangular.

While everybody is talking about this technology trend, few are relating it to the death of income taxes. But when accounts can be in a bank in any tax haven in the world, with purchases made conveniently anywhere else in the world, the ability of government's to monitor the volume of such transactions is extremely limited, and the acquired data of little value in the enforcement of tax laws.

Taking The Information Superhighway Offshore

While American banks are still thinking about on-line banking services, many of the larger European banks already offer such services. In addition, many offshore money managers, trust firms, and similar suppliers can provide information and communications through E-mail (electronic mail). Many present information about their services through the Internet, and an increasing number of banks and brokers are actually handling transactions through the Internet.

But what exactly is the Internet? Most of us have heard enough from the media to know it has something to do with downloading information through phone lines into a personal computer -- but many still aren't quite clear as to how the Internet impacts our lives, whether, in fact, it should impact our lives. Isn't it something for experts, after all?

You know, scientists, scholars, economists, stock brokers, and people like that? Why should an average person be concerned with getting information on line? What's in the Internet for you and me? That attitude is understandable if you aren't familiar with what the Internet can offer you.

It's the greatest democratization of information ever conceived by humanity, bringing within the reach of anyone with a computer, modem, and telephone line vast informational resources that used to be the exclusive domain of specialists -- but which are now our common intellectual property.

Whatever you're into, the Internet offers multiple roads to get more information about it. And you'll meet people on line who share your interests -- some of them at the top of their fields. You can read on-line books and articles before they're printed, or publish your own work for an electronic audience. Plus, you can also shop for virtually any product imaginable. In short, the Internet obliterates distance and goes a long way toward realizing the ideal of the global village. You can dip into databases, discussion groups, and product selections from the next city or as far away as the next continent.

All these seemingly science-fiction possibilities are as easy as dialling a phone once you have a direct Internet Access Account. It's your master key to the informational wonders of cyberspace, and the provides software with unrestricted access to the entire Internet (many on-line services restrict you to only the services they provide, and you'll get ACCESS DENIED messages if you try to venture outside the permitted ones). This is critically important if you want to explore the world of offshore investments and banking, or use the Internet to communicate with your offshore contacts.

Computers on the Internet can communicate with other Internet computers, whether they are in the next room or on the other side of the world -- without even the cost of a long distance call. The relativity of cyberspace obliterates distance and brings people who live far apart into the same global community. Taking the Internet to get offshore offers many advantages.

America's Lost Dream Contributes To The Self-Employment Trend

All of this discontent adds to the death of income taxes, as more and more working class Americans become self-employed and pay fewer taxes. The "system" isn't working for them anymore, so they don't feel like paying for it. They begin to take on cash work, unreported independent contracting, and what they commonly call "off the books" employment. They start using tax havens, trusts, and annuities.

Over half of all first time heart attacks occur between the hours of 8 AM and 10 AM Monday morning? People would rather die than go back to work!

Blue collar jobs are becoming extinct, and white collar jobs aren't far behind. Millions are out of work, collecting unemployment (until it runs out) sadly searching for the same kinds of jobs their former employers just eliminated completely in some other company that hasn't streamlined yet. Where will they go for work? What will they do? Those workers just aren't needed anymore -- and who can afford them anyway?

What is The American Dream? Ask a million people and you'll have a million separate answers -- we all have our own unique version of what The American Dream means.

However, there are a number of things that all our dreams have in common. We all want freedom and security for ourselves and our families. We want more money than we have now. We want health and happiness. Basically, we want what we don't have. The sad fact is, tens of millions of people aren't living their dreams at all.

What else do we want? A good education for our kids...travel and vacations,,,entertainment...recreation...going out to dinner...new clothes...and a whole host of other possessions and possibilities for realizing our dreams.

Today many people aren't free to do what they'd really love to do for a living -- what they're really good at. They're strapped to a job they don't like -- or worse, one they hate -- because they just have to have the paycheck to survive. The truth is only one half of one percent of the people in America make over $100,000 a year. And that's just about how much it takes today to even get close to financial security.

The cornerstone of The American Dream has always been financial freedom -- enough money to do what you want, when you want to do it.

That's not to say that money alone is what we desire most. We all know it's not the money, but what the money will buy. And it's true that one thing money does buy in a society like ours is freedom.

Money builds churches and schools and puts clothes on our children's backs.

Another thing money can buy today is health. The rising cost of medical care has made it virtually impossible for people of average means to afford even basic medicines and proper health care. And is there any greater cause of stress -- which more and more physicians say is a primary contributor to sickness and disease -- than anxiety and worry over money? Medical research proves the affluent are significantly healthier than the average American.

But the sad truth is the vast majority of Americans today don't stand a chance of getting what they want out of life. For them, The American Dream has become a fairy tale. A myth. For an alarming number of people, it may even have become The American Nightmare.

Instead of being part of this vicious circle, those with foresight are divorcing themselves from the income tax, and building the real assets that will protect their families -- and someday be invested in the rebuilding of America.

Retire At Age 35 (or 45 or 55) Without Being A Millionaire

Paul figured out how much money you need to retire. He was surprised that a net worth of just $100,000 -- including home equity, IRAs, and cars -- was enough when he did it in the 1980s. That's for a pretty basic retirement. But he also figured that more than half of all American families probably have enough to do it.

Paul then determined that to retire without making any sacrifices -- in fact, to travel all over the world and live in luxury -- would take more...closer to $400,000. But when he added up all of his assets -- he found that he could sell his home, his cars, and cash in his savings -- and have enough.

And he's not alone. Millions of Americans, many of them in their 30s and 40s, have between $100,000 and $400,000 net worth.

You could retire and never work another day. You could travel to London, Paris, Athens, and Rome. You could get to know your friends and family better -- because you'd have the freedom and the time. And you could spend based on what you need -- not just what you can "afford." If you live the way most Americans do, you spend about 56% of your budget on your home and car. Food and clothing eat up another 24%. Health care costs about 4%, and just 6% is left for entertainment and travel.

But if you live and retire like Paul Terhorst did, you spend 53% of your budget on food, entertainment, and travel -- and only 16% on your home and transportation. Compare the difference in monthly expenses: Retire like the Retire like Expense Average American Paul Terhorst Home $825 33% $200 13% Transportation $575 23% $ 50 3% Food $425 17% $300 20% Clothing $175 7% $100 7% Entertainment and Travel $150 6% $500 33% Health Care $100 4% $150 10% Misc. $250 10% $200 14% Total $2,500 $1,500 Paul gave up his home in Los Angeles and his expensive cars for an exciting life in Buenos Aires. He bought a spacious, beautiful apartment with no mortgage, didn't need a car, and dined out all the time.

In fact, despite living the life of an international jet setter since his retirement, Paul watched his net worth grow to $900,000, just by reinvesting the money he did not spend. He lived better on about $22,000 a year than he did when he was making five times that in the United States! He spent a lot of time traveling. Round-trip airfares from Buenos Aires were expensive...so he budgeted about $4,000 a year in addition to the expenses listed above. That brought his yearly total up to a whopping $22,000 -- which was easy to earn on the $400,000 of net worth that he invested.

Paul's secret was figuring out how to live better on less.

Back in 1984, Paul faced a trade-off...between making $125,000 a year in a prestigious international firm and giving it all up. You may ask, why would he even consider it?

At the time he was working as a CPA for Peat Marwick.

Living in Los Angeles was expensive. You couldn't buy a nice home for much less than $400,000. And if you were making payments on a $400,000 house ($48,000 a year)...then paying $30,000 in income and property taxes, $5,000 in insurance costs, $10,000 on transportation, $2,000 on health insurance, $10,000 on food, $5,000 on travel and entertainment, $5,000 on clothing, and easily another $5,000 in miscellaneous costs...you'd be spending $120,000 a year. So if you were making $125,000 -- you'd have a whopping $5,000 left over. Not very much...especially when you consider that you'd be working 10 to 12 hours a day to earn it.

Sure, you'd be living in the best part of town, wearing $500 suits...driving a luxury car...and eating at the finest restaurants in town. But would it really we worth it?

Consider the future. Paul started working at Peat Marwick in San Francisco in 1972. It's not that he didn't like his job - - despite the pressure. But he looked at his lifestyle...and where it was likely to lead.

For years he watched partners from San Francisco's most elite firms put away their briefcases, get a new set of golf clubs, and move to Carmel. They were going to play eighteen holes with their wives in the morning and eighteen with the guys later on. They were going to relax and enjoy the money they had worked so hard to save. And some of them did -- for six months or so. Then they had heart attacks and died.

His observations are backed up by medical facts. Life in stressful, high-pressure jobs can kill. After giving the best years of your life to your job, you may not even have any years left over for yourself.

On the other hand, Paul figured if he left his job he could start to live the life of his dreams. He and his wife could travel the world. He could write a novel. He could learn to play the saxophone.

When he got tired of traveling, he could buy a home in one of the culture capitals of the world. (He bought a home in Buenos Aires for just $20,000 with no mortgage.) He could entertain friends in his luxurious new apartment. He could learn to speak the language...and make many new friends. He could join a modern jazz band. And best of all, he could do it all on about $50 a day.

Paul's three-part formula demonstrates that with the equity in your home and other assets you can afford to retire in style with as little as $100,000 in net worth.

For the details on Paul Terhorst's innovative retirement plan, read Paul's excellent book, Cashing in on the American Dream -- How to Retire at Age 35 (Bantam Books, 1988).

Here again, we see the tremendous wealth advantage of breaking away from a rigid, institutional approach to life. There are millions of people who could retire young...or enjoy much nicer retirements...by taking advantage of creative, often unconventional strategies.

As Paul Terhorst points out, many of the things you spend money on neither increase your wealth nor improve the quality of your life. The idea is to focus carefully on the things that really matter, to you. You may discover that you too can find your own version of a better life -- while actually building your wealth at the same time.

Nomadic Survival

Cities and mechanized agriculture, the results of "civilization," are first to be hurt when the structure of civil order collapses. War has destroyed the largest towns; farmers were quickly cut off from supplies with the onset of hostilities.

Nomads, with camel, goat, and sheep herds, are highly mobile and can generally avoid areas where there is fighting. Camels, in particular, are natural survival aids in Somalia. They permit the nomads to scrape a bare subsistence from the arid semi- desert. War and famine have driven up the price of grain, forcing nomads to barter away more of their animals to obtain it. Nevertheless, the incalculable effects of war affect the nomads, though later and less intensely than they impinge on the settled populace.

The portable, indestructible business structure we've discussed is just another manifestation of this principle of nomadic survival.

On an international scale there is a survival lesson here for the civilized world as well. Do you want to escape the control over your life and property now held by modern governments? The PT concept could have been called Individual Sovereignty, because PTs look after themselves. We don't want or need authorities dominating every aspect of our existence from cradle to grave. The PT concept is one way to break free.

In a nutshell, a PT merely arranges his or her "paperwork" in such a way that all governments consider him a tourist -- a person who is just "passing through." The advantage is that being thought of by government officials as a person who is merely "parked temporarily", a PT is not subjected to taxes, military service, lawsuits, or persecution for partaking in innocent but forbidden pursuits or pleasures. Unlike most citizens or subjects, the PT will not be persecuted for his beliefs or lack of them. PT stands for many things: a PT can be a "prior taxpayer," "perpetual tourist," or "permanent traveler" if he or she wants to be. The individual who is a PT can stay in one place most of the time. Or all of the time. PT is a concept, a way of life, a way of perceiving the universe and your place in it. One can be a full-time PT or a part-time PT. Some may not want to break out all at once, or become a PT at all. They just want to be aware of the possibilities, and be prepared to modify their lifestyle in the event of a crisis. Knowledge will make you sort of a PT -- a "possibility thinker" who is "prepared thoroughly" for the future.

The PT concept was inspired by Harry Schultz, the financial consultant and author of a number of books on investing that were best sellers in the 1970s.

Today there is a publishing company in Britain specializing in books for the PT -- unique titles on tax havens, obtaining a second citizenship, living in exotic locations, buying a tax free car, and making money internationally. Even if you never buy the books, just reading the catalog is fascinating. The catalog is free, and can be had by writing Scope International Ltd., Box AS125, Forestside House, Forestside, Rowlands Castle, Hants. PO9 6EE, Great Britain.

PT is elegant, simple, and requires no accountants, lawyers, offshore corporations, nor other complex arrangements. Since the income of most PTs is immediately doubled, and most frustrations of life with Big Brother are instantly eliminated, the logical question is only: "Can you afford not to become a PT?"

The income is immediately doubled, even for a U.S. citizen, because income taxes are eliminated. Three months in the U.S., three months in Europe, three months in the Caribbean, and three months in Asia adds up to not being a taxable resident anywhere. Yes, it is true that the U.S. is the only major country that taxes its citizens on a worldwide basis, but there are exclusions for working abroad, extra housing allowances, and other deductions. If these exclusions are properly combined with the use of your own foreign corporation, the result is a small tax- free salary, with most expenses being paid for by the corporation. And all of this still fits with our option strategy.

The PT, once properly equipped, operates outside of the usual rules, gaining mobility and a full slate of human rights. The value of these rights cannot even be perceived by people who have never experienced them.

The message of PT is not, however, to encourage greed, lust, irresponsibility, immorality or any of the other seven deadly sins. The effect of PT being popularized will be to release creative souls from the many burdens of coping with Big Brother.

You don't need to found a new country or displace someone else to make yourself a sovereign. The PT need not dominate other people. He or she must only be willing to break out of a parochial way of thinking: the PT must be superior only in that small area located between the ears. We speak of the potential PT now in terms of wealth, talent, intelligence and creativity. Who is this PT in the upper minuscule of the population? It might well be you...

America's New Dream

Fifty years ago, people moved to the suburbs, in search of a better life. Now they are moving to small towns in Washington, Virginia, Colorado -- even Arkansas! This new "migration" will take the wealthiest, up-and-coming Americans to places that are oases of natural beauty and culture. High-tech companies will move their headquarters to these peaceful little communities. Already places like Charlottesville, Virginia -- home of the University of Virginia -- are becoming magnets for film stars, entrepreneurs, and software start-ups. Orem and Provo in Utah have become such a Mecca for software-related businesses, and Orem is the headquarters of Word Perfect Corporation. Rochester, Minnesota, home of the famed Mayo Clinic, is becoming the center for a lot of small, high-tech, entrepreneurial medical technology companies.

The Center For The New West is working with rural communities seeking to lure what they call "lone eagles," professionals such as consultants who usually work at home and keep in touch with clients through phone, fax and computer. The Denver think tank has a grant from Edison Electric Institute, a trade group whose members serve rural communities. Rural communities now see attracting these "lone eagles" as an important economic development tool, more compatible with the community lifestyle than trying to attract small factories.

By the year 2000, you could live a life of financial independence -- in a beautiful small town where there is no crime, no congestion, no pollution -- where you have a spectacular view from your gorgeous home -- no mortgage to worry about -- and low taxes -- where you work a few hours a day -- on projects you really like -- even hold live conferences with your business partners who live hundreds of miles away.

This is the "good life" -- the way of life that the majority of Americans will desire most -- the life that you and your family will want to live.

Those who can see the changes ahead will be able to enjoy the good life. And by the year 2000, they will be living very, very well.

They will feel more directly the impact of income taxes. A tax withheld from a paycheck is psychologically remote, since wage-earners tend to think in terms of net pay. The entrepreneur who has to pay the tax is more aware of it, and more attuned to ways to avoid it. It is an easy mental jump to realize that if a consultant or programmer is selling his services from Aspen or Charlottesville, and delivering his work product by encrypted computer messages, he can do exactly the same thing from Buenos Aires or Europe and pay little or no income tax. Or to do the same thing on behalf of a personal foreign corporation or trust, allowing most of the profits to accumulate tax free in an offshore haven.

Many stock and commodities traders have already moved offshore. Some have actually renounced U.S. citizenship. But such a step is not necessary, because of the various exemptions available to an American citizen living overseas. Those not wishing to live overseas will quickly realize that they can be trading advisor to their own offshore corporation, taking a small, taxable investment advisory fee while letting the profits accumulate tax-free in the offshore corporation until needed. With proper legal and accounting advice, such approaches to life are entirely legal, and need not involve any questionable activities. In the next section we'll tell you who to call to get the proper advice.

The World Of Tax Havens

This does not mean that a U.S. person can avoid the U.S. income taxes simply by moving to a foreign tax haven, since the U.S. taxes its citizens regardless of where they live (although there are substantial exemptions). Many American owned companies profit by the use of tax havens, since a foreign company owned by Americans is not subject to U.S. taxes (except on certain types of investment income).

But just where are these tax havens, and how can they survive? Most tax havens are small political entities in need of economic development, some are countries that have never had an income tax, and others are major countries with special legislation for certain types of businesses. Even the U.S. is a tax haven for foreign investors in our securities and commodities markets, and for the interest on U.S. bank accounts held by foreigners.

Tax haven trusts and corporations are a very complex subject, but the hours you spend studying their use will probably pay you more per hour than the hours you spend directly earning an income -- an unfortunate commentary on the confiscatory taxation policies of most governments. Just stop and think for a moment how much faster your money can grow if you are not paying out an average of 40-60% to a taxing government somewhere.

Asset Protection Trusts Can Be Free Of Income Tax

One of the best ways to protect yourself against such a calamity is to have an asset protection plan in advance of any problems. In the process of doing so, many people are discovering that they can eliminate most income taxes through the proper use of offshore trusts, corporations, and annuities. Tax planning alone may not have caused them to examine these techniques, but the fear of losing everything they have built up over a lifetime has driven them to investigate alternatives. And when they learn that they can be protected and reduce taxes, they become contributors to the death of income taxes.

Creating an asset protection plan is not expensive, and provides a great deal of assurance that you and your family will have the benefit of the money you have built up through years of work. Asset protection plans are a relatively new area of law, prepared by lawyers who specialize in protecting what you own instead of in suing people.

Asset protection is different from traditional retirement or estate planning. It is the systematic and integrated protection of your family and business from risk.

Most financial planning is intended to help you establish wealth so you can retire, and pass on as much of that wealth as possible to your family after death.

Asset protection plans include estate plans but are intended to also help you keep your wealth while you are living. They often involve legal structures such as family limited partnerships, children's trusts, exempt assets, offshore trust arrangements and living trusts.

More lawsuits are being filed today than at any time in history, and the top 80 percent of wage earners in the United States will be sued an average of five times during their lifetimes. Other situations include bankruptcy filings, taxation, insurance company failures or bank financing.

Many small businesses are finding that critical financing is being pulled out from under businesses that are current in their loan payments simply because their bank has been sold or merged and no longer wants that type of loan.

If someone slips and falls in a business, or if a car taps their car's rear end, they react like they just won the lottery. If an armed thug breaks into a home in the dead of night, slips on a child's marbles, and breaks a leg, he can sue and likely win.

A small construction firm is having its monthly partners meeting. They send out for pizza. Their secretary decides to go pick it up. Unknown to the partners this person has a horrible driving record. On the way back the secretary runs into a group of pedestrians. The police arrive. The secretary eats the pizza and the partners are sued. A judge decides that they are liable as the secretary was performing an act for the partners in her ordinary course of employment. The jury, sympathetic to the victims and enraged by the driving record, awards several million in damages. As partners, all of the owners are jointly liable for payment. In effect, the jury has awarded the plaintiffs three condos, two sail boats, three houses, nine cars, and twelve installment notes to pay the balance over a lifetime.

A land speculator bought a parcel for subdivision, held it for one week and sold it to a developer. Later, after houses were built, a homeowner who was an environmental engineer noticed an old buried drum. It contained a deadly toxin. The Environmental Protection Agency held the site to be a "superfund" site. The largest law firm in the world, Uncle Sam, began an action against the landowners. The suit brought in the land speculator. Although the total invested was only $100,000, the liability exceeded $30,000,000. Under the law this can never be discharged in bankruptcy. The builder and the developer collapsed, leaving the individual land speculator with an overwhelming judgment.

Asset protection plans are not only for the wealthy. An asset protection plan can be relevant if you drive a car, have children, own a business or simply want to pay less taxes. It can come into action in the event of an auto accident, if someone injures himself at your business, or possibly in the case of a divorce.

Asset protection plans are fully legal. It is not something for people who might want to avoid the law or their responsibilities. The law is clear as to what is permissible and what is not. Asset protection simply gives protection against unfair lawsuits and gives a level playing field to operate from.

The goal is to structure the plan so you never have to misrepresent yourself or worry about the legality of the plan.

For more information on asset protection planning, read Keep What You Own: Protect Your Money, Property, and Family from Courts, Creditors, and the IRS, available in bookstores. The book is also available by mail for $19.50 (including shipping) from: Paladin Press, Box 1307, Boulder CO 80306. Visa, Discover or MasterCard customers may call 1-800-392-2400.

People set up an asset protection plan to keep what they own, but in the process of planning, when they learn that there are ways they can accomplish protection and tax avoidance, they gain a degree of financial freedom and contribute to the death of income taxes. Even asset protection plans that are totally domestic can reduce or eliminate taxation, through such devices as income splitting by creating family limited partnerships, or the tax-deferral of annuities.